Dividing property and debts after you separate

The law calls you and your partner spouses if:

  • you're married, or
  • you've been living together in a marriage-like relationship (you might call it a common-law relationship) for at least two years.

If you divorce or separate, there are laws that say how the property and debt of spouses should be divided.

The law divides property into:

  • family property, and
  • excluded property.

What's family property?

Family property is everything you or your spouse own on the date you separate, except excluded property. It includes:

  • the family home
  • other land, houses, or condos
  • RRSPs
  • investments
  • bank accounts
  • insurance policies
  • pensions
  • businesses

It doesn't matter if the name of only one spouse is on any of these. The law says it's still family property.

See section 84 of the Family Law Act to find out more about what family property is.

What about property one of you owned before you got together?

Any property you owned before you and your spouse lived together is called excluded property. That means:

  • it's not family property, and
  • you don't have to split the value of it equally if you separate.

But if the property increases in value while you're living together, that increase is part of the family property. That means the increased value is divided equally between the two of you if you separate.

For example, say you owned a house before you started living with your spouse. If you separate, you won't have to give your spouse an equal share of its total value. But you do have to give them half of the increase in the house's value since you started living together.

Say:

  • your house was worth $250,000 when you and your spouse started living together, and
  • it's worth $450,000 when you separate.

That means it increased in value by $200,000 during your relationship.

Your spouse can get half of the increase, or $100,000 in this example.

Excluded property also includes property that you bought with excluded property.

For example, if you owned an apartment before you got married and you sold it to buy the family home after you got married, you can "trace" the value of the excluded property (the apartment) that went towards the new family property. You don't have to share this part of the value.

Tracing the value of the excluded property can be complicated, so you might need to get some legal advice.

What else is excluded property?

Other types of excluded property are:

  • any other assets that each of you owned before you started living together (whether you are married or not), and
  • any gifts or inheritances that only one spouse got.

See Section 85 of the Family Law Act for a full list of excluded property.

Remember: If you own something that's excluded property, its increase in value during the time you were living together is family property. That means you need to share the amount of the increase with your spouse.

What if your spouse gave you the excluded property?

Excluded property could become family property if one spouse:

  • mixes excluded property with family property, or
  • puts excluded property into the other spouse's name.

Here are a couple of examples of what might happen:

  • Example 1: One spouse inherits $100,000. They use that $100,000 to pay for property held jointly by both spouses. The court might decide that the $100,000 was a gift from one spouse to the other, so it's now family property.
  • Example 2: One spouse's parents give their child money for a down payment on a house that the child and their spouse both own. The court might decide that the money was a gift from one spouse to the other because they used it to pay for a house they both own. This means it becomes family property.

Make a written agreement if you want to be sure that any of the things in this list remain excluded property:

  • inheritance,
  • gifts from relatives, or
  • other excluded property (like savings you had before you moved in with your spouse) put into property bought during the relationship.

This can get complicated, and the law about it is changing, so you might need to get some legal advice.

How are family property and family debt divided?

If you and your spouse separate, the law says that all the family property and family debt have to be divided equally between the two of you, unless you make a different agreement.

If you and your spouse have made an agreement about property and debt, you'll divide everything the way you agreed to in the agreement.

See Write your own separation agreement for help with making an agreement if you're separating.

If you've already separated from your spouse, you can still make a separation agreement. See Making an agreement after you separate for tips on how to do this.

What's family debt?

Family debt includes all debts either spouse took on during the relationship. This includes:

  • mortgages
  • loans from family members
  • bank lines of credit or overdrafts
  • credit cards
  • income tax
  • repair costs

It also includes debts taken on after you separate if the money was used to take care of family property.

Both spouses are equally responsible for family debt:

  • whether they're married or living together as if they're married, and
  • even if one spouse's name isn't on the debt.

See section 86 of the Family Law Act to find out more about what counts as family debt.

Can creditors make you pay back your ex-spouse's debts?

Creditors can only collect payment from the person who took on (signed for) the debt. If a couple has joint debts, creditors might decide to collect payment from only one spouse.

If you've separated,

  • Write to all your creditors to tell them that you've separated from your spouse.
  • Cancel any secondary credit cards (that is, credit cards where you're the primary cardholder but your spouse has a second card).
  • Talk to your bank about any joint accounts you have and ask how you can protect the money.
  • Cut down the limits on any overdrafts and credit lines to what you owe now, or ask if the account can be changed so that you need two signatures to withdraw money.
  • If you need credit, ask the bank to open a line of credit in your name only.
  • Change the beneficiary to someone else if your spouse is the beneficiary of your:
    • investments,
    • RRSPs,
    • insurance, and
    • will.

This can get complicated. For example, you both need to agree about how you'll deal with taking money from an ATM.

You might need to get some legal advice.

Can family property and family debt be divided unequally?

The court will only order family property and family debt to be divided unequally if it would be "significantly unfair" to one spouse to divide it equally.

Here are some things the court will look at when it's deciding if it's fair to divide family property and family debt equally:

  • How long your relationship lasted.
  • If you made any agreements other than written agreements that were signed and witnessed.
  • How the family got into debt.
  • If your family debt is worth more than the family property.
  • Each spouse's ability to pay a share of that debt (for example, if you gave up work to stay home to look after your children, it won't be easy for you to pay off the debt).
  • If one spouse did something to increase or lower the family debt or property value after you separated.

You can agree to an unequal division (that is, one person gets more than the other) of family property if that seems fair to both you and your spouse.

See section 95 of the Family Law Act to find out more about unequal division of property and debt.

How much time do you have to divide family property or family debt?

There are time limits for making a claim to divide property and debt. The times are different for married spouses and common-law spouses:

  • If you were married, you have to apply to divide family property or debt no later than two years after you get an order for divorce or annulment.
  • If you were in a common-law relationship, you have to apply within two years of the date you separated.

For more information about dividing family property and debts, see: