Net family property is what a married spouse owns on the valuation date, minus what they owe on that date, minus the net value of what they brought into the marriage, leaving out excluded property such as a third-party inheritance. The result can never be below zero. The spouse with the higher figure pays the other half the difference.
How is net family property calculated, step by step?
The formula comes from the definition of "net family property" in section 4(1) of the Family Law Act. Each spouse does the calculation separately, for their own property only. The two results are then compared to find the equalization payment, which our page on how property is divided in Ontario explains from start to finish. For the broader picture of property claims, see our property division practice page.
- Pick the valuation date. Usually the day you separated with no reasonable prospect of resuming cohabitation. Values are taken as of close of business on that day (s. 4(4)). If the date is contested, our page on choosing the valuation date sets out the options.
- Add up everything you owned on that date. Use what each item was worth on the valuation date, not what you paid for it. Include your share of anything owned jointly.
- Subtract your debts and liabilities on that date. Mortgages, loans, credit cards, unpaid taxes and the tax that would be owed when certain assets are cashed in (s. 4(1.1)).
- Subtract excluded property. Section 4(2) lists seven kinds of property that do not count, such as an inheritance from a third person received after the marriage.
- Subtract your net worth on the wedding day. Value what you owned on the date of the marriage, less what you owed then. The matrimonial home is left out of this step.
- Apply the floor. If the answer is below zero, it is treated as zero (s. 4(5)).
In a court case, each spouse puts these figures on a sworn net family property statement (Form 13B) before a settlement conference or trial, under rule 13(14) of the Family Law Rules. The parties then file a joint comparison of the two statements (Form 13C) at least six days before the settlement conference (r. 13(14.2)).
What counts as property, and what counts as a debt?
"Property" in the Act is wide. It means any interest, present or future, vested or contingent, in real or personal property (s. 4(1)). In practice that covers:
- your interest in real estate, including the matrimonial home and any cottage or rental unit;
- bank accounts, GICs, RRSPs, TFSAs, RESPs you own, and non-registered investments;
- vehicles, boats, jewellery, art and household contents of real value;
- shares in a company or an interest in a partnership or sole proprietorship;
- the family law value of a pension, measured only for the period from the marriage date to the valuation date (s. 4(1), clause (c), and s. 10.1);
- money owed to you, such as a loan to a friend or a tax refund;
- property you gave away but can still take back, or that you control through a power of appointment in your own favour (s. 4(1), clauses (a) and (b)).
The pension figure has its own rules. Our page on pensions on separation explains how the family law value is reached and paid out. Business interests usually need a formal valuation; see what happens to a business on separation.
On the other side of the ledger are your debts and other liabilities on the valuation date. The Act says these include any applicable contingent tax liabilities in respect of the property (s. 4(1.1)). How joint loans, lines of credit and tax debts are treated is covered in our guide to debts on separation.
The wedding-day deduction and the matrimonial home
The deduction for what you brought into the marriage is where many calculations go wrong. The Act lets you deduct the value of property you owned on the date of the marriage, after deducting your debts on that date. Two exceptions apply:
- The matrimonial home is not deducted. If you owned a home on your wedding day and it is still a matrimonial home on the valuation date, its wedding-day value cannot be subtracted. Its full value on the valuation date counts in your property.
- Debts tied to that home are not deducted from the wedding-day figure. Debts that relate directly to buying or significantly improving a matrimonial home are left out of the wedding-day calculation.
The practical result: a spouse who owned the family home before the marriage can end up sharing its entire value, while a spouse who brought in a stock portfolio of the same value only shares the growth. The exception turns on the home's status at separation: the Act's definition of matrimonial home looks at the family residence at the time of separation (s. 18(1)) and at the valuation date (s. 4(1)). A house you owned at the wedding but sold long before separating is generally treated like any other wedding-day asset.
| Item | Counted on the valuation date? | Wedding-day value deducted? | Section |
|---|---|---|---|
| Matrimonial home owned before the marriage | Yes, full value | No | s. 4(1), "net family property" |
| Investments owned before the marriage | Yes | Yes | s. 4(1) |
| Inheritance from a parent after the marriage, kept separate | No, excluded | Not applicable | s. 4(2), para. 1 |
| Inheritance used to pay down the matrimonial home | Yes | Not applicable | s. 4(2), paras. 1 and 5 |
| Interest earned on an inheritance | Yes, unless the will said to exclude it | Not applicable | s. 4(2), para. 2 |
| Pension | Yes, value from marriage to valuation date only | Not needed | s. 4(1), s. 10.1 |
| Canada Pension Plan earnings | No, excluded | Not applicable | s. 4(2), para. 7 |
What changes the answer
- Excluded property. Gifts and inheritances from third parties, damages for personal injury, life insurance proceeds, property traced from those, property excluded by a domestic contract, and unadjusted pensionable earnings under the Canada Pension Plan are all left out (s. 4(2)). Our page on property excluded from equalization covers tracing and proof.
- Who has to prove it. The spouse claiming a deduction or an exclusion carries the burden of proving it (s. 4(3)). No proof usually means no deduction.
- Contingent tax. An RRSP or a rental property with a built-up capital gain carries tax that will be owed one day. Applicable contingent tax liabilities may be deducted (s. 4(1.1)).
- The floor at zero. If a spouse's debts are larger than their property, their figure is zero, not a negative number (s. 4(5)). The other spouse cannot be asked to share those debts through equalization.
- A domestic contract. Property that the spouses have agreed in a domestic contract to leave out of net family property stays out (s. 4(2), para. 6).
- Unconscionability. Even a correct calculation can be adjusted if an equal split would be unconscionable under the factors in section 5(6), such as debts incurred recklessly or in bad faith.
A worked example
For example, imagine a hypothetical couple, Morgan and Riley. They co-own their home, worth $900,000 on the valuation date with a $400,000 mortgage, so each holds a $450,000 share and owes $200,000 of the mortgage. The tax figure on Morgan's RRSP is an assumed estimate for illustration only. Riley inherited $80,000 from an aunt during the marriage and kept it in a separate account.
| Line | Morgan | Riley |
|---|---|---|
| Share of home | $450,000 | $450,000 |
| RRSP | $120,000 | $0 |
| Bank accounts | $25,000 | $0 |
| Inheritance account | $0 | $80,000 |
| Pension (family law value) | $0 | $90,000 |
| Vehicle | $15,000 | $10,000 |
| Total property | $610,000 | $630,000 |
| Less share of mortgage | ($200,000) | ($200,000) |
| Less other debts | ($10,000) line of credit | ($5,000) credit card |
| Less estimated tax on RRSP (assumed) | ($30,000) | $0 |
| Less excluded inheritance | $0 | ($80,000) |
| Less wedding-day net worth | ($30,000): $40,000 savings less $10,000 student loan | ($60,000) investments |
| Net family property | $340,000 | $285,000 |
The difference is $340,000 minus $285,000, or $55,000. Riley is entitled to half of that, so Morgan owes Riley $27,500. After payment, each is left with $312,500. If Riley could not prove where the $80,000 came from, it would stay in Riley's figure, Riley's net family property would rise to $365,000, and Riley would owe Morgan $12,500 instead.
Common mistakes in the calculation
- Deducting the wedding-day value of the family home. If it is still a matrimonial home on the valuation date, the deduction is not allowed.
- Forgetting debts on the wedding day. A student loan or car loan you had when you married reduces your wedding-day deduction, which raises your net family property. Leaving it out understates what you owe.
- Using today's values. The calculation uses values on the valuation date, not the date of the trial or the date you sell.
- Ignoring tax. Treating a $100,000 RRSP as equal to $100,000 in a chequing account overstates the RRSP holder's figure.
- Mixing up property and income. Net family property looks at what you own. Support looks at what you earn. A bonus received before separation may be in a bank account on the valuation date and also be part of your income for support purposes, which is a separate test.
- Losing the paper trail. Exclusions and deductions need proof, sometimes from many years ago.
What to do this week
- Write down your marriage date and your best estimate of the separation date.
- Request statements for every account, investment and debt for both dates. Banks can often provide older statements on request.
- Ask your pension plan administrator how to apply for a family law value, and keep a copy of the request: rule 13(3.3) of the Family Law Rules requires you to serve it in a property case.
- Find the Municipal Property Assessment Corporation assessment for any Ontario real estate for the year of the valuation date, which rule 13(3.3) also requires.
- Gather proof of any inheritance, gift, insurance payout or injury settlement and follow the money to where it sits today.
- Start a simple two-column list, one for the valuation date and one for the wedding day. A lawyer can turn it into a Form 13B later. Our page on financial disclosure lists every document a court expects.
Frequently asked questions
How is jointly owned property counted?
Each spouse includes the value of their own interest. For a home held as joint tenants, that is usually half each. Section 14 of the Act says property held in both names as joint tenants is proof, absent evidence to the contrary, that you intended to own it jointly.
Are gifts between spouses excluded?
No. The exclusion in section 4(2) covers gifts from a third person only. A gift from your spouse counts in your net family property, though a court can take it into account under section 5(6)(c) when deciding whether equal sharing would be unconscionable.
Who decides what the house is worth?
Spouses often agree on a value or each obtain an appraisal. In a court case, rule 13(3.3) requires each spouse to serve the property tax assessment for the year of the valuation date, and the judge decides the value if the parties cannot agree.
What if one of us gave money away before separating?
Section 8 requires disclosure of property disposed of in the two years before the sworn statement, or during the marriage if shorter. Intentional or reckless depletion is one of the factors in section 5(6)(d) that can justify an unequal split.
Does the calculation change if a spouse dies?
The method is the same, but the valuation date becomes the day before the death (s. 4(1), para. 5), and the surviving spouse has to elect between the will and equalization within six months (s. 6(10)).
Can our net family property be different from what we agree?
Yes. Spouses are free to settle on a number in a written, signed and witnessed separation agreement (s. 55(1)). Each should have full disclosure first, because a contract can be set aside for failure to disclose significant assets or debts (s. 56(4)(a)).