How an Ontario equalization payment is paid

An Ontario equalization payment is normally a single sum of money that the spouse with the higher net family property pays to the other spouse. It can be paid in cash, by transferring property, from a pension, or out of the sale of the home. A court can allow it to be paid in instalments, or delay it, for up to ten years, but only if that is necessary to avoid hardship, and it can require security such as a charge on property (Family Law Act, s. 9(1)).

How does an equalization payment get paid, step by step?

The equalization payment is the end point of the property calculation described on our property division page. Each married spouse works out a net family property, and the spouse with the lower figure is entitled to one-half of the difference (Family Law Act, s. 5(1)). That entitlement is a debt between the spouses. It does not give either of you a half share of any particular asset. How the money actually moves is a separate question, and it is often the harder one.

Fix the number. The amount comes from the two net family property statements, built from values on the valuation date. Our step-by-step guide to calculating net family property shows how each side's figure is reached.
List the sources of money. Write down what the paying spouse actually has: bank and investment accounts, equity in the matrimonial home, registered savings, a pension, shares in a company. A payor can owe a large sum and still have very little cash.
Agree on the method, or ask the court. Most couples settle the method in a separation agreement. If they cannot agree, the Superior Court of Justice decides on an application under s. 7. The Ontario Court of Justice cannot hear equalization claims, because the definition of "court" in Part I leaves it out (s. 4(1)).
Choose the tools. Under s. 9(1), the court may order a lump sum payment, security for that payment (including a charge on property), instalments or a delay of up to ten years where needed to avoid hardship, the transfer or vesting of specific property, or the partition or sale of property.
Paper the transfer. If property moves between you, the transfer needs to follow the agreement or order. A deed for a home, a pension transfer form or a share transfer each has its own paperwork.
Enforce if it is not paid. An unpaid court order for payment can be enforced through the Family Law Rules, including seizure and sale and garnishment (rule 26(3)).

Ways an equalization payment can be paid in Ontario

Method	When it tends to fit	Legal basis	Watch for
Lump sum cash	The payor has savings or can borrow	Family Law Act, s. 9(1)(a)	Prejudgment interest may be claimed, and money owing under an order bears interest (Courts of Justice Act, ss. 128 and 129)
Transfer of a specific asset, such as the home or an investment account	The receiving spouse wants the asset instead of cash	s. 9(1)(d)(i)	Tax cost of the asset, land transfer paperwork, mortgage approval
Sale and division of proceeds	Neither spouse can buy the other out	s. 9(1)(d)(ii); Partition Act	Selling costs and timing; s. 11 limits for a working business or farm
Pension lump sum transfer	Most of the payor's property is a pension	s. 10.1(3); Pension Benefits Act, s. 67.3	No more than 50 percent of the family law value can be transferred
Instalments or delayed payment	Paying now would cause hardship	s. 9(1)(c)	Ten-year outer limit (s. 9(4)); security and financial reporting can be ordered (s. 9(1)(b), s. 9(2))
Share of business profits or shares in the company	Paying from the business would force a sale or seriously impair it	s. 11(2)	Only where needed to avoid that harm

Can an equalization payment be paid over time?

Yes, but the Act treats it as an exception. Section 9(1)(c) lets the court order instalments over a period of no more than ten years, or delay all or part of the payment for up to ten years, "if necessary to avoid hardship." The words matter. The fact that paying at once is inconvenient, or that the payor would prefer to keep investments intact, is not the same as hardship.

When a court does order instalments or a delayed payment, three protections usually travel with it:

Security. The court may order that security be given for the payment, including a charge registered on property (s. 9(1)(b)). If the payor later defaults, the court can direct the sale of the charged property to realize the security, on notice to everyone with an interest in it (s. 13).
Financial reporting. The court may order the paying spouse to provide specified financial information, including periodic financial statements, and to allow inspections of specified property (s. 9(2)).
Limited variation. If the payor's circumstances change materially, the court may vary the instalment or delay terms, but it cannot change the amount the receiving spouse is entitled to (s. 9(3)). Neither a variation nor an extension of time can push payment past the ten-year limit (s. 9(4)).

Spouses who settle by agreement have more room. A separation agreement can set its own payment schedule, interest and security, and a domestic contract on a matter dealt with in the Act generally prevails (s. 2(10)). Agreements that defer payment should say what happens if a payment is missed, whether interest runs, and what security stands behind the promise.

What changes the answer

A pension is the main asset. Before a pension is in pay, an order can provide for an immediate lump sum transfer out of the plan and no other division. If the first pension payment was due on or before the valuation date, the order can divide the pension payments instead (Family Law Act, s. 10.1(3) and (5)). In deciding whether to order a transfer and how much, the court can look at the assets each spouse has, how much of the payor's net family property is the pension, liquidity, contingent tax and each spouse's retirement resources (s. 10.1(4)). Our page on how pensions are divided on separation sets out the 50 percent cap and the administrator's deadlines.
A business or farm is the main asset. An order under s. 9 or s. 10 must not require the sale of an operating business or farm, or seriously impair its operation, unless there is no reasonable alternative (s. 11(1)). The court can instead order a share of profits, or a transfer or issue of shares if the business is incorporated (s. 11(2)). Our guide to a business owned by one spouse explains how the value is reached in the first place.
The home holds most of the equity. The court can order a property transferred to one spouse or sold (s. 9(1)(d)). A buyout usually depends on whether the keeping spouse can refinance. Our page on who keeps the matrimonial home covers the possession rules that apply in the meantime.
Assets are at risk of disappearing. Where it is necessary to protect the other spouse's interests, the court can make an interim or final order restraining the depletion of a spouse's property and for its preservation (s. 12).
Tax on transferred property. Under the Income Tax Act, capital property transferred to a former spouse in settlement of rights arising out of the marriage generally moves at its tax cost, unless the transferor elects otherwise (s. 73(1) and (1.01)(b)). The income attribution rules generally stop applying to income for the period the spouses live separate and apart because of the breakdown (s. 74.5(3)(a)). Ask a tax professional about your own return before you sign.
Land transfer tax. Ontario's Regulation 696 under the Land Transfer Tax Act treats a conveyance between spouses or former spouses as outside the tax where enough information shows, for example, that it follows a written separation agreement or a court order (s. 1(b) and (c)). Your real estate lawyer completes the required statements on registration.
Interest. A person entitled to an order for the payment of money can claim prejudgment interest, and money owing under an order bears postjudgment interest; the court has discretion to change the rate or period, or disallow it, where just (Courts of Justice Act, ss. 128 to 130).

A worked example

For example, imagine Sana and Marc separate after 14 years of marriage. This is a hypothetical. After the calculation, Sana's net family property is $640,000 and Marc's is $280,000. Marc's entitlement is one-half of the $360,000 difference, so Sana owes him $180,000.

Sana's assets are a half interest in the Toronto home (equity of $300,000 on her side), a defined benefit pension with a family law value of $220,000, and $30,000 in savings. She cannot pay $180,000 in cash.

Option one, pension transfer. Up to 50 percent of the family law value, here $110,000, could move to Marc in a locked-in account. The remaining $70,000 would still have to come from somewhere. Because pension money is locked in and taxed when it comes out, a lawyer would look at whether a dollar of pension is worth a dollar of cash to Marc.
Option two, refinance the home. If Sana keeps the house and can borrow against it, she could use new mortgage funds to pay Marc for his half of the home plus the $180,000 equalization. If the lender will not approve that amount on her income alone, this option fails.
Option three, a mix with time. Sana pays $30,000 now, transfers $100,000 from the pension, and asks for the last $50,000 over three years, secured by a charge on the home and backed by yearly financial statements. A court would only order instalments if paying at once would cause hardship, and Marc could argue that a refinance avoids any hardship.

The numbers are invented and leave out tax, selling costs and interest. The point is the structure: the amount is fixed by the formula, and the payment method is where negotiation actually happens.

Common mistakes with equalization payments

Thinking equalization splits each asset. It does not. It creates a money entitlement; the method of payment is decided separately.
Agreeing to instalments with no security. An unsecured promise to pay over several years is only as good as the payor's finances in year five. Courts use charges and reporting duties for a reason (s. 9(1)(b), s. 9(2)).
Treating pension dollars like cash. A locked-in transfer carries future tax and cannot be spent today. Compare like with like before trading the pension against the house.
Signing before the financing is approved. A buyout that depends on a new mortgage should not be final until the lender has committed.
Letting assets drain away while you negotiate. If you suspect accounts are being emptied or property sold, raise a preservation order early rather than after the money is gone (s. 12).
Missing the limitation period. An equalization claim has firm deadlines, including six years after separation and two years after a divorce (s. 7(3)). Our page on the deadline to claim equalization explains them.

What to do this week

Write out each of your assets and debts with a current value, and mark which ones can be turned into cash and how quickly.
Ask your pension administrator about applying for the family law value, if either of you has an Ontario workplace pension.
Speak to your bank or mortgage broker about what you could borrow on your own income, if you hope to keep the home.
Gather the documents for your financial disclosure, including statements closest to the valuation date.
Make a note of any large withdrawals, transfers or sales by your spouse since separation, with dates.
Book a free consultation to test the payment options against your numbers before you make an offer.

Frequently asked questions

Is there a deadline to pay an equalization payment once it is agreed?

The Act does not set one for an agreement; the agreement does. A court order usually states when payment is due. If a court orders instalments or a delay, the payment cannot run past ten years (s. 9(1)(c) and s. 9(4)).

Can I pay my spouse with the house instead of money?

You can if you both agree, and a court can order property transferred to satisfy the payment (s. 9(1)(d)(i)). A transfer of the matrimonial home needs care with the mortgage, title and tax, so it is usually done with a real estate lawyer. Our page on selling or mortgaging the home explains the consent rules.

Does the equalization payment include interest?

It can. Under the Courts of Justice Act, a person entitled to an order for the payment of money can claim prejudgment interest, and amounts owing under an order bear postjudgment interest (ss. 128 and 129). The court can adjust or refuse interest where it considers it just (s. 130). Agreements should deal with interest expressly.

What if my spouse stops paying the instalments?

A payment order can be enforced by a financial statement request, a financial examination, seizure and sale, garnishment or a receiver (Family Law Rules, rule 26(3)). If the order included a charge on property, the court can direct a sale to realize that security (s. 13).

Can the amount be lowered later if the payor's income drops?

No. The court can vary instalment or delay terms after a material change in circumstances, but it cannot vary the amount found owing (s. 9(3)).

Is an equalization payment the same as spousal support?

No. Equalization settles property; support is about income and need, and it has different tax rules. The two interact in practice, because a large property payment can affect the support claim. Our page on how spousal support is worked out explains the support side.

Does any of this apply to common-law partners?

No. Part I of the Family Law Act, including the equalization payment, applies only to married spouses. Common-law partners use other claims, which our page on unjust enrichment explains.

How is an equalization payment paid in Ontario, and can it be paid over time?