Marital breakdowns can be some of the most difficult and emotional experiences for individuals to face. In a recent article, we discussed the calculation of income for support obligations. This article will focus on the Family Law concept of the division of assets, known as Net Family Property (“NFP”).

The fair market value (“FMV”) of NFP can be calculated as follows at a particular date:

Net Family Property = Total FMV of Assets – Total FMV of Liabilities

The concept of NFP is important to the facilitation of division of assets in a divorce. In Ontario, spouses share in the total increase in their respective NFP from the Date of Marriage (“DOM”) to the Date of Separation (“DOS”). If the NFP for one spouse increased more than that of the other spouse during the marriage, an equalization payment from the former to the latter may be necessary.

Some of the most common questions when it comes to the equalization of Net Family Property include:

a) How is an equalization payment calculated?

b) What are the tax implications?


Guidance regarding property ownership in Canada varies across the country. In Ontario, upon the breakdown of a marriage, all assets and liabilities acquired during the marriage are viewed as shared by each spouse, with some exclusions, such as inherited property that is maintained separately from jointly owned property (e.g. inherited funds that are kept in a separate investment account and are not comingled with a joint bank account used for shared purposes).

Of particular note, the matrimonial home receives special treatment in the NFP calculation. If one spouse owns a home at the DOM that becomes the matrimonial home, that spouse is not able to include the value of the home as a DOM asset, but it will be included as a DOS asset. The impact of this could lead to a substantially larger equalization amount owed by the spouse who owned the home prior to marriage.

Common-law couples in Ontario are not necessarily subject to the same laws as married couples when it comes to property that was accumulated during the relationship. One such difference is that common-law partners may not share in the growth in value of property a partner may have brought into the relationship.

Generally, equalization of NFP is applicable to married couples, but there are exceptions. On that note, it is important to speak to a legal professional to determine whether equalization of NFP applies to a particular relationship.

Calculating the Equalization Amount

The key steps related to calculating the equalization amount are as follows:

a) Each spouse will calculate their NFP at the Dates of Marriage and Separation.

b) Both parties will then deduct their NFP at the DOM from their NFP at the DOS. This will determine the increase in each spouse’s NFP during the marriage.

c) The difference between the increases for each spouse is divided in half.

The chart below provides a simplified equalization calculation:

We note that identifying the existence and fair market values of all of the applicable assets and liabilities that should be included in the calculation of NFP can be a time-consuming exercise. Examples of assets and liabilities that are typically considered include, but are not limited to, the following:

  • Real estate (matrimonial home, vacation dwellings, rental properties, etc.);
  • Cars, boats, aircraft and other motorized equipment;
  • Other assets (jewelry, antiques, artwork, furniture, etc.);
  • Chequing, savings, and investment accounts (including RRSP, TFSA, and pension accounts);
  • Interests in privately held corporations;
  • Debts (credit cards, line of credits, and mortgages);
  • Loans receivable or payable; etc.

Determining the FMV of privately held corporations can be a particularly complex point of contention, especially when there are multiples businesses involved. As a result, it is common that a family lawyer will engage a Chartered Business Valuator (“CBV”) with experience in business valuations and matrimonial disputes.

Tax Implications

Any equalization payment made by one spouse to another is not tax deductible by the payor and is not included in taxable income for the recipient. In some cases, the payor may finance the equalization payment by selling assets or making withdrawals from an RRSP account, which would trigger a taxable event.  Furthermore, with respect to some of the assets listed above (e.g. investment accounts, private corporations, real estate, etc.), it is necessary to calculate Contingent Disposition Costs (“CDC”), such as expenses to sell an asset at a valuation date (e.g. real estate commissions, income taxes on the increase in the value of the investments, etc.), which will impact the NFP calculation.

GG Observations

Once NFP is calculated, each party can conduct more progressive negotiations toward resolution of the equalization of assets and how the payment will be made. For instance, there could be a direct transfer of certain assets and/or cash.

Resolution of a marital breakdown can be a complex and time-consuming process. Our team of Valuation and Tax experts is here to make the process easier. Do not hesitate to reach out if you would like to discuss any concepts pertaining to the calculation of Net Family Property, and about how we can assist with these, and other important matters.



Tom Strezos, CPA, CA, CBV, CFE, ASA

Valuations and Litigation Support

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Direct: (905) 747-5162

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Claudio Martellacci, CPA, CA, CBV

Partner – Valuations & Litigation Support

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Direct: (289) 819-1744