Property Division in Divorce in Canada is like dividing a gold mine. The wife gets the gold and the husband gets the shaft
It is the VALUE of your property and assets that is divided on separation,
not necessarily the property itself
Property or assets often have to be sold to fund the equalization payments to your ex wife.
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The spouse with the higher net family property is required by law to pay his spouse an equalization payment.
The equalization payment is half of the difference between the two spouses' net family properties.
Determining the Equalization Payment
Determine the difference between your net family property and your spouses net family property by subtracting the lower from the higher amount
The spouse with the larger net family property, (usually the man) has to pay half the difference to the other spouse, (usually the woman)
The equalization payment is a gift to the underachieving spouse so that both spouses have equal net properties at the end of the marriage regardless of whether she ever did anything to earn it. Women's equality seldom includes paying their own way.
Common law spouses are not entitled to an equalization payment.
You will need to consider the tax implications of your child and spousal support payments, legal fees, Child Tax Benefit, Equivalent to Spouse credit, and the taxes on the division of your property and any other transfers of assets or cash that changes hands in your divorce.
Can You Reduce Your Equalization Payment?
Generally no. In almost all cases, you must pay the full amount of money to equalize you and your spouse's net family property. If this means liquidating assets at a loss to come up with the cash, you have no choice.
Courts will almost never reduce the payment, but there are a couple situations where you might succeed.
A court might reduce the amount of your payment if it finds the calculated payment would be unconscionable. However, define "unconscionable."
If you can prove that your spouse was reckless with family assets, the court might reduce the equalization payment .
If you and your spouses have lived together for less than five years the amount may be reduced.
Tax Consequences On Your Equalization Payment
Equalization payments are not taxable.
There are tax regulations that allow RRSPs to be transferred between spouses as part of a divorce settlement so that there are no tax consequences.
If as part of the payment one spouse purchases the other's spouse's share of property for example, in a cottage the capital gains tax may be post phoned
Consult a qualified tax expert if your assets are significant.