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How Divorce Impacts Home Assets in Ontario

Introduction 


Divorce is a complex process that involves not only emotional but also legal and financial considerations. One of the most significant aspects of this process is the division of assets, particularly the matrimonial home. This blog post will delve into how divorce impacts home assets in Ontario and whether it is necessary to sell the matrimonial home in the case of a divorce. 


Impact of Divorce on Home Assets 


Division of Property 


In Ontario, the Family Law Act governs the division of property in a divorce1. The law aims to ensure fairness by dividing the property acquired during a marriage equally when a marriage ends123. This includes the matrimonial home, car, business, furniture, pension, and money1


For property owned before marriage, any increase in value is usually divided equally1. This applies to the family home where the couple lived1. However, there are some exceptions that allow one spouse to keep property they own, known as excluded property1


The Matrimonial Home 


The matrimonial home holds special significance in divorce proceedings2. It is often considered the matrimonial home and comes with specific rules and considerations2. For example, one spouse may have the right to remain in the home temporarily, particularly if there are children involved2


Is It Necessary to Sell the Matrimonial Home? 


The decision to sell the matrimonial home during a divorce is not always straightforward. It depends on various factors, including the financial situation of both parties, the best interests of any children involved, and the housing market conditions56789

In some cases, the court may order the sale of the matrimonial home589. This usually happens when the family's finances are dire, and the spouse who moved out cannot afford to maintain two residences5. However, the court will consider the well-being of the children and whether selling the home would cause them undue hardship5

If the spouses can't agree on what to do with the matrimonial home, they may apply to the courts for an order of partition and sale requiring the house to be sold8. However, a separation agreement is not necessary in Ontario to sell a matrimonial home, but it can be helpful as it will outline the details of the sale7


Legal Implications of Selling the Matrimonial Home 


In Ontario, neither spouse can sell or encumber an interest in a matrimonial home, except by court order, unless the other spouse has consented or released their rights to the home in a separation agreement11. If one spouse does "alienate" the family home in this way, the court can set aside the transaction upon application of the other spouse11


Financial Implications of Selling the Matrimonial Home 


When you transfer an asset to a spouse, there are generally no immediate tax implications8. By default, the asset transfers at its adjusted cost base (or the undepreciated capital cost for depreciable property) with no capital gain triggered, unless you elect otherwise8. After your home sells, the profit will be divided between you and your spouse12. In many cases, this involves an even split; however, if one spouse had previously contributed more to the maintenance of the house, or the monthly mortgage payment, then that spouse may be awarded a proportionally larger amount of the proceeds from the sale of the home12


Emotional Implications of Selling the Matrimonial Home 


Deciding to sell the matrimonial home can be one of the most emotionally challenging aspects of the divorce process13. The home may hold many memories tied to your married life that you’re not ready to part with13. Both parties may feel emotionally connected to the house, so it’s important for all involved to understand what steps need to take place and abide by legal regulations throughout15


Conclusion 


The impact of divorce on home assets in Ontario is significant and complex. It's crucial to understand the legal, financial, and emotional implications and consider all factors before deciding whether to sell the matrimonial home. Always consult with a legal professional to ensure you are making the best decisions for your situation. 


Remember, every situation is unique, and this guide is intended to provide general information. Always seek professional advice tailored to your circumstances. 


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