Dividing your assets
How assets are divided is one of the main decisions that spouses need to make while going through divorce. While these can be very difficult decisions to make, they are necessary decisions and there is only one way to avoid making them – and that is to have a judge make them for you. Handing over control of your divorce to a judge is, in our opinion, the worst case scenario. After lawyers’ fees and the emotional stress of going through a trial in court, spouses are inevitably left with less than if had they been able to finalize their divorce themselves by creating a separation agreement.
We tell our clients that the best strategy is to do what the judge would otherwise do for you - follow the rules set out by the Canadian Government and create your own separation agreement. One of the most important things to do is to try to keep dialogue with your spouse open and honest. By staying honest and following the rules, spouses can save themselves the cost and stress of going to court.
Rules of asset division:
Here are some of the basics regarding how assets are divided.
All assets must be disclosed to your partner with an attached value. In general, property is divided evenly at the end of a marriage. Property which was owned prior to moving into the same residence or marriage (whichever is earlier) is not divided evenly. This means that if you owned a sofa before moving in with your spouse, the sofa is still yours at separation. The main exception to this rule is the matrimonial home. Even if the home was owned prior to living together or getting married, the home is still split evenly between spouses.
(For more information on how the matrimonial home is divided please see our previous post on this subject.)
Money is divided in much the same way as property. All money accumulated throughout the marriage is divided evenly. The money held by the parties prior to marriage and any money associated with an inheritance is exempt from being evenly divided.
Pension division is complex, and care should be taken when identifying your entitlements. The value of the pension at the time of marriage is determined, and the owner of the pension is entitled to this amount. The pension is then evaluated at the time of separation, and any difference in value between the date of marriage and separation is to be split between partners.
Pensions are difficult to place a strict value on. It is important that the valuation be accurate. Please contact us and we would be happy to recommend a pension valuator for you.
RRSPs are treated similar to pensions. They are divided based upon value at the date of marriage (or cohabitation) and the increase in value between that date and the date on which you separate is the amount that will be evenly divided between you and your spouse.
The sale or transfer of an RRSP carries potential tax consequences. It is important to be aware of these tax consequences when determining how to divide the asset. Keeping the RRSP whole and making an equalization payment is the ideal solution for most divorcees.
Our Asset Calculator
Our asset calculator is designed to create a fair division of assets based upon the information you provide. All you need to do is tell us whether you want to keep the asset, give the asset to your ex, or that you don't care. From that point on we handle the rest and provide you with three possible outcomes. Try out the asset calculator for free here:
THE SEPARATION AGREEMENT
A separation agreement is a legally binding contract that lays out the details of your divorce. While a separation agreement isn't necessary, it replaces your need to go to court. If you and your spouse are agreeable, creating a separation agreement yourselves is the best strategy for getting through divorce. Doing so will greatly reduce the cost of your divorce and give you control and flexibility over how your divorce is handled.
In general, a separation agreement sets out each spouse’s rights regarding: how assets and debts are divided, spousal/child support payments, and child custody/access. Any other decisions you've made regarding your separation are detailed in the separation agreement.
Our next post will discuss how the courts deal with determining spousal and child support payments. To keep yourself in the loop, Subscribe by entering your email at the bottom of this page or follow us on Twitter.