The division of marital property following a divorce or separation in Canada is governed by a combination of federal and provincial laws designed to ensure fairness and equity for both parties. The legal framework seeks to balance the contributions of each spouse, both financial and non-financial, to the marriage, civil union or common-law relationship.
Legal Framework
The federal Divorce Act primarily deals with the granting of divorces and issues related to custody and access issues and child and spousal support and maintenance. However, property division falls under the jurisdiction of provincial and territorial laws. This means that the rules for dividing property can vary greatly, depending on where you live.
Property division laws for common-law couples vary widely across Canada’s provinces and territories. While some provinces have specific provisions for common-law relationships, others do not have any laws to govern partnerships that are not covered by the legal definition of “marriage”.
What is Included and Not Included in the Division of Marital Property
Every region of Canada has its own legislation governing the division of marital property, as set out later in this article. These laws outline which assets are considered marital property, how they should be valued, and how they should be divided when the marriage breaks down. Generally, marital property includes all assets and debts acquired during the marriage, regardless of who holds title to them, including:
- the family home,
- vacation homes and revenue properties,
- bank accounts,
- investments,
- businesses,
- pensions and RRSPs,
- annuities,
- insurance policies,
- vehicles,
- furniture and household items,
- debts.
In the case of a business that is owned by one partner and not the other, the owning partner may claim that the business is not a family asset. However, for the purposes of separation of property, both tangible and intangible contributions are considered in the division of assets. “Intangible contributions” may include effective management of the household or child rearing responsibilities by the non-owning spouse.
Certain types of property may be excluded from division, including:
- property acquired by either partner before the marriage, as long as these assets are not co-mingled with the family assets,
- inheritances and gifts received by one partner during the marriage, as long as these assets are not co-mingled with the family assets,
- personal injury settlements,
- personal items like jewelry,
- property specifically excluded by the parties under the terms of a prenuptial or postnuptial agreement, as long as these assets are not co-mingled with the family assets.
Notwithstanding that certain property may be excluded from division, any increase in the value of excluded property during the relationship may also be subject to division.
The Equalization Principle of Property Division
In some provinces, the division of property is done on the principle of equalization. This involves calculating the net family property (NFP) of each spouse, which is calculated as follows:
Value of assets – Debts at date of separation = Net Family Property
The spouse with the higher NFP is required to pay the other spouse an equalization payment to ensure both parties leave the marriage with an equal share of the family property. While the goal is usually equal division, courts may deviate from this principle in certain circumstances, such as:
- Short marriages
- Significant debts brought into the marriage by one spouse
- Misconduct affecting financial status.
The Family Home
The family home holds special significance and is often treated differently from other types of property. In many provinces, the family home is divided equally regardless of whose name is on the title or when it was acquired. This ensures both spouses have a fair share of what is often the most significant asset.
Dispute Resolution
- Mediation is a popular method for resolving property division disputes. A neutral mediator works with the parties to reach a mutually acceptable agreement without going to court.
- Arbitration involves a neutral third party, known as an arbitrator, who listens to both sides and then renders a binding decision on the division of property. This process can be quicker and less formal than going to court.
- If mediation and arbitration are unsuccessful, the parties may need to resolve their disputes through litigation. This involves presenting the case to a judge, who will make a final decision on how the property should be divided.
It is essential for individuals going through a separation or divorce to seek legal advice to understand their rights and obligations, and to ensure that the property division process is conducted fairly and equitably.
Provincial Laws
Under almost every provincial / territorial law, distribution is typically 50-50, but the court may order an unequal division if an equal division would be inequitable. Some of the factors considered include the length of the marriage, the contributions of each spouse to the marriage, and any pre-existing agreements made between the spouses.
Alberta
Alberta’s Family Property Act governs the distribution of property when married spouses are separating or divorcing, and when adult interdependent partners (common-law) are ending their adult interdependent relationship. If a couple lived together in a relationship of interdependence before they were married, the same property division rules will apply to the entire relationship – not just the years they have been married. Under Alberta law, proceeds from insurance policies that do not cover property, such as life insurance or disability insurance, are exempt property as they are intended to provide financial support to the individual and their dependents in times of need.
British Columbia
In British Columbia, the Family Law Act governs the division of property and aims to ensure a fair division of family property and debt. The division is generally equal unless it would be significantly unfair to do so. The Family Law Act recognizes common-law relationships for the purposes of property division. Partners who have lived together for at least two years are entitled to a division of family property and debts.
Manitoba
In Manitoba, property division is regulated by the Family Property Act, and applies to both married spouses and common-law partners. The Act mandates the equal division of family property, including any property that either or both spouses have acquired while married and living together, or that either or both partners have acquired while they have lived together. If a couple cohabits for a time immediately before their marriage, the property they acquire during cohabitation is also family property. The basic rule is that both spouses or common-law partners have a right to an equal share in the value of family property when they separate, no matter which one owns the property or where it is located.
New Brunswick
New Brunswick’s Marital Property Act provides for the legal rights and interests of:
- persons who are married,
- persons who are planning to get married,
- married persons who are separated,
- persons obtaining an annulment or divorce,
- persons whose spouse has died, and
- persons who have signed or are considering signing a marital contract, separation agreement or cohabitation agreement.
The Act does not apply to common-law couples.
Newfoundland and Labrador
The Family Law Act governs property division in Newfoundland and Labrador. The Act only applies to common-law couples if they have opted into the Act under the terms of a written cohabitation agreement or similar document.
Northwest Territories
The Northwest Territories Family Law Act governs property division. The Act treats common-law partners the same as married partners if they have lived together for at least two consecutive years, and applies to both same-sex and opposite-sex common law partnerships.
Nova Scotia
In Nova Scotia, the Matrimonial Property Act governs the division of property. This Act only applies to married couples, or couples who are in a registered domestic partnership. It does not apply to common law couples.
Nunavut
In Nunavut, the Family Law Act outlines the rules for dividing property. Common-law partners without a written agreement governing property division are not legally obligated to divide their property. This means that a common-law partner cannot claim half of shared assets or debts.
Ontario
Ontario’s Family Law Act governs the division of family property. The Act introduces the concept of “net family property”, which is the value of each spouse’s property minus any debts on the date of separation, excluding certain types of property such as inheritances or gifts received during the marriage. The equalization of net family property ensures that each spouse receives an equal share of the increase in value of family property accumulated during the marriage.
Common-law couples are not legally required to split property acquired when they lived together, but common-law spouses may choose to enter into a domestic contract such as a cohabitation agreement or separation agreement that sets out their respective rights to property. Furniture, household items and other property belong to the person who bought them. Common-law couples do not have the right to split an increase in value of the property they brought with them to the relationship.
Prince Edward Island
Prince Edward Island’s Family Law Act governs property division. Common-law spouses in PEI have none of the legal rights to the division of property that married spouses have, nor do they have a right to stay in the matrimonial home upon separation if they are not on title.
Quebec
In Quebec, the division of property is governed by the Civil Code. The Code establishes a partnership of acquests regime, which means that property acquired during the marriage is shared equally between spouses upon separation. Common-law spouses have no legal rights to division of property under Quebec law if their relationship ends. Each partner keeps their own property, even if they bought it together or lived in it. However, partners can agree on how to divide their property through the use of a cohabitation agreement or similar contract.
Saskatchewan
The Saskatchewan Family Property Act deals with the division of family property between married spouses or common-law couples who have lived together as spouses for at least two years. The Act defines family property as any property owned by either spouse at the time of separation, including property acquired before the marriage.
Yukon
In Yukon, the Family Property and Support Act outlines the rules for property division. Each partner in a common-law relationship keeps their own assets, subject to the court making an order that divides property differently. This would require a court application or filing a consent order with the court.
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