Dividing Property and Debt Upon Separation

By Lian Kubisz

Separating from a spouse is often emotionally taxing, and navigating the practical aspects of dividing property and debt adds another layer of complexity to an already challenging situation. Whether you and your spouse were married or unmarried, resolving the division of property and debt is crucial.

Who is considered a “spouse”?

For the purposes of dividing property and debt, two people are considered spouses if they were either married or living in a “marriage-like relationship” for at least two years. This might seem simple at first but can quickly become complicated. Courts have found that the period of living together does not necessarily have to be continuous, such as in cases where it has been interrupted for work or health reasons. It is possible for people to co-habit while maintaining two homes, if there was a rational reason for doing so.

The date a spousal relationship began is either the date of marriage, or the date that a couple began living in a marriage-like relationship, whichever is earlier.

Family Property and Debt

The first step in determining how to divide property and debt is to establish what constitutes family property and family debt.

All property owned by either or both spouses on the date of separation is considered family property unless it is excluded. This might include the family home, bank accounts, pensions, interests in businesses, and RRSPs. Likewise, all debt owing by either or both spouses on the date of separation is considered family debt unless it is excluded.

There is a presumption that entitlement to family property and responsibility for family debt are to be shared equally between both spouses. This remains true regardless of whether the spouses used or contributed equally to the property or debt.

Excluded Property and Debt

Property that one spouse owned prior to the start of the spousal relationship is considered excluded property. However, other property that is acquired during the spouses’ relationship can also be considered excluded property. This may include things like inheritances, gifts from third parties to only one spouse, and certain types of insurance payments, court awards, or settlements.

Similarly, debt that was incurred by one spouse prior to the start of the spousal relationship or after the date of separation is considered excluded debt. Sometimes, debt that is incurred after the date of separation may also be considered family debt, such as debt that was incurred for the purpose of maintaining family property.

It is important to note that even when dealing with excluded property, any increase in the value of the excluded property from either the date it is acquired, or the date the spousal relationship began, whichever is later, is considered family property. As such, any increase in value is to be shared equally between the parties.

Additionally, if one spouse claims that a piece of property should be excluded, they are responsible for proving that it is excluded property.

Conclusion

There are many factors to consider when dividing property and debt upon separation. If you are going through a separation, it is important to seek legal advice to properly understand how property and debt should be divided in your unique situation.