Pension Division in Ontario: An Insight into the Family Law Act
When navigating a marriage breakdown, one of the critical aspects to consider is the division of property. In Ontario, the Family Law Act (FLA) provides a comprehensive framework for this process, ensuring a fair division of assets. A significant part of this process pertains to the division of pensions, which can often be the largest asset a couple owns, aside from their home.
Pensions as Property
Under the FLA, pensions are regarded as property and are included in the net family property statement. This means that they form part of the assets that are subject to division upon the dissolution of a marriage. Even if a pension is unvested or in pay, it still has an after-tax value that must be included in the net family property.
The Value of Pensions
Valuating pensions can be complex and requires a nuanced understanding of the FLA and associated case law. One approach, as indicated by the Supreme Court of Canada in Boston v. Boston, is to use a pro rata method. This involves calculating the number of years of membership in a pension fund and the years of marriage during which contributions were made to the pension fund.
The value of the pension is then calculated as a fraction of these two numbers. For instance, if a person joined a pension plan in 1980, got married in 1990, and separated in 2000, half the value of the pension would be included in their net family property. This is because the marriage lasted for 10 years, during which 20 years of contributions were made to the pension.
Challenges in Pension Division
One of the challenges in pension division arises when the pension holder starts receiving payments. In some cases, a spouse may also claim support, leading to a situation referred to as "double-dipping". This can occur when the pension has been included in the equalization payment, but support is also claimed later, using the pension as the main source of income. The court typically focuses on the portion of the pension acquired after separation in such cases.
Conclusion
Understanding the role of pensions in asset division during a marriage breakdown is crucial. With pensions often being one of the most significant assets owned by a couple, it's essential to understand how they are valued and divided to ensure a fair settlement.
If you're navigating a marriage breakdown, consider consulting with a family lawyer who can provide advice tailored to your specific circumstances and help guide you through the often complex process of property division.
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