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When you find the person you want to marry, you’re probably not planning on the relationship ending. Unfortunately, over time, some married couples determine that the best way forward to separate. While the number of divorces in Canada has trended downward over the last decade, they are still an undeniable part of life here.
When a couple decides to get a divorce, the next natural step is to make it legal and then divide the assets. For those couples who have invested shared capital in a real estate property, division of the assets could prove troubling. If you’re about to get a divorce in Canada and you’ll need to split up the real estate portfolio, here’s what you need to know.
If you are getting a divorce and both of your names are on the mortgage, click the link below to book a free strategy call to begin discussing your options.
How to get a divorce in Canada
Before you can legally divvy up the assets shared between you and your spouse, you will need to ensure that you can legally get a divorce. In Canada, the only reason you need to file for a divorce is a marriage that has “broken down.” Of course, for a court to consider the marriage officially broken down, a married couple must demonstrate that they have lived separately for a year or more. “Living separately” doesn’t necessarily mean one of the spouses has to move out.
It only means that each spouse has to demonstrate that they have been living independently of one another. Outside of a one-year separation, Canadians can apply for a divorce if their spouse has been unfaithful or mentally and physically abusive.
Though the process for divorce is set on the federal level, individual divorces must be processed on a province-by-province basis. To get the ball rolling, head to the web site of your province’s local Ministry of Justice or Attorney General to locate the paperwork you’ll need to fill out.
As you work through the paperwork, you and your spouse will need to work out the child and spousal support, custody arrangements, and, of course, property division. That last one can be especially tricky. In fact, even Canada’s Department of Justice acknowledges that deciding who should get the assets can be incredibly tricky, even if the divorce is amicable.
Be patient and communicative
It’s critical to remember that divorce proceedings can last a long time, which can be frustrating when you just want to split the assets. There’s a year of separation, often followed by another year of deliberation and legal proceedings before you can claim your divorce.
To make this long, tiring process as simple as possible, make a list of your collective assets as well as your demands and needs. Have your spouse do the same. While a lawyer isn’t legally required for a divorce, it’s never a bad idea to acquire one to help mediate the inevitable conflict that will occur.
Discover Residential Property Management With This Step By Step Guide
Get a lawyer
If your real estate portfolio is a consideration, it’s worth hitting a real estate lawyer to help determine your portfolio’s value. Once again, even if the divorce is amicable, it will still be challenging to assess value and split everything up. There is emotion involved that can add sentimentality to property and items. That’s why it is crucial to enlist the services of a competent real estate lawyer. A professional can assess your property’s actual value, not the emotional value, and then help you determine how best to proceed with that knowledge.
What’s more, the rules and regulations for splitting real estate assets vary from province to province. As a result, ensuring that you have someone on your team who is intimately familiar with the specific rules regarding the split of your real estate assets.
The date of separation is critical
When you want to start the separation process, it’s essential that you notify your spouse of your intent to end the relationship. This notification must be signed, dated and in writing. The date of your letter marks the beginning of your one-year separation period. It also marks the date when your assets stop accruing together and start accruing separately.
This date is the point your lawyer will use to establish the value of your collective assets at the time of your legal separation. For example, let’s say you start a real estate portfolio when you’re already married, and the value rises to 100K.
Then you provide your spouse with notification of separation. Over the course of the next year, the amount of your real estate portfolio doubles. When your legal professional begins to account for the value of your real estate portfolio, they will only include the value of your assets on the day of your separation. As a result, you’re only entitled to split half of the first 100K with your spouse, and the rest is all yours—assuming they don’t still have their hands in managing the portfolio
Your spouse is probably entitled to something
In certain scenarios, one party in a marriage may feel entitled to gain complete control of the real estate portfolio. Perhaps they owned their real estate before they met their spouse. Maybe their name is the only one on the deed. In either case, your spouse will still likely be entitled to some part of that.
While, again, every province has its own specific rules regarding the division of a real estate portfolio, there is one general consideration to keep in mind. If you brought a real estate portfolio into a marriage, you will probably get to keep it.
However, if your portfolio has seen an increase in value over the course of the relationship, then the amount of that increase will be split between you and your spouse. For example, if your portfolio is worth 100K when you get married, and its value rises 50K during your marriage, when you divorce, your spouse will likely be entitled to half of that 50K.
If you built up your portfolio over your relationship, then most provinces stipulate that half the value of your portfolio legally belongs to your spouse.
When you’re a real estate investor about to get married, consider a prenuptial agreement. It can make sticky situations like the division of property a lot simpler—and hopefully, you’ll never have to use it.
If you would like to learn more about how getting a divorce and impact your mortgages, click the link below for a free strategy call today.