Divorce Equalization Payment Calculation – Case Study
What is an equalization payment in a divorce?
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?
Contact Information
Ken S, Maynard CDFA
1.855.731.3500
647.360.3200
Divorce Equalization Payment Calculator – Download
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Have Any Questions?
Contact Information
Ken S, Maynard CDFA
1.855.731.3500
647.360.3200
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