Yours, Mine, and Ours (Canada)

The equitable distribution of property at divorce comes at a time of great emotional turmoil. Deciding what is "yours," "mine," or "ours" can be a difficult process, but there are some guidelines to follow. Here's how property division typically works in Canada.

By Michael G. Cochrane, LL.B.
Updated: March 25, 2015
Property Division

A headline in the Toronto Star proclaimed: "Did no work, husband loses share of house." The story described a woman who had "lived like a pauper" to buy her $185,000 Scarborough, ON house while her husband contributed almost nothing to its purchase or care. The judge felt that the husband's contribution was so totally absent that he should receive none of its value. It's an interesting case from a number of perspectives, and it underscores the importance of the family home as what is usually the largest and most significant asset owned by a family.

During the trial, the couple's neighbors were called to court to testify that the husband had spent most of his days sitting in his lawn chair drinking from a coffee cup. One witness testified (in what must have been a dramatic moment) that the husband had occasionally mowed the lawn.

The wife in question testified that her husband had lost his job at a dairy just before they married and that he had done just a little cooking and cleaning while she did most of the household chores as well as working at a full-time job. At the end of the trial, the judge found that the wife should keep the entire value of the home and that the husband should receive none of it.

The case is also an excellent example of the expense such family law litigation can generate. The wife reported that, while she is happy with the "victory," she faces a legal bill of $40,000. The husband, on the other hand, having lost his interest in the house, was faced with a bill of $25,000 in legal fees. A subsequent newspaper account of this decision reports that the husband has launched an appeal.

Property division in a marriage breakdown situation is governed entirely by provincial law. Since each province has its own property division scheme, the number of generalizations that we can make about property division law in Canada is limited.

This article will provide a sense of the common goals of property division and examine some of the more practical aspects of this area. I'll pay particular attention to the property division scheme enacted in Ontario in 1986 -- not out of preference for the particular scheme, but rather because it is so comprehensive that it provides some valuable insights.

Marriage is an Economic Partnership

It's safe to say that the goal of property division schemes in all of the provinces and territories is to divide equitably, if not equally, the value of all of the assets acquired by the couple between the date of the marriage and the date of their separation or divorce. Marriage has become, for all intents and purposes, an economic partnership between a man and a woman. The partnership, like any business, sees each partner bring a contribution to it. Assets and liabilities are acquired over the life of the partnership, and at its conclusion, they're divided equally between the partners.

This "partnership" arises upon becoming legally married in Canada. Common-law spouses have very serious limitations on their entitlement to share property at the end of a relationship; the rules and guidelines we are discussing in this article concern only legally married spouses.

While it is difficult to say whether or not married couples are any better off materially now than 20 or 30 years ago, it's safe to say that they're subject to a much more complex scheme of provincial property division and that they're acquiring assets that have a much more complex nature and value. The typical Canadian family may own (or rent) a home, car, furniture, and miscellaneous other personal items, and they may have an interest in a pension plan. Others may own more than one vehicle, a cottage, recreational vehicles, stocks and bonds, RRSPs, GICs, and so on. Cases have considered hundreds of different types of property, acquired in marriages, that spouses have been unable to divide themselves. Disputed assets have included oil paintings, coin collections, books, heirlooms -- just about every conceivable personal effect, including pets.

The complexity of the property division schemes and the types of property that couples own demands the involvement of lawyers and in many cases Chartered Accountants and Valuators. So here's an important caution: you'll need to rely heavily on legal advice in this area and you'll be bearing a great deal of the responsibility yourself for locating, describing, and valuing your own marriage's assets.

Property division is the issue the court prefers to settle first. Once the family's property has been divided, the court then turns its attention to questions of custody of the children, access to them, child support and, depending on the amount of property received, spousal support.

Ontario's Financial Statement is by far the most comprehensive attempt to describe property and liabilities that a couple may acquire during the course of their marriage. While it does not apply in any province except Ontario, it is a useful way of determining precisely what a couple has and what a couple owes. You can get a copy of your province's form from your lawyer. In Surviving Your Divorce (John Wiley & Sons, 1999), I have reproduced a copy of Ontario's form.

As with any claim that can be made in court, you'll face certain time limitations. Each province provides its own cutoff date for claiming such things as property division and spousal support. If you have separated, one of the best reasons to consult with a lawyer as soon as possible is to ensure that you know the time frame within which you must make a claim for property or support.

What is "Property"?

The definition of property varies from province to province. Some provinces make the distinction between "family assets" and "non-family assets." Family assets are generally those items most frequently acquired and used by the family; they include such things as the home, the family car, furniture, joint bank accounts, cottages, and recreational equipment. Non-family assets, on the other hand, include such things as business interests of the spouses, inheritances, special assets that were never used by the family, and so on.

Some provinces have made a distinction between these two categories so as to distinguish between assets that are divided equally upon marriage breakdown and assets that are not divided upon marriage breakdown. So, for example, if a family held family assets of the nature I just described upon the date of their marriage breakdown, the net value of those assets would usually be divided equally between the husband and the wife.

I use the term "net value" in describing the value that would be divided because the value must include a deduction for any debts that are owed in connection with a particular asset. So, for example, if a couple owned a cottage that was worth $200,000 but it was subject to a $100,000 mortgage, its net value is $100,000 -- if their marriage breaks down, this couple would divide $100,000 (the net value). The same is true for a car that is subject to a bank loan, a home that is subject to a mortgage, and even stocks that are purchased on a line of credit provided by a bank. The debts must be repaid first, and any remaining value is divided.

Since 1986, Ontario has not made any distinction between family and non-family assets. Under Ontario's scheme, all property owned by either spouse, subject to some very limited exceptions, is divided between the spouses at marriage breakdown. An often complex formula, which we will examine in a moment, is used to divide that property.

What is not Divided?

Each province provides a list of exceptions for assets that need not be divided upon marriage breakdown. For example, every province allows a couple to exempt property from division by use of a marriage contract. At the time they were married, if a couple agreed that a particular piece of property -- for example, the matrimonial home -- would not be shared if the marriage broke down and that agreement was contained in a marriage contract, the property would be exempt. No two provinces exempt property in exactly the same way, but the following types of property are typical of the types of exemption:

  • any asset owned in advance of the marriage
  • a gift or inheritance received during the course of the marriage
  • a court award or a settlement giving a spouse damages for personal injuries they suffered, for example, in a car accident
  • items of exclusively personal value
  • business assets
  • family heirlooms
  • proceeds from a policy of life insurance (e.g., if a husband's mother died and left an insurance policy payable to him, the amount of money received could be exempt)
  • gifts from one spouse to the other
  • traceable property (this means property that started out in one exempt category but may have ended up in some other form. So, for example, if a person took his/her damage award for injuries suffered in an automobile accident and purchased GICs, the GICs are still exempt because they can be traced back to the original exempt category.)
  • assets exempted by virtue of a marriage contract
  • assets that are acquired after the date of separation and before the trial.

One of the first issues to discuss with your lawyer is which categories of exempt property are applicable in your province or territory.

How is Value Determined?

A difficult question that can arise in the area of property division is the value that should be attached to a particular asset. The following example is a good illustration of how diametrically opposed valuations can be.

A man and woman had been married for approximately 20 years and operated a dairy farm that had been passed down through five generations in the husband's family. Over those generations, the dairy operation was gradually surrounded by suburbs from a major metropolitan centre. The dairy operation was successful and the father and mother intended, throughout most of the marriage, to pass the dairy operation on to their children. The marriage experienced difficulty, the couple separated, and the value of the dairy operation came into question.

The husband pointed out that the dairy operation had a book value of approximately $700,000 and that he was prepared to divide that value with his wife. The wife, on the other hand, had a valuation of the property performed and reported that the farm should be valued at $3,500,000. Why the discrepancy? The wife's valuation was dependent upon ending the dairy operation and selling the land to developers for a new subdivision of homes.

Which valuation is correct? Both. If the dairy operation continues, the business is worth $700,000. However, if the dairy operation is terminated and the property is sold for its value as a housing development, it's worth $3,500,000. Which is the best solution in this particular case? None of the alternatives satisfied all of the people involved, particularly the children who had expected to inherit the property.

This example illustrates that valuations can be quite different -- which is a good reason to explore your alternatives with your lawyer. Some provinces such as Manitoba and Saskatchewan specify that the value to be used is the "fair market value." Other provinces don't specify the basis of valuation and allow each case to be decided on its own facts. This means that in cases involving difficult or unusual assets, various approaches will be used including "current market value," "fair market value," "cost," "book value," and "liquidation value."

Another twist that can be applied to the valuation issue is whether or not tax obligations and other costs should be taken into consideration when arriving at a value for an asset. For example, if a party would incur tax consequences for a particular disposition, should those tax consequences be factored in to reduce the value of the asset as divided?

Similarly, if a piece of property when sold would involve costs of disposition, a question arises as to whether or not those costs of disposition should be deducted from the value as divided. So, for example, if a divorcing couple owns a home and one party wishes to keep the property by buying out the other person's interest, a question arises: Should the value be the fair market value of the home after the deduction of an amount for real estate commission? If the property were sold on the open market, a commission would likely be paid. Should the commission be taken into account in reducing the amount that must be shared with the other spouse?

These are all questions that must be answered in the effort to arrive at an equitable division of the family's property. Valuation methods will vary from asset to asset and province to province.

Provincial Differences

Each province, as indicated earlier, has its own method for division of property. Generally, that method is to add up the total value of all assets, add up the total value of all liabilities against those assets, and divide equally the net value that remains. Every province, however, provides a method for the court to divide the net value in a way that is not equal. Every provincial legislature has recognized that there may be circumstances in which it would not be fair to divide the family assets equally between the two spouses. The provinces have, however, taken a different approach in describing the circumstances in which the court can exercise that discretion.

Some provinces -- such as Ontario, Manitoba, Newfoundland, and Nova Scotia -- have provided in their laws that assets should only be divided unequally where to divide them equally would be "grossly unfair or unconscionable." This is a very high standard. It means that the court would need to find that it was almost shocked by the effect of an equal division for it to depart from that general rule. Other provinces, on the other hand, give the court the discretion to depart from an equal division of the value of the asset where to divide equally would be merely "unfair."

In the case I described involving the house in Scarborough, the judge found it unconscionable to give the husband any interest in the home because of his lack of contribution. It is one of the rare decisions interpreting unequal division in unconscionable circumstances in Canada.

Because of the existence of this provision in the laws of some provinces, you should discuss with your lawyer the circumstances under which your provincial legislation will allow the court to depart from an equal division of the property. You should be aware, of course, when discussing this issue that unequal division of assets can be a double-edged sword.

The Matrimonial Home

A special asset that requires separate consideration is the matrimonial home. All provinces provide for a restriction on one spouse's ability to dispose of or encumber the matrimonial home without the other spouse's consent. Therefore, one spouse cannot sell the matrimonial home or place a mortgage on the property without the other spouse's consent. This protects the value of the property for sharing at marriage breakdown.

Another consideration is possession of the matrimonial home at the time the marriage breaks down. Possession does not necessarily relate to ownership of the matrimonial home. Manitoba, New Brunswick, Newfoundland, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan all provide an automatic equal right to possession of the matrimonial home at the time of marriage breakdown regardless of ownership of the home. This means that if the couple separates, either or both spouses can apply to the court for an order giving one of them exclusive possession of the matrimonial home. Alberta, British Columbia and Quebec do not provide this automatic right to possession of the home. In cases of family violence or where there is a need to keep children in a particular neighborhood for reasons of continuity, an order for exclusive possession can be a valuable tool. Discuss with your lawyer the availability of orders for exclusive possession in your particular jurisdiction.

At marriage breakdown, you can also obtain an order from the court prohibiting your spouse from dealing with any of his or her property until further order of the court. This allows the court to preserve the assets until the end of trial, if necessary, so that there will be property available to divide and to pay for satisfaction of the judgment.

Payment of the judgment can be an interesting exercise. The goal of the formulae provided by provincial family law is to calculate a sum of money that is owed by one spouse to the other. The judgment can therefore be paid simply by a cash payment from one spouse to another or can be paid by the transfer of particular pieces of property. If, for example, the court finds that the wife is entitled to $100,000 for her interest in the family property and finds that the matrimonial home has an equity of $100,000, the court could simply order that the matrimonial home be placed in the wife's name alone in satisfaction of her interest in the family property.


Another special asset is a pension. It's quite common for one or both spouses to have separate, private pension plans. If the particular province considers the pension to be a family asset, then it must be valued and divided like any other asset owned by the family. Valuing pensions is an intriguing experience with values varying from pension to pension and pensionholder to pensionholder. Since the amount of the pension to be divided may only be the amount of pension accumulated during the marriage, it may not be the entire value of the pension that needs to be calculated. Different methods used by valuators and accountants include the "termination method" or the "retirement method." In examining the value, the person doing the valuation will also consider mortality tables, the role of interest, early retirement provisions, death benefits that may be available after retirement, and the tax consequences of the benefits upon receipt. Indexed pensions are a separate matter.

You should be aware that those who do pension valuations or valuations of any assets for that matter do not work for free. Their bills for valuations can represent a significant disbursement on your lawyer's account -- a disbursement that is eventually passed on to you. You should receive an estimate from your lawyer in advance before authorizing the valuation of an asset as significant as a pension.

One area of special interest in the area of pensions is the Canada Pension Plan (CPP) credit-sharing scheme. The CPP was amended in 1978 to provide for the sharing of the pension credits accumulated by one or both spouses during the years of their cohabitation. This sharing of credits takes effect upon the dissolution of the marriage. It was designed to ensure that low- or non-income-earning homemakers whose marriages had ended were provided with some pension coverage.

People who can claim a division of pension credits include married spouses who have been separated for at least one year as well as common-law spouses whose relationship has ended with the death of one of the parties or a separation lasting at least one year. The general rule applied is that upon the dissolution of the marriage or the ending of the common-law relationship, all unadjusted pensionable earnings of either spouse during the eligible years of cohabitation are added together with one-half the total being credited to the CPP or provincial pension plan account of each of the spouses.

Spouses whose divorce became absolute or effective prior to January 1, 1987 are treated differently than spouses whose divorce became effective after that date.

The method by which the credits are divided is related to the contributions made by the respective spouses to the CPP. A wife who never worked and was therefore never eligible to contribute to the CPP but whose husband always made the maximum allowable contribution would benefit to a large degree from the division scheme. If, however, the spouses had incomes throughout the marriage that were relatively equal, their pension credits would remain relatively unchanged.

Your precise entitlement to a sharing of CPP credits can vary and you should therefore consult your lawyer during the discussion of property division to determine whether or not you are entitled and, if so, to what form of credit.

Financial Statements

Returning to some of the more practical considerations of property division, we should consider the all-important financial statements for a moment. Each province prescribes its own particular form of financial statement. If spousal support, child support or property division is claimed by either party, financial statements must be filed. Financial statements can be dispensed with only in very limited circumstances of uncontested divorces where all financial matters have been resolved.

It is very likely that the first document a lawyer will present you with, after a Family Law Client History form, is the particular province's financial statement. You will be sent home with a direction to complete the form to the best of your ability and return it to the office. So much depends upon the accuracy of this statement that it must be a full statement, complete, up-to-date, and meaningful. There's no point in trying to avoid a description of an asset, artificially undervaluing an asset, or describing it in such vague terms that it cannot be understood. The content of the financial statement will be scrutinized by your spouse's lawyer and, ultimately, by the court.

While it's your job to locate the information and supporting documentation for the financial statement, it should be prepared under close supervision by your lawyer. Remember, the form is designed to save time and money by ensuring complete financial disclosure as early as possible in the legal proceedings.

Your all-important credibility in a legal proceeding is at risk if the financial statement is not prepared accurately. The courts look with disfavor upon a party who has neglected to give full and complete disclosure. You should remember that these financial statements are sworn affidavits. Any attempt to mislead the court can draw an adverse inference from the judge.

Your credibility is also at risk if the form is not honestly completed and honestly kept up to date throughout the proceedings. It may be necessary, from time to time, to file amended financial statements showing updates and corrections. I have seen a client's case improved immeasurably at trial when they have withstood a probing cross-examination of the financial statement and can demonstrate to the judge and the opposing counsel their complete honesty and accuracy in completing a financial statement.

In some cases, clients worry about the disclosure of confidential financial information in a public proceeding. Many provinces have now incorporated provisions into their rules of procedure that allow the financial statement to be shielded. If this is a concern, you should immediately consult with your lawyer so that you receive that type of provision.

The Last Word

Property division is the area of family law that varies most from province to province. The goals, as you have seen above, are relatively consistent in seeking to divide, on an equitable basis, the value of assets acquired by the marriage partnership between the date of the marriage and the date of separation or divorce.

Both you and your lawyer have a special role in the preparation of the information that will guide the court in its effort to divide your family property. Your primary goal is to ensure that your lawyer prepares, on your behalf, the most complete, honest and accurate financial statement possible. It is your job to ensure that the statement retains that status from the beginning of the proceeding to the trial.

This article has been edited and excerpted from Surviving Your Divorce: A Guide to Canadian Family Law (John Wiley & Sons) by Michael G. Cochrane. A lawyer with Ricketts, Harris in Toronto, Cochrane is the author of two other books on family law: For Better or For Worse: The Canadian Guide to Marriage Contracts and Cohabitation Agreements and Surviving Your Parents' Divorce, both of which are also published by John Wiley & Sons. All three titles are available at or at retail bookstores across Canada.

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August 16, 2006
Categories:  Financial Issues

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