Calculating Property & Equalization Payments During a Divorce
Understanding how property and equalization payments work in Ontario can be overwhelming. This guide will walk you through the basics and provide a real-world example to help you visualize how equalization is calculated.
What Is Equalization?
Under Ontario’s Family Law Act, the law aims to ensure that both spouses leave the marriage with an equal share of the net property acquired during the marriage. This is called the Equalization of Net Family Property (NFP).
How Is Equalization Calculated?
Each spouse calculates their Net Family Property (NFP) using the following steps:
1
Add up your assets on the date of separation.
2
Subtract any debts on the date of separation.
3
Subtract the value of any excluded property, such as:
- Inheritances
- Gifts from third parties
- Personal injury settlements
(Note: These must still exist and have been kept separate.)
4
Subtract the value of your net assets on the date of marriage (assets minus debts at marriage).
5
The result is your Net Family Property.
Each spouse does this calculation. Whichever spouse has the higher NFP pays half the difference to the other. This is the equalization payment.
Example Equalization Calculation
Date of Separation – Assets
| Asset | Husband | Wife |
|---|---|---|
| Home (joint ownership) | $190,000 | $190,000 |
| Cars (fair market value) | $30,000 | $12,000 |
| Pensions | $0 | $260,000 |
| RRSPs (net of 25% tax) | $210,000 | $25,000 |
| Snowmobiles | $5,000 | $0 |
| Business | $100,000 | $0 |
| Total Assets (A) | $535,000 | $487,000 |
Date of Separation – Debts
| Debt | Husband | Wife |
|---|---|---|
| Mortgage | $80,000 | $80,000 |
| Credit Cards | $10,000 | $7,000 |
| Car Loan | $8,000 | $0 |
| Total Debts (B) | $98,000 | $87,000 |
Excluded Property (C)
| Item | Husband | Wife |
|---|---|---|
| Snowmobile – Gift from parents | $5,000 | $0 |
Date of Marriage Assets Less Debts (D)
| Item | Husband | Wife |
|---|---|---|
| Pension | $0 | $25,000 |
| RRSP | $40,000 | $5,000 |
| Car | $3,000 | $4,000 |
| Car Loan | $0 | ($2,000) |
| Total D | $43,000 | $32,000 |
Summary: Net Family Property
| Husband | Wife | |
|---|---|---|
| Total A (Assets) | $535,000 | $487,000 |
| Minus B (Debts) | ($98,000) | ($87,000) |
| Minus C (Exclusions) | ($5,000) | $0 |
| Minus D (Marriage Assets) | ($43,000) | ($32,000) |
| Net Family Property | $389,000 | $368,000 |
Difference: $389,000 – $368,000 = $21,000
Equalization Payment Owed by Husband to Wife: $10,500
Property and Home Buyouts
If the husband wishes to keep the home, he must:
- Pay the equalization payment of $10,500
- Buy out the wife’s half of the home equity
- In this case: Home value: $380,000
- Mortgage: $80,000
- Equity: $300,000 → Each spouse’s share = $150,000
- The husband's total payment to the wife:
- $150,000 (her equity share) + $10,500 (equalization) = $160,500
Additional Notes
Exclusions must remain separate to be deducted. If inherited or gifted property is spent or used jointly, it typically cannot be excluded.
- Debts are treated individually unless jointly held. What’s in your name is your responsibility.
- Don’t over-focus on individual items, the law looks at the overall picture using the equalization formula.
- Valuation matters. A business or pension may need a certified valuation.
In rare cases, if equalization would be unfair (“unconscionable”), the court may allow unequal equalization. Speak to a lawyer if you believe this may apply.
Need Help?
Even experienced professionals sometimes get equalization wrong. At Galbraith Family Law, our lawyers handle these calculations daily. We can help ensure everything is done correctly and fairly.