“I bought that condo five years before I met him. It has nothing to do with this.” It is one of the most common things people say when they first sit down to talk about a separation, and in Ontario it is only partly true. What you owned before the wedding still belongs to you. Ownership, however, is a different question from how much you will have to share at the end.
Ontario’s Family Law Act does not ask who owned what first and hand it back. For married spouses, it gives you a credit for the net value of what you brought in, as it stood on your wedding day. Growth after that date is generally shared, and a house you lived in together may lose the credit altogether. The result can feel backward, especially for someone who worked for years to buy a first home in Brampton before getting married.
This article is general information and not legal advice. It applies to married couples. If you were never married, the rules below do not apply, and the position is described later on.
The credit is a number, frozen in time
Each spouse’s net family property starts with what they own on the valuation date, usually the date of separation, minus their debts. Then comes the deduction: the value of property owned on the date of marriage, other than a matrimonial home, after subtracting debts and liabilities on that date.
Three things follow.
Only the wedding-day value counts. Let’s say that, hypothetically, you owned shares worth $50,000 when you married, and that they are worth $150,000 at separation. You list $150,000 and deduct $50,000. The extra $100,000 goes into the calculation. The fact that the asset came with you does not protect its growth.
The asset itself does not have to survive. You get the deduction for what you owned at marriage even if you have since sold it or spent it. A car you had on your wedding day and scrapped ten years ago can still count at its old value, if you can prove what it was worth.
The other spouse’s assets are treated the same way. Both people go through the same exercise. It is the comparison of the two final figures that decides who pays. The spouse with the higher net family property pays half of the difference.
Debts on your wedding day
The deduction is a net figure, so what you owed at marriage reduces it. A person with $40,000 in savings and $25,000 in student loans brought in a net $15,000.
The statute has one carve-out, which is easy to overlook. When calculating the date-of-marriage figure, debts “related directly to the acquisition or significant improvement of a matrimonial home” are not subtracted. This fits with the home’s treatment overall: since the home gets no deduction, its mortgage does not reduce the credit you get for your other assets. For example, someone who owned a house with a large mortgage and a separate $80,000 investment account may still be able to claim the full $80,000, provided that the house qualifies as a matrimonial home at the valuation date. If a spouse’s debts at marriage exceeded their assets, how that plays out is a technical question, and you should get specific advice on it.
The house you already owned
The biggest surprise usually involves real estate. The Act says the date-of-marriage deduction is for property “other than a matrimonial home”. A matrimonial home is every property in which a spouse has an interest and that was ordinarily occupied by the couple as their family residence at the time of separation.
The test looks at the status of the property at separation, not on the wedding day. So the outcomes can be very different on facts that seem similar. Here are three hypothetical stories with one starting point. In each, a spouse owns a Brampton townhouse worth $300,000 on the wedding day, with no mortgage.
Story one: they live there until they separate. The townhouse is a matrimonial home on the valuation date. It is now worth $700,000. The owner includes the full $700,000 and gets no deduction for the $300,000. The entire value goes into the calculation, even though the other spouse never paid a dollar toward it.
Story two: they sell it and buy a bigger house together, before separation. The townhouse is gone before the valuation date, so it was never a matrimonial home at that point. The owner may claim the $300,000 date-of-marriage deduction, while the new house’s value is counted. The owner gets a credit that the first story does not allow.
Story three: they move out and rent it out, then separate later. On these facts, if it was not ordinarily occupied as a family residence at the time of separation, it is not a matrimonial home. The owner may claim the $300,000 deduction. The growth is still included.
This is the reason people ask whether it matters when they move. It can matter a lot. Please do not make decisions about your home solely to affect a calculation without advice, since the status of a property can be disputed, and the same facts may raise other issues. A cottage or a second home that the family regularly uses can also be a matrimonial home, and a person may have more than one.
Equal rights to live there
Separate from the money, both spouses have an equal right to possession of a matrimonial home, regardless of whose name is on title. You cannot change the locks on your spouse just because you bought the place before the wedding. Selling or mortgaging it generally requires the other spouse’s consent or a court order. Title gives you ownership but not unilateral control, while the marriage continues.
Putting your spouse on title
Many couples add a spouse to the title of a home that one of them owned before marriage. It often seems like the natural thing to do, or a lender may ask for it. Under section 14 of the Act, holding property as joint tenants is proof, unless there is contrary evidence, that the spouses were intended to own it jointly. So that person may now own half outright. The equalization calculation is one thing; the ownership split is another. In many families, the combined effect is that the original owner ends up with no credit at all for what they brought to the marriage.
If you have transferred a share already, get advice before assuming you can undo it. If you are thinking of it now, consider a marriage contract first.
RRSPs, pensions and everything else
RRSPs and TFSAs. The value on your wedding day is deducted, net of any contingent tax that applies, and the same adjustment can be claimed at the valuation date. The rate is a matter of evidence. Remember to gather statements for both dates.
Pensions. A pension is valued differently. The Act defines the property as the imputed value of your interest for the period from the date of marriage to the valuation date. So the pre-marriage portion is effectively already left out, and you generally do not take a further deduction for it. The plan administrator’s family law value will reflect that period if you ask for the correct dates.
Businesses and shares. Owning a business before the marriage produces a deduction for its value on that date. If the business has grown, the growth is included. Valuing a small company as of a date years or decades ago is often expensive, because the records may be thin and an expert may be needed. For many business owners, this is the strongest reason to sign a marriage contract before the wedding.
Vehicles, jewellery and household items. These count too, although the amounts may not be large enough to justify a dispute.
Land and accounts outside Canada. For many Brampton families, the most significant pre-marriage asset is a family home or farmland in another country. You can claim it, but you must prove your interest and its value on the marriage date. That can require old land records, foreign bank statements, translated documents and a retrospective appraisal by someone qualified there. Also note the exchange rate on the relevant date. Any share of family land that you hold should be disclosed on your financial statement whether you think it counts or not.
You have to prove it
Section 4(3) puts the onus of proving a deduction on the person claiming it. This is where many strong claims become weak ones. A spouse who says “I definitely had $60,000 in savings in 2006” without anything further may get little or nothing for it.
Useful records include:
- bank, RRSP and investment statements from the months around the wedding
- a mortgage statement or purchase documents and a retrospective appraisal for real estate
- vehicle ownership records and old sales ads for similar cars
- corporate financial statements and tax returns for a business
- old income tax returns
- a financial statement or disclosure exchanged at the time of a marriage contract
If a bank no longer keeps a statement, ask anyway. Sometimes a later statement shows an opening balance or a transaction that helps. A judge can draw reasonable conclusions from indirect evidence, and a claim with partial evidence may succeed in part. Do start early, because it can take months to obtain records from other countries.
Common-law couples
None of this applies if you were not married. Common-law partners in Ontario do not have an equalization claim, however long they lived together, and each generally keeps what is in their own name. A partner who contributed to the other’s property, for example through mortgage payments or renovation work, may have a claim based on trust or unjust enrichment. That is a different analysis that looks at contributions and benefits, not at a date-of-marriage deduction. It is one reason why couples should know their status when they consider buying or moving together.
The marriage date matters in another way, too. Time spent living together before marriage does not change the rule: the deduction uses the wedding date. Couples who lived together for ten years and then married may be surprised by what falls on which side of that line.
Protecting pre-marriage property
A properly made marriage contract is the main tool. The Act excludes property the spouses have agreed, by a domestic contract, not to include in net family property. Such a contract can:
- exclude a home you own from equalization, along with its growth
- exclude a business or shares
- set an agreed date-of-marriage value, which avoids an argument years down the road
- provide for what happens to money you each put into a home
A contract cannot remove a spouse’s right to possession of the matrimonial home under Part II of the Act. It must also be in writing, signed and witnessed, and it can be set aside for reasons such as a failure to disclose significant assets or debts. You can make one before the wedding or while you are married.
Even without a contract, a small step helps: on the day you marry, or as soon as you can after that, save a dated record of everything you own and owe. Keep it somewhere that will still be available in twenty years. It may be the most valuable piece of paper you ever file.
Where to go from here
If you are already separated, the first task is to make a list of what you owned and owed on the date of marriage, along with a note about the record you have for each item. Be aware of the deadline too: an equalization claim generally must be made within two years of a divorce or six years of separation, whichever comes first. Our family law team can help you to work out how these rules apply to your property, and you can read about our work in Brampton or contact the office to book a time to talk.