How is the matrimonial home divided?
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Ontario has some very particular rules for addressing specific situations in family law. One of these is how the family home, or “matrimonial home”, is dealt with during separation and divorce.
What is a Matrimonial Home?
In legal terms, a “matrimonial home” is defined in the Family Law Act as:
18 (1) Every property in which a person has an interest and that is or, if the spouses have separated, was at the time of separation ordinarily occupied by the person and his or her spouse as their family residence is their matrimonial home.
The key phrase here is “was at the time of separation ordinarily occupied,” as a residence brought into a marriage by one of the spouses, which is still the family home at the date of separation, fits the definition of a matrimonial home, but a residence that is brought into the marriage and sold prior to separation, does not.
|Need to know more about the matrimonial home? More information on the status, possession, and how the matrimonial home is considered during a divorce, can be found in our blog,
How is the Matrimonial Home Different than Other Property?
Special Status of the Matrimonial Home
When calculating the equalization of net family properties, the matrimonial home has a “special status” (with regards to whether the property was brought into the marriage by one of the spouses and whether you sell this property). A couple’s net family properties and assets usually amount to many hundreds of thousands of dollars, with the matrimonial home being one of the largest factors.
This situation does not apply to common law relationships unless there is an agreed upon contract or signed agreement between the parties.
Under section 4(1) of the Family Law Act, when calculating the value of property owned by a spouse on the date of marriage, that spouse is entitled to include the value of all property owned by them at the date of marriage, other than the value of the matrimonial home.
Equalization & Net Family Properties
For some background, equalization is calculated under section 5 of the Family Law Act: when a marriage breaks down, spouses are entitled to a division of their net family properties (NFP), so that the spouses may equally share in the wealth they accumulated together during their marriage. A spouse’s NFP is the amount that their net worth has increased during the course of the marriage: the value of their assets, minus their debts and liabilities. The court calculates the spouses’ net worth on the “valuation date” (generally, the date of separation), then subtracts what their net worth was on the date of marriage.
|Example: Calculating NFP|
|Two parties accumulated $300,000 during their marriage. If one party had a net worth of $50,000 on the date of marriage, and a net worth of $250,000 on the date of separation, their NFP would be $200,000. If the other party has an NFP of $100,000, the court would equalize their NFPs by ordering the party with the higher NFP (the spouse with an NFP of $200,000) to pay the spouse $50,000, resulting in them equally sharing the $300,000, at $150,000 each.|
What does this mean for the Matrimonial Home?
As a result of the phrasing of the law, if a person has an interest in a residence that is worth $200,000 on the date that they get married, but that residence is sold before they separate, they are entitled to a marital date deduction of $200,000 when calculating their NFP. Particularly, this remains the case even if the sale proceeds were used to purchase a new residence that is occupied as a family residence on the separation date.
If the parties had continued to occupy the original residence as their family home up until the time that they separated however, no deduction is permitted, resulting in an NFP that is $200,000 greater than in the prior example.
|Example: Different Results with the Matrimonial Home|
|Assume that the home brought into a marriage was worth $1,000,000 (and had no mortgage). If the home is still lived in it at the date of separation, the other spouse gets half the value ($500,000) upon separation. By contrast, if the home is sold during the marriage and the spouses later separate, the spouse that originally brought the home into the marriage does not lose their investment ($500,000)!|
While it might make sense for lawmakers to treat matrimonial homes differently from other property, the distinction between residences that are sold during the marriage and residences that remain the family home creates inequity and could cause significant financial loss or gain, depending on who brought the home into the marriage.
Conclusion: What to Do from a Legal Perspective
If you enter, or entered, into marriage with a home and the two of you move into it together, your best personal financial strategy would be to sell it and buy another home.
Conversely, if your spouse came into the marriage with such a home, your best personal financial strategy would be to not move out of it and to never buy another home together.
Needless to say, the rule is weird. Unfortunately, there are many other rules like it in family law. The lawyers of Stephen Durbin and Associates are experienced in matters of the matrimonial home and real estate. We can lead you through the process in order to ensure your rights are protected and you are treated fairly in divorce and separation.
Please be advised that all articles written on this website are for informational purposes only and do not constitute legal advice on any subject matter. The information contained within these articles is subject to change at any time and should not be acted upon without previous consultation with legal counsel.