Division of property and equalization relates to the assets and liabilities accumulated by the parties during their marriage, collectively called the net family property. The division of Net family property happens upon a dissolution of marriage. Common law spouses may not be able to seek equalization of their net family property except in cases where it can be shown that there is a constructive trust issue or perhaps a joint family venture. These concepts are usually only applicable to longer term relationships.
Upon marriage breakdown, the triggering event for the divorce process is called the “date of separation” or “valuation date”. The date of separation is the more commonly used term. This is the date that the parties separated with no possibility of reconciliation. As “living separate and apart” can look different for different families, sometimes, determining this date can be the cause of litigation. It is not uncommon for parties to be separated but continuing to live under the same roof. If the date of separation is unclear, it is determined based on evidence, for example, one spouse left the matrimonial home with a view to live elsewhere or by consent.
The date of separation is the basis for equalization calculations and is the date that the parties are no longer financially tied to each other except for where they have joint rights and obligations. For example, a joint credit card continues to be a joint debt.
Equalization recognizes both spouses contribution to the marriage. Marriage is an equal partnership, whether one spouse is responsible for the financial well-being of the family and the other is responsible for the running of the household. Both contributions are recognized.
To determine equalization, the parties must provide to the other party a sworn financial statement which lists all assets, liabilities, inheritances, gifts, etc. on the date of separation or valuation date. In addition, all of the parties’ debts and assets from the date of marriage must be listed. Supporting documentation must be provided as well.
Disputes may arise dealing with the value and ownership of property. In addition, it is not uncommon for a party to neglect to list assets or to provide adequate value. It may also be necessary to obtain a preservation order to prevent a party from depleting the family assets prior to the completion of the equalization analysis. Pensions are also included in the calculation of net family property. Depending on the type of pension, it may be necessary to engage the services of a pension valuator. Often due to the complexity of either party’s financial position, forensic accountants may be necessary. As well, if a party owns a private company, sole proprietorship or partnership, it may be necessary to obtain the services of a Chartered Business Valuator to value the company.
Once each party’s net worth is determined, the party with the higher net worth owes an equalization payment to the party with the lesser net worth such that the parties then each have the same net worth. This is equalization.. Each spouse may retain their property as long as the value of the property has been included in the equalization calculation.
The longer the marriage and the more prosperous the couple, the more likely it is that determining division of property and equalization will be complicated. Both parties would probably benefit from legal representation.
At Heft Law, we have a network of evaluators and financial experts who we know and trust, and who have many years of experience helping our clients. Not every situation calls for an expert. Contact us at Heft Law for your No Fee 30 minute initial consultation to see if an expert is necessary in your matter.