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How to Split Assets in a Canadian Divorce

Splitting assets causes a great deal of anxiety during most divorces. Many people are worried they’ll be left destitute, or that their former spouse will walk away with “everything.”

It is almost impossible for either spouse to walk away with everything however. Canadian law is designed to divide property as equitably as possible. 


How are finances split in a divorce?

Assets are divided up between marital assets and non-marital assets.

Non-marital assets are any assets you owned prior to entering the marriage, so long as you did not comingle them with marital assets. For example, if you owned a boat before you were married then you’ll be able to take the boat with you during your divorce.

Co-mingling does leave some sorts of property in a precarious position. For example if you owned a business prior to your marriage, then gave your spouse shares of the business and proceeded to employ your spouse in the business, then there’s a good chance the business has passed on towards becoming marital property. If you owned a retirement account then the principle you brought into the marriage is still yours, but any profits or gains made after the marriage would be marital property.

Marital property is any property acquired from the date of marriage. It is assumed that both parties contribute to your paired ability to get assets, even if one spouse did not work. Even a spouse who works as a homemaker provides a long list of services, without which it would not have been possible to acquire as many assets as have been acquired.

Both spouses have a 50% right to marital property, though the division of property is not always, as a practical matter, purely 50/50. Judges attempt to make the division of property equitable. Your divorce attorney will also attempt to help you retain the value of the property.

For example, it’s impossible to hand someone 50% of an investment account without devaluing the account. There’s less in the account to gain interest, so the long-term value is hindered. There are other ways to work a divorce settlement to ensure that the value is retained.

It’s impossible to just chop a home or property in half, and it might not be desirable to force the sale of the property. One spouse might agree to give up something else in order to take the property whole, or might make an equalization payment or buy out the spouse’s interest in that property instead.

The only exception to the 50% property rule is if a spouse spent a great deal of the marital property entertaining an affair. For example, if you spent $25,000 bringing a paramour to Paris then the spouse might be entitled to claw back that $25,000 even if it would put their share of the property over 50%.

Until a divorce goes to trial, the division of property is negotiable. Spouses have the power to agree to almost any settlement that makes sense to them as long as it does not violate Canadian law. You and your attorney can work out any number of creative agreements. You’re likely to walk away with more property, and more valuable property, by doing that than you are if you try to fight tooth and nail.

Speak to your attorney to get the best case and worst case scenario for your case. You want your divorce settlement to land somewhere between those two extremes. 


How are debts divided in a divorce?

Debts, like assets, are divided 50/50. The only exception is if a spouse ran up debts entertaining a lover during an affair. Those debts would almost always be assigned right back to the spouse who incurred them. Even pleading that you did not know about a debt won’t necessarily stop it from being assigned to you.

Debts, like assets, are divided into marital and non-marital debts, and debts are as negotiable as assets are. 


Will my spouse get half my pension if we divorce?

Not necessarily. The division of pensions is extremely complex. Speak to your attorney to get the likely scenario in your specific case, and your options for offering pension benefits in a divorce settlement.

It is likely you will have to give up at least some of your pension to your spouse, unless you are willing to make some other payment or give up some other asset in return for keeping your pension untouched. 


Are there exceptions to equalization? 

There are several exceptions to equalization. The court may vary the equalization payment if:

  • One spouse tries to hide assets.
  • A spouse recklessly depletes assets prior to separation.
  • A spouse recklessly incurs debts prior to separation.
  • The spouse lies about debts or assets at the time of marriage. 
  • The marriage lasted less than 5 years, which can reduce a spouse’s claim on commingled non-marital property.

Keep careful records of your joint accounts and other jointly held assets at the time of separation to make sure that you can prove reckless depletion or incursion of debts! 

The only other exception is that you do not have to have an equalization arrangement if you settle your divorce out of court. Mediation, negotiation, and collaborative divorces are the most successful. The courts will almost always simply try to push the arrangements as close to 50/50 as possible, even if that means devaluing assets or creating long-term problems. Remember that a judge has very little time to get to know you or your unique financial situation. The last thing you want to do is to launch a divorce trial. 


Get Help Today 

Dividing assets is a complex process. Get help from Merchant Law. We’ve helped thousands of high net worth Canadians navigate their divorce cases. 

We help clients in British Columbia, Alberta, Saskatchewan, and Manitoba. We’re known for being some of Canada’s savviest negotiators and toughest litigators. We’re also a full service law firm, which means you get the benefit of working with skilled attorneys who have a firm backing in real estate and business law. This allows us to come up with sophisticated legal solutions to your division of property and spousal support issues, and to preserve the value of your assets.

Contact Merchant Law to get started today.

About Donald I.M. Outerbridge

Donald became the Executive Director of Merchant Law Group LLP starting in 1993, nearly 30 years ago. His experience managing law firms at various levels and in multiple provinces across Canada goes back even further to 1981.

Please note: The information provided on this website is Not Legal Advice. The information may or may not be accurate. The information is for discussion purposes only. Reliance upon any information provided would not be grounds to advance a claim against Merchant Law for providing any advice. In order to get a formal legal opinion upon which you may rely about any specific fact scenario, you would have to first retain the services of a lawyer and request a formal legal opinion.