Canadian Family Law 101:  Property Acquired After Separation – But Before Divorce

Most married couples will be familiar with a basic principle of Canadian Family Law:  That any assets they acquired during the marriage are subject to an equalization process upon separation and divorce.  In Ontario, that process is governed by the provincial Family Law Act, R.S.O. 1990, c. F.3 (FLA). 

But what about property that one of them acquired after their separation date?

For example, let’s say you and your spouse decided to formally separate September 1.  You sign a separation agreement, tell your children, and announce it to your friends. Your separation date is official.  And there is no reasonable prospect that you will get back together.

And then let’s say that on September 15th, you turn out to be the lucky winner in the Mega-Millions lottery. 

Related: How is Property Divided Between Spouses?

Is your spouse entitled to a share of property acquired after separation – but before divorce? 

Very likely not.  In Ontario, the FLA sets up an equalization process that covers only Net Family Property (NFP), which is defined to mean the “value of all the property, …. that a spouse owns on the valuation date” (which in this case would be your official separation date).  Your NFP comprises only what you own at separation (in this illustration, September 1), subject to certain specified deductions and exclusions laid out in the FLA itself. 

This means that while the NFP equalization process covers any increase in the value of property you and your spouse acquired during the marriage, it generally excludes any property acquired after your separation date – including your theoretical lottery win on September 15th.  Those funds remain with you as the recipient, and are untouched by the NFP equalization process.  (And note here we are not talking about post-separation increases in income – just assets like a one-time boon or an unexpected gift).

This approach to post-separation windfalls is illustrated in several Ontario cases. In one called Hamilton v. Hamilton the husband sought a share of his wife’s $2,100,000 lottery winnings as part of the NFP division. The court refused, noting that he and the wife had separated before she won the prize, and indeed by then the husband had permanently moved back to Jamaica to start a new life. The fact that he sometimes stayed platonically at the wife’s home when briefly visiting Canada did not mean their marriage was ongoing.

Likewise in Hubley v. Fitzpatrick, the husband’s elderly “Aunt Jean” had generously paid off both the couple’s joint debts and the husband’s debts post-separation. The court concluded this was a one-time gift (not a loan) from the husband’s beloved family member, and was consistent with other sporadic financial boosts she had given him in the past.  Importantly, it was intended solely to benefit the husband – not the wife – so that he could afford to keep the family home after the split.

With that said, sometimes post-separation payments by third parties – such as the parents of a divorcing husband or wife – can amount to deemed income in the hands of the recipient, for child/spousal support purposes.  Courts have the discretion in some circumstances to impute income to a spouse where he or she has received unusual – and often large or recurring – financial gifts.  

But even there, the court will look at all the circumstances. For example in a case called N.R. v. S.R., the wife had received generous support from her parents post-separation, and managed to improve her financial situation considerably.  However, the court declined to include these payments in her income for support purposes, noting these were merely one-time payments to help her get afloat financially. She had used them to pay off her mortgage, and to help her and the children get through lean times, during a period where the husband was not yet paying any support at all.  The evidence also did not suggest she would be receiving any further cash gifts from her parents in the future.

If you are separated and have received some sort of financial or other windfall after-the-fact, you’ll want to get some expert legal advice.  Feel free to give our offices a call.