The Matrimonial Home–Be Aware! (Part 1)

The ‘matrimonial home’ is treated differently than other types of property under the Family Law Act.  Indeed, the matrimonial home is accorded its own special place—Part II of the Family Law Act.    
 
A Matrimonial Home is defined as a property which at the time of separation was ‘ordinarily occupied by the person and his or her spouse as their family residence’.  It should be noted that you could possibly have more than one matrimonial home.  For example, if you owned a cottage as well, one that was enjoyed by the family on a regular and frequent basis, both home and cottage could be considered matrimonial homes, thereby falling under the provisions of Part II of the Family Law Act. 
 
Is the definition of the matrimonial home important? 
 
You bet it is. 
 

Normally, when a married couple separates, the value of “the property of the marriage” is to be divided equally.  ‘Property of the marriage’= 1) your assets/property minus your debts from the date of marriage to the date of separation; 2) minus property (and debts) that you brought into the marriage (pre-marital deductions); 3) minus any ‘excluded’ property you received during the course of the marriage (excluded property could be a gift from a  person other than your spouse or an inheritance).  
 
Once the above calculations are performed, you arrive at an amount referred to as your ‘Net Family Property’ (NFP).  Under Part 1 of the Family Law Act, the parties’ net family properties need to be ‘equalized’; the party with the greater NFP value with have to pay the other an ‘equalization payment’ so that they end up with the same NFP.  If for example, Dick has $20,000 NFP and Jane has $10,000 NFP, Dick will have to pay Jane an equalization payment of $5,000.00, so that they both end up with $15,000.00. 
 
Beware:  As mentioned, the value of property owned prior to getting married is not included in the calculation.  So, for example, if Jane had an investment that was worth $10,000.00 at the date of marriage and this investment had grown to $15,000.00 at the date of separation, only the $5,000.00 increase in value would go on Jane’s ‘side of the ledger’, so to speak.  The initial $10,000.00 investment would be considered a ‘pre-marital deduction’. 
 
THIS PRINCIPLE DOES NOT APPLY TO THE ‘MATRIMONIAL HOME’! 
 
If Jane owned a home prior to marrying Dick which at the date of marriage was worth $300,000.00, the parties lived in this home until they separated, and the home was worth $350,000.00 at the date of separation, the whole value of the home, all $350,000.00 worth, would go on Jane’s side of the ledger.  
 
Ouch.  Poor Jane. 
 
Remember I said that gifts from third parties or inheritances were considered ‘excluded property’ and as such would not be added to the value of a person’s NFP….. 
 
Let’s say that Jane received a $50,000.00 inheritance from her recently deceased favorite Aunty during the course of the marriage.  She takes the $50,000 and places it in an investment.  The $50,000.00 is still considered excluded property; so far, so good for Jane.  But, then she takes that $50,000.00 and uses it for renovations to the matrimonial home.  The value of the home is now worth $400,000.00.  She already cannot deduct the value of her home as of the date of marriage; and now she cannot deduct the $50,000 inheritance she received from her Aunt during the marriage. 
 
Ouch, poor, poor, Jane, indeed.  
 
(To be continued….) 

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