When a couple separates, they need to calculate their Net Family Property in order to come up with an equalization payment. The first step is to calculate the property value of each party at the date of marriage and at the date of Valuation or Separation. Section 4(1) of the FLA defines the valuation date as follows:
• the date the spouses separate and there is no reasonable prospect that they will resume cohabitation;
• the date a divorce is granted;
• the date the marriage is declared a nullity;
• the date one of the spouses commences an application based on section 5(3) of the FLA (improvident depletion) that is subsequently granted; or
• the date before the date on which one of the spouses dies leaving the other spouse surviving.
Most of the time, when couples separate, the Valuation date is the Separation date. This said, that date can be open for negotiation especially when couples have lived separate and apart but in the same home for quite some time and have already separated all their financials (new bank accounts etc).
The good thing about mediation is that it provides couples a lot of flexibility and parties can pick and chose their date of separation if they both agree to it, as long as they fully understand the implications or repercussions involved.
Because assets, investments can go up and down from week to week, just look at the real estate markets in the last years or even the stock market in the last 4-5 months. Picking the wrong date may have a huge financial impact on your Net Family property therefore on you equalization payment.
A lot of clients think that the separation date is when one spouse actually leaves the home or family residence. The date of separation can definitely be that day, however if the spouse left the home or residence but continued to pay the same expenses as before, if they continued to have joint accounts with their spouse , if they tried counselling during that same period, if they even talked about being confused, needing some ”time apart” or a “break”, that separation date may not be applicable, as there may have been some hope, on the part of one or both spouses, of a possible reconciliation, which goes against what is outlined in Section 4(1) of the FLA.
The separation date you pick can have a considerable impact on the division of your family property. A mediator can help you pick the right Valuation/Separation date in order to protect your financial future and/or your children’s financial future.
