How is an equalization payment calculated in Ontario?
Under Ontario's Family Law Act, each spouse calculates their Net Family Property (NFP): the value of all assets on the separation (valuation) date, minus debts on that date, minus the net worth they brought into the marriage, minus any excluded property. The spouse with the higher NFP pays the other spouse half of the difference between their NFPs. This is the equalization payment.
What property is excluded from equalization in Canada?
Excluded property under FLA s.4(2) includes: gifts and inheritances received during the marriage (if kept separate), proceeds of a personal injury settlement, life insurance proceeds, and property the spouses agreed to exclude in a domestic contract. Income from excluded property is only excluded if the donor/will expressly says so.
Why isn't the matrimonial home deducted as marriage-date property?
A special rule in Ontario's FLA: if you owned the matrimonial home on the marriage date and it is still the matrimonial home at separation, you cannot deduct its marriage-date value. This often creates a large equalization obligation for the spouse who brought the home into the marriage.
Can an equalization payment be unequal?
Yes. Under FLA s.5(6), a court can order an unequal division if equal division would be 'unconscionable' — for example, where a spouse recklessly depleted assets, incurred debts in bad faith, or the marriage lasted under five years. This is a high threshold and rarely granted.