Going through the process of a divorce is already a hard task. In most cases, things go rougher when it is time to split the assets after a divorce. You will need knowledge about complicated legal principles and have to agree with the opposite side.
Hence, it is a very important part for people who are getting divorced or the people who are thinking about it. In this blog, we will explain the process of how to split assets in a divorce Canada so that you can learn about it.
What are Assets?
Assets are anything someone owns that adds value to them. Often, it refers to financial owning such as cash, shares, stocks, bonds, and more. Tangible items like property or equipment are also considered as assets. The owners can get value from their assets in the form of income produced from dividend payments, capital gains, or in some cases sale of some assets.
How Are Assets Valued During Divorce?
The basics of evaluating the assets in divorce cases are almost the same across Canada. The greater value of the assets between the current market price and the potential of future earnings is considered.
Real estate assets like cars or homes are appraised to determine their fair worth. Assets with earning potential like family businesses or stocks, are appraised by an expert to get a fair market value. In cases of antiques or other collectibles, an expert from the auction house can determine the true and proper value.
Can You Split Assets in a Divorce or Separation?
Yes, assets be split in Canada during a divorce or separation. Laws in each province and territory decide how to divide assets so that they are shared fairly between spouses. Usually, things that were bought during the marriage belong to both families and must be split equally. This includes homes, bank accounts, stocks, and retirement plans. But things that were brought into the marriage or received as gifts or inheritances may not be counted.
In some places, common-law partners may have to follow different rules. Usually, the first step in the split process is to list and value all of the assets. Next, a settlement is negotiated, or if that fails, a court order is sought. To get through the complicated process of dividing assets during a divorce or split, it’s important for couples to know what their legal rights and duties are and to get professional legal help if they need it.
How to Split Assets in Divorce Canada?
There are three major approaches to split assets in a Canadian divorce. They are:
Reaching an Agreement
Reaching an agreement is the most desirable and hassle-free approach. It reduces the legal complications and emotional damage of this process. You and your spouse can decide the portions of assets and debts you want to take and come to a fair agreement. You can get help from a lawyer or a mediator.
Arbitration
If you can not agree on your own about splitting the assets, you go for arbitration. You can find a neutral third party for you to decide on splitting the assets.
Going to Court
When you can not agree on your own, and arbitration does not work, you have no option but to go to court. After the failure of negotiation and arbitration, the judge will divide the assets. The judge will come up with a decision that is considered “Fair and equitable.”
What are the Ways to Protect My 401K While Getting a Divorce?
A 401K is a tax advantage providing retirement savings plan. It is named after a section of the US International Revenue Code. There is no equivalent to a 401k in Canada. RRSPs (Registered Retirement Saving Plans) and TFSAs (Tax-Free Saving Accounts) come close; they are similar but not the same.
Therefore, knowing how to protect your 401K in the divorce process is very important. There are two vital steps that you can take to protect your 401K effectively. However, it is always recommended to consult a lawyer because different situations and account types are divided differently.
- Pre-Nuptial Agreement: A prenuptial agreement can be made, mentioning the outlines of how the RRSP will be handled in case of divorce. It will be a great defence.
- Contributions Made Before Marriage: In times of divorce, contributions made to your RRSP before marriage are considered as your separate asset.
Are There Exceptions to the 50/50 Division?
Everything does not get split into 50/50 in Canada. In fact, assets gained while you are married are divided “Fairly.” Below, there are some facts you should know about this.
- Pre-marital assets like the grandmother’s inheritance are normally considered as the original owner’s personal assets and stay with him. But if the value of that inheritance increases during the marriage it will come into consideration. The increased value can be a subject of division.
- Depending on the situation, separate property can become marital. Suppose you have a pre-marital house. It will become a family asset if both spouses live in that house. Of course, if one spouse is added to the ownership in documents, it becomes family property.
- Splitting your house doesn’t mean you will have to break the house into two physically. One spouse can keep the house and give equivalent assets to balance the property value.
- Infidelity can also impact the process of splitting assets. If one spouse spends marital assets on an affair, the opposite party can claim compensation for their share of the property.
How to Protect Your Assets During Divorce?
Divorce comes with a requirement of splitting the family assets where there is a chance of financial loss for both parties. Thus, knowing how to protect your assets during divorce is crucial. Here are some tips for you:
- Review all the financial statements before you get a divorce.
- If possible, make a postnuptial agreement with the help of an experienced lawyer.
- Separate the marital property and non-marital property. It will make things easier.
- Always keep tabs on the marital property you are acquiring. Create an inventory and keep all the data sorted.
Ensuring these steps are taken properly will save your hard-earned property from being taken over.
How Can a Family Lawyer Help in Splitting Assets During a Divorce?
During the process of a divorce, many complex legal principles can make your life a mess. Especially when it comes to splitting the assets, an experienced family lawyer can be a big help. They are highly knowledgeable in this domain and give you proper guidelines. Their counsel is invaluable and can ensure you get your proper share of the assets. Besides, they can help you with child support, alimony, and all other divorce-related issues.
Final Thoughts
This blog covered almost everything you need to know about how to split assets in a divorce Canada. However, we highly recommend you consult an experienced and knowledgeable lawyer before starting the process. Remember, every divorce situation is unique, which changes the outcome of the process. Keep your cool, and don’t do anything that will make you regret it in the long run.
FAQs
Does my wife get half of everything after the divorce in Canada?
No, your wife will not automatically get half of everything. The pre-marital assets and inheritance will be considered your separate assets, and the marital assets will be divided “Fairly.”
Is inheritance money split in a divorce in Canada?
Well, that depends on the type of inheritance. If the assets are inherited pre-marital times, they will remain yours. If the assets are inherited during your marriage, then it could be different. Even in cases of pre-marital inheritance, if the value of the assets increases during marriage, the increased value can be a subject of division.