Equalization: how property is divided in Ontario

This is the single most misunderstood area of Ontario family law. People arrive expecting everything to be divided in half. That is not what the legislation does.

The calculation

Each spouse calculates their net family property: net worth on the date of separation, minus net worth on the date of marriage. The spouse with the larger increase pays the other half the difference. That payment is the equalization payment.

The result is that you are not dividing assets — you are equalizing growth. Someone who entered the marriage with substantial wealth generally keeps the value they brought in, while the increase during the marriage is shared.

The matrimonial home is different

The home receives special treatment. Its full value on the date of separation is included, regardless of who owns it or who brought it into the marriage. A spouse who owned the home before marrying does not deduct its value on the marriage date if it was still the matrimonial home at separation. This surprises people every time, and it can change a settlement substantially.

Excluded property

• Gifts and inheritances from third parties received during the marriage
• Income from those gifts if the donor specified it is excluded
• Damages for personal injury
• Certain life insurance proceeds
• Property traceable to any of the above

How exclusions are lost

By mixing. An inheritance deposited into a joint account, or used to pay down the mortgage on the matrimonial home, generally loses its excluded status. Keeping inherited funds separate and documented is what preserves the exclusion — and it must be done at the time, not explained afterward.