Will I have to divide my assets with my spouse if we separate?

Under the Family Law Act (FLA), people who are legally married or have been living together for at least two years are entitled to share equally in the assets acquired during their relationship, subject to certain exclusions discussed below. It is important to know the date you and your spouse began living together and the date you separated as this is how a court will determine what assets are divisible and their value. It is a common misconception that if you hold an asset solely in your name, your spouse has no entitlement to it. Whether an asset is in joint names or in your name alone, it is still presumptively divided equally.

If you and your spouse are legally married or having been living together for at least two years, you can expect to divide the following assets:

• Real Property (ie. family home): upon separation you and your spouse are each entitled to 50% of the market value of the property. Practically, to equally divide a home upon separation, the home will have to be sold on the open market with the proceeds split equally, or one spouse must have the funds available to pay the other spouse for their 50% share of the market value of the home. To determine the market value, an appraisal should be done.
• Personal property/household contents (ie. car, furniture, etc.): this includes anything that was acquired during the relationship or that increased in value during the relationship. Again, to divide this kind of property, the items can be sold on the open market with the proceeds divided equally, the physical items can be divided equally between the spouses, or a value can be placed on the individual items and the spouses can pay the other for their 50% interest. Beware! It can become quite an expensive and onerous process to value every dish and throw cushion in the family home!
• Employment Pensions: If you made contributions to your pension during the period of time that you lived with your spouse, that portion of your pension is presumptively family property to be shared equally.  This division is usually done in one of two ways.  The first is to have your pension valued by an actuary who will provide you with an estimate of the value of your pension for the period of time you lived with your spouse.  You would then “buy-out” your spouse for 50% of that value using other financial resources available to you.  The second option is to split the pension at the source, meaning that your pension provider will calculate how much your spouse would be entitled to, and your spouse will receive their share from the pension provider directly, usually by way of monthly payments.
• Canada Pension Plan Credits: CPP credits are accumulated from your mandatory CPP employment income deductions. Should either of you apply, the CPP credits accumulated by you and your spouse during your relationship will be totalled and then equalized. An application must only be made by one spouse, it does not require the other’s consent. So, if you and your spouse agree that you will each keep your own CPP credits, make sure to have that explicitly set out in an order or separation agreement.
• Financial assets (ie. RRSPs, RRIFs, bank accounts, TFSAs, investments, etc.): all financial assets, regardless of whose name they are held/registered in, are presumptively divided equally under the FLA. Provided the CRA’s requirements are met, all or part of the funds in one spouse’s RRSP or RRIF may be transferred to the other spouse’s RRSP or RRIF without any tax consequences. This is often called a “spousal rollover”.
• Businesses (ie. the interest of a spouse in a company, business or partnership): often times, your interest in a business can be hard to value. Business valuations, while expensive, can be obtained to assist the court or parties in determining the value of the business subject to division.

What is excluded property?

The starting point under the FLA is that all assets either or both spouses own on the date of separation are subject to equal division. If you claim an asset is excluded from the pool of family assets, you need to be able to prove it. The basic categories for excluded property are as follows:

• Pre-cohabitation assets: the value of assets owned prior to the start of your cohabitation
• Inheritances: so long as the inheritance can be traced throughout your relationship, you can claim it is excluded property. Inherited money that is spent (ie. on holidays, bills, household expenses) is rarely recouped.
• Gifts from 3^rd parties: a gift from a parent or friend may be excluded property. However, make sure you have a gift letter or some proof it was not a gift to you and your spouse or you could lose your exclusion.
• Personal injury settlements: settlement funds paid out to you for your pain and suffering is excluded property. However, settlement funds paid out to reimburse you for lost wages could be considered family property.
• Property bought during the relationship with excluded property. For example, if you purchase a rare painting with inheritance funds, the rare painting becomes excluded property.

What if we aren’t married or haven’t lived together for at least two years?

The property division sections of the FLA do not apply to unmarried people who lived together for less than two years. If you have not lived with your spouse for two years, but you jointly hold property together or believe you are entitled to property your spouse owns, you need to seek legal advice as these claims can become more complicated.

Caution: This is not legal advice, and you should not rely on it as such. To ensure your interests are protected, formally seek advice from a lawyer.