What is the “equalization” that family law lawyers keep talking about?

In a nutshell, “equalization” is a process for calculating (married) spouses’ net worth at the valuation date (usually the date of separation) and for making the two spouses’ net worth after separation comparable or the same. By law, the spouse with less net worth is entitled to (usually) half of the difference, although the court has limited power to order unequal sharing between the spouses.

A payment to satisfy this process is called an equalization payment.

The equalization process gives rise to a debtor-creditor relationship in the sense that the one with the higher net worth owes half of the difference to the one with the lower net worth. At the same time, the assets themselves are not divided. Each spouse retains ownership of his or her own property.

However, in many instances where the spouse with the higher net worth doesn’t have enough cash to make the equalization payment, his or her assets may have to be sold to raise enough cash to honour the debt obligation.

In certain instances, the spouses may decide to transfer the properties to satisfy their equalization payments, rather than selling the properties to a third party.

I would recommend that readers obtain independent legal advice before finalizing the equalization process.

This blog is provided for your reference only and is not a substitute for the law. The law may have changed since the publication of this article. This article is not legal advice and should not be regarded as such.