Spousal Support & Property Division

Spousal Support

One of the most hotly disputed issues in family law, spousal support entitlement arises when one spouse is economically dependent on the other. This is true whether a couple is married or living in a common law relationship although a common law relationship must be “of some permanence” which is usually understood as having lasted for more than one year or having produced a child.

A court will consider various factors when contemplating spousal support such as income,  length of the relationship, the needs of the recipient, standard of living during the relationship, earning history and capacity.  Since 2009 lawyers and judges have increasingly been utilizing the Spousal Support Advisory Guidelines to come up with a more standardized approach to determining spousal support. The use of Guideline calculations is not binding on a judge but they are however influential in determining the amount of spousal support (before and after tax), how long spousal support will last, and helping to determine lump sum spousal support in some cases.

The length of time over which spousal support will last is driven primarily by the length of the marriage itself as well as the ability of a dependent spouse to ultimately achieve economic self-sufficiency. In general, long term marriages in which spouses performed traditional roles of bread-winner and home-maker will result in indefinite spousal support orders. Moreover, child support can play a role in the determination of spousal support because courts recognize that there is economic overlap when a spouse is supporting both a former spouse and children that reside together. It is not inconceivable that a long term spousal support order will outlast the need of children to receive support and in that instance spousal support can actually increase when child support ends.

It is important to remember that unlike child support. spousal support is taxable in the hands of a recipient spouse and deductible to the spousal support payor. In some instances spouses agree in a Separation Agreement to weight more support as spousal rather than child support in order to divert taxes owing from Revenue Canada and into the hands of a recipient spouse as support as such an arrangement can benefit both spouses.

In preparing a Separation Agreement it is important, where possible, to build in incentives for a recipient spouse to make good faith efforts to return to work and become self-sufficient, as well as spousal support review provisions in the event that a recipient spouse enters into a new relationship resembling a marriage. At Morgan and Phillips LLP we have thirty plus years of cumulative experience in dealing with spousal support issues and we can help you negotiate this most difficult of issues in the most effective manner and advantageous means possible.

Property Division

Distribution of Property in Ontario: The Basics

When a couple separates all of their property must be divided up between them.  How the property is divided depends on whether or not the couple was married.  For married couples, the Ontario Family Law Act sets out a formula for the ‘equalization’ of the couple’s property.  Unless the couple agree otherwise in a Domestic Contract, this formula will be applied to determine how their property will be divided and whether one spouse owes the other spouse any money at the end of their marriage.  For common law couples, there is no formula and property is divided according to the ownership rights, unless both spouses agree otherwise in a Domestic Contract or unless a court orders that one of the spouses has an interest in the other spouse’s property.

Division of Property for Married Spouses

On the breakdown of a marriage in Ontario, the increase of a couples’ net worth during a marriage is typically shared equally by both spouses.  The value of the couple’s property, but not the property itself, is divided between the spouses.

The Ontario Family Law Act sets out a formula that calculates the value of each spouse’s increase in net worth (or net loss) during the marriage, which is called their ‘Net Family Property’.  The Family Law Act also sets out a formula for the ‘Equalization of Net Family Property’, which requires the spouse with the larger Net Family Property to pay an ‘Equalization Payment’ to the other spouse.  While there are certain exceptions and exclusions to what is included in this formula, the basic formula works like this:

  1. When the marriage ends, both spouses will need to determine the value of the assets and debts they each had at the date of marriage.  The debts at the date of marriage are deducted from the value of the assets at the date of marriage to arrive at each spouse’s net worth at the date of marriage.
  2. Calculate the value of each spouse’s assets and debts at the date of separation.  Subtract each spouse’s separation date debts from the value of their assets at the date of separation to determine each spouse’s net worth at the date of separation.
  3. For each spouse, subtract their net worth at the date of marriage from their net worth at the date of separation.  The resulting sum will be a measure of each spouse’s increase in their net worth during the marriage and is called their Net Family Property.
  4. Determine the difference between the spouses’ Net Family Property figures by subtracting the smaller Net Family Property from the larger Net Family Property.   Divide the difference between the two spouses’ Net Family Properties in half.  The resulting sum is the amount the spouse with the larger Net Family Property will have to pay to the other spouse.  This sum is called the ‘Equalization Payment’.

The Family Law Act includes several exceptions and exclusions to the basic equalization calculation set out above, including special rules for properties considered to be matrimonial homes.  A matrimonial home is the home where the couple is living at the time of their separation. Couples may have more than one matrimonial home if they own vacation properties. Both spouses have a right to remain living in their matrimonial home(s) unless they agree to move out or a court orders them to leave the home. Some other exceptions and exclusions in the Family Law Act relate to property that was received by gift or inheritance during the marriage. Inherited property is not included in a spouse’s net family property if that property is held separate from his or her spouse and not invested in a matrimonial home.

Apart from the exceptions and exclusions, all property belonging to either spouse is included in the equalization calculation, including business interests, pensions, property owned in other countries etc.  Occasionally the application of the equalization formula would be very unfair to one of the spouses.  In these situations a court may allow for an unequal sharing of the spouses’ net family properties.

For some couples, the equalization formula is not something they feel would result in a fair division of their property.  For these couples they can agree on a different method of dividing their property in a Domestic Contract.  If the spouses agree before or during their marriage on how they would like their property divided in the event of a separation they can sign a Marriage Contract setting out how they would like to divide their property if they separate.  For couples who have separated and agree on a different way of dividing their property they can sign a Separation Agreement.  In an initial consultation, a lawyer at Morgan and Phillips LLP can discuss your situation with you and provide you with direction and advice on your property concerns.

Division of Property for Common Law Couples

The rules for equalizing property, as set out in the Family Law Act, only apply to married spouses.  When an unmarried couple separates the only rules governing the division of their property are rights of ownership.  Whatever is in one spouse’s name belongs to that spouse and the property in the other spouse’s name belongs to them.  This can sometimes lead to unfair results, especially in situations where the couple has lived together for several years and one spouse has more property in their name although both spouses have worked towards increasing the value of that property.

In these situations, if the spouses don’t agree to share their property in a way that recognizes both spouses’ contributions, one spouse can make a claim in court for a share of the other spouse’s property.  This kind of claim is called a constructive trust claim and is often the only way a common law spouse can share in property held in their spouse’s name.  At Morgan and Phillips LLP, we would be happy to discuss your rights and concerns about your property in a consultation with a lawyer.