Divorce Equalization Payment Calculation – Case Study

 ontario equalization payments separation calculator ontario
  • Jointly owned assets have no bearing on the Equalization of Net Family Property Calculations.

  • Simply because you are married you are not automatically joint owners of any asset.

  • One spouse could buy out the other’s interest as in the case of the matrimonial home.

  • Despite the breakup of their marriage, spouses could decide to continue as joint owners.

What is an equalization payment in a divorce?

equalization payment separation agreement terminology

Equalization Payment: This is an amount paid from one spouse to another to equalize the net worth of the two individuals. The equalization payment is equal to one-half of the difference in net worth between the husband and wife.

Bruce Smith (Husband) Amount
Assets
Value of  Real Estate (matrimonial home value at $1,800,000) $900,000
Household (Cars, Boat Furniture, etc.) $55,000
Financial Accounts (RESP, Savings, RRSP etc.) $350,000
Business $135,000
Subtotal of Assets $1,440,000
Liabilities
Mortgage $275,000
Ford Motor Credit Car Loan $9,000
RBC Visa Credit Card (50% of Joint card with a $22,600 balance) $11,300
Tax Allowance on RRSP $45,000
Business Tax Adjustments $34,000
Real Estate Disposition Cost $52,545
Subtotal of Liabilities $426,845
Date of Marriage Deduction
RRSP $12,000
Line of Credit ($4,000)
Subtotal of Date of Marriage Deduction $8,000
Excluded Property
Kids RESP $123,400
Inheritance $50,000
Subtotal of  Excluded Property $173,400
Net Family Property Summary
Total Assets $1,440,000
Less Total Liabilities $426,845
Less Total Marriage Deduction $8,000
Less Total  Excluded Property $173,400
Net Family Property $831,755
Mary Smith Amount
Assets
Value of  Real Estate (50% of matrimonial home value at $1,800,000) $900,000
Household (Cars, Furniture, etc.) $35,000
Financial Accounts (Teachers’ Pension, Savings, etc.) $650,000
Time Share $5,000
Subtotal of Assets $1,590,000
Liabilities
Mortgage $275,000
Honda Finance Canada Car Loan $15,000
RBC Visa Credit Card (50% of Joint card with a $22,600 balance) $11,200
Tax Allowance on and Pension $114,000
Real Estate Disposition Cost $52,545
Subtotal of Liabilities $467,845
Date of Marriage Deduction
RRSP $18,000
MasterCARD Credit Card ($4,000)
Subtotal of Date of Marriage Deduction $14,000
Excluded Property
Inheritance $23,400
Gift $30,000
Subtotal of  Excluded Property $53,400
Net Family Property Summary
Total Assets $1,590,000
Less Total Liabilities $467,845
Less Total Marriage Deduction $14,000
Less Total  Excluded Property $53,400
Net Family Property $1,054,755
Equalization Calculation NET FAMILY PROPERTY
Bruce Mary
$831,755 $1,054,755
Mary $223,000
Financial Imbalance has a greater NFP then
Bruce
Mary $111,500
Equalization Amount To equalize she needs

Pay / Transfer to

Bruce
Soft Landing Settlement Example
Matrimonial Home Value (appraised market value) $1,800,000
Obligations:
Disposition Cost (RE Commission + Legal + HST) $105,090
Mortgage (Bruce will assume) $550,000
Subtotal of Obligations:  deductions from home equity $655,090
Subtotal: Equity = $1,144,910
Share of Net Equity: Value due to Mary (50%) 1/2 $572,455
Offsetting Values:
Equalization due from Mary to Bruce (see above) $111,500

Bruce Transfer RRSP to Mary (Tax-Free Rollover)

$190,000
Bruce pays Mary cash $270,955
Subtotal of Payments Value of payments to Mary $572,455
Total Balance due to Mary $0

Have Any Questions?

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Contact Information
Ken S, Maynard CDFA
1.855.731.3500
647.360.3200

Divorce Advice
 ontario equalization payments separation calculator ontario

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Contact Information
Ken S, Maynard CDFA
1.855.731.3500
647.360.3200

Divorce Advice
About the Author:
Certified Divorce Financial Analyst & Family Mediator at
647.360.3200
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