During a divorce, if your date of separation was pre-COVID-19, you may have experienced a sharp decline in the value of your assets post-separation. This applies whether you invest in the stock market, real estate market or if you own your own business. Is it fair that an owner-spouse alone must suffer this market-driven loss, while the non-owner spouse gets the benefit of the higher, date of separation value?
In Ontario, when married spouses separate, they share the wealth that accumulated during their marriage. To calculate each spouse’s share of family property, we look to the values of each spouse’s assets and debts on the date of separation. The spouse with the higher net worth on date of separation is obligated to share his or her wealth and make an equalization payment the other spouse.
There is a possibility that post-separation circumstances may be taken into account in a property settlement, but only in “exceptional circumstances”. For example, following the 2008 crash, the courts applied an unequal division of property in the case of Serra v. Serra, because of a significant market-driven decline in the value of one spouse’s principal asset.
It is important to note that this crystallization of value does not apply to assets that are jointly owned by spouses. Where spouses jointly own property, the presumption is that they are each entitled to an equal share of the present value.
While the long-term effects of COVID-19 on the markets are still unknown, a proactive approach can help you plan for your future. If you have separated or are thinking about moving forward with your divorce, but you are concerned about how the changes in the market will affect your case, be sure to speak with a family law lawyer who can help you understand the effects that COVID-19 related market changes may have on your settlement.