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The Matrimonial Home Trap

The Matrimonial Home Trap

There is a unique rule in the Ontario Family Law Act that can have a significant financial impact on individuals entering a marriage. It is an exception to the rules on splitting family assets. When a marriage ends, the value of any property that was acquired by the spouses during the marriage and still exists at separation must be divided equally. Any increase in the value of the property that was owned on the date of marriage must also be shared. Each spouse determines his or her net family property by taking the value of the property that is owned on the date of separation less any assets owned at the date of marriage. When the marriage ends, each spouse makes an equalization payment to their former spouse of 50% of their net family property. These rules ensure any increase in the value of the property during the marriage is shared.
The matrimonial home is an exception to the formula. It the property was owned on the date the individual gets married it cannot be deducted in the calculation of net family property. Thus, if a person owns a $500,000 home at the date of marriage, the value of the property will be split. To use an extreme example, John owns a home valued at $500,000. If they separate one month later, his former spouse is entitled to 50% of the value of the home.
This becomes an important issue when couples are approaching the second marriage and both individuals own a home. One individual will have an incredible advantage in case of separation if that person sold his or her home and moved into the house owned by the future spouse. In addition to having a claim on 50% of the new home, the sale of the former house will result in a higher value of property owned at the time of the marriage.
Although it may not make emotional sense, the ideal solution is for both parties to sell their home and prior to the marriage and use the proceeds to jointly purchase a new home.
Other rules that may apply to the matrimonial home include
• The matrimonial home can include more than one property. For example, if the couple had a home in the city and a cottage, both properties may be included in the definition of matrimonial home.
• The matrimonial home rules only apply to married couples and not couples living common-law.
• A prenuptial agreement (marriage contract) can eliminate this potential problem.
• Both spouses have a right of possession regardless of whose name is on the deed.
• A spouse cannot acquire a mortgage on the property without their spouse’s consent.
Conclusion – It has been said that the exception in the net family property rules for the matrimonial home is the best thing that ever happened to gold diggers and gigolos. If you are entering a marriage and own home, see a lawyer.

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