How to Protect Your Assets in a Contested Divorce in Ontario

What Assets Are Subject to Division in Ontario

Overview of Net Family Property (NFP) Equalization

Ontario does not automatically split assets 50/50. Instead, each spouse calculates their Net Family Property, which represents the increase in their net worth during the marriage.

In simplified terms:

• Each spouse determines the value of all property on the date of separation
• Subtracts:
  • The value of property owned on the date of marriage
  • Most debts and liabilities
• The spouse with the higher NFP pays the other spouse an equalization payment equal to half the difference

Assets Typically Included in Net Family Property

In a contested divorce, disputes often arise over valuation, disclosure, and classification of the following asset categories:

Matrimonial Home

The matrimonial home is treated differently from all other assets under Ontario law.

Key features:

• The full value of the home on the separation date is included in NFP
• No deduction is allowed for the home’s value at the date of marriage
• Applies regardless of:
  • Whose name is on title
  • Who paid the down payment
  • Whether the home was owned before marriage

Bank Accounts and Investments

Most liquid financial assets are included in NFP, including:

• Chequing and savings accounts
• Joint and personal accounts
• Stocks, bonds, ETFs, and mutual funds
• Taxable investment portfolios
• Cryptocurrency holdings

Pensions and RRSPs

Included assets typically are:

• Employer pensions (defined benefit or defined contribution)
• RRSPs and locked-in retirement accounts
• Deferred profit-sharing plans
• Government pensions accrued during the marriage

In Ontario:

• Pensions are usually valued professionally
• The portion earned during the marriage is included in NFP
• Equalization is often achieved through a transfer at source, rather than cash payments

Business Interests

They may include:

• Sole proprietorships
• Corporations or professional practices
• Partnership interests
• Shares in private companies

Even if a business was started before the marriage, the increase in its value during the marriage is generally included in NFP. Courts may require:

• Independent business valuations
• Analysis of retained earnings
• Review of shareholder agreements
• Examination of income manipulation or expense deductions

Assets That May Be Excluded or Treated Differently

Common exclusions include:

• Gifts or inheritances received from third parties during the marriage
• Damages awarded for personal injury
• Life insurance proceeds (in some circumstances)
• Property specifically excluded by a marriage contract or separation agreement

Important limitations:

• Excluded property can lose its excluded status if it is:
  • Used to purchase or improve a matrimonial home
  • Mixed with joint assets in a way that cannot be traced
• Clear documentation and tracing are essential

Role of a Divorce Lawyer in Asset Protection

Strategic Advice Tailored to Contested Divorces

An experienced divorce lawyer provides:

• Early risk assessment of vulnerable assets (business interests, pensions, real estate, investments)
• Guidance on what actions are legally permissible—and what actions could backfire
• Strategic planning around timing, particularly the separation date and valuation date
• Advice on structuring interim financial arrangements without compromising long-term claims

Ensuring Compliance With Ontario Disclosure Requirements

Full and frank financial disclosure is mandatory in Ontario family law proceedings. Failure to comply can result in:

• Court orders compelling disclosure
• Cost penalties
• Adverse credibility findings
• Reopening of settled issues later

A divorce lawyer ensures compliance by:

• Preparing and reviewing Form 13 or Form 13.1 Financial Statements
• Identifying assets that must be disclosed, even if held solely or indirectly
• Ensuring valuations are defensible and supported by documentation
• Monitoring the opposing party’s disclosure for gaps, inconsistencies, or omissions

Preventing Unilateral Asset Movement or Dissipation

One of the greatest risks in a contested divorce is unilateral asset dissipation, such as:

• Draining bank accounts
• Transferring funds to third parties
• Selling assets below market value
• Incurring excessive debt
• Manipulating business income or expenses

Divorce lawyers help prevent this by:

• Advising clients on lawful account management during separation
• Seeking status quo orders to freeze financial arrangements
• Bringing motions for restraining orders or non-dissipation orders
• Requesting urgent court intervention where assets are at immediate risk

Litigation Strategy to Preserve Financial Interests

In contested cases, asset protection is inseparable from litigation strategy. A divorce lawyer develops a structured approach that may include:

• Early case conferences to address disclosure and interim financial issues
• Motions for exclusive possession or financial restraints where appropriate
• Strategic use of expert evidence (business valuators, pension valuators, forensic accountants)
• Cross-examination on financial discrepancies and credibility issues
• Cost consequences against parties who act unreasonably or dishonestly

Preventing Asset Dissipation and Unfair Transfers

What Counts as Asset Dissipation in Ontario

Ontario courts may find dissipation where a spouse:

• Acts unilaterally without the other spouse’s knowledge or consent
• Makes transactions outside the normal course of family or business life
• Cannot reasonably justify the timing or purpose of financial decisions
• Intends to defeat or undermine equalization under the Family Law Act

Dissipation is assessed based on conduct and effect, not just intent. Even if a spouse claims benign motives, the court may intervene if the result is unfair or prejudicial.

Common Warning Signs of Asset Dissipation

Early identification of red flags allows lawyers to act quickly to preserve assets and seek court protection.

Unusual Withdrawals

Examples include:

• Large cash withdrawals shortly before or after separation
• Draining joint accounts without explanation
• Moving funds to newly opened personal or offshore accounts
• Repeated small withdrawals designed to avoid detection

Courts carefully examine bank records and may draw adverse inferences where withdrawals cannot be justified.

Gifting or Selling Assets Below Value

Another common dissipation tactic involves transferring assets to third parties.

Warning signs include:

• Gifting money or property to family members or friends
• Selling vehicles, investments, or valuables at well below market value
• Transferring ownership of assets without legitimate consideration
• Accelerated repayment of non-essential “loans” to insiders

Ontario courts may treat these transactions as notional assets, adding their value back into the dissipation spouse’s Net Family Property.

Business Income Manipulation

For business owners, dissipation may occur through income suppression rather than outright transfers.

Examples include:

• Delaying invoices or contracts
• Inflating business expenses
• Paying excessive salaries or bonuses to relatives
• Retaining earnings in corporations without justification
• Deferring distributions or dividends strategically

Courts are increasingly willing to look behind financial statements, especially where income changes coincide with separation.

Court Remedies Available to Stop Improper Conduct

Ontario courts have broad authority to intervene when assets are at risk.

Common remedies include:

Non-Dissipation and Restraining Orders

• Orders prohibiting the sale, transfer, or encumbrance of assets
• Restrictions on bank accounts, investments, or real property
• Enforcement through contempt proceedings if breached

Preservation and Status Quo Orders

• Orders requiring parties to maintain existing financial arrangements
• Preventing unilateral changes to business operations or spending patterns

Tracing and Notional Asset Adjustments

• Courts may add dissipated assets back into a spouse’s NFP
• Particularly effective where assets have been gifted or hidden

Cost Sanctions and Adverse Inferences

• Courts may order the dissipation spouse to pay legal costs
• Credibility findings can affect all financial and parenting issues

Court Orders and Legal Tools to Protect Assets

Preservation and Restraining Orders

Preservation orders and restraining orders are among the most effective tools for preventing asset dissipation during a contested divorce.

These orders may:

• Prohibit the sale, transfer, or encumbrance of assets
• Freeze bank accounts, investments, or business interests
• Restrict withdrawals beyond ordinary living or business expenses
• Apply to real property, personal property, and financial accounts

Courts grant these orders where there is evidence of:

• Actual or threatened dissipation
• Unilateral financial decision-making
• Lack of transparency or cooperation

Once in place, these orders preserve the asset pool until equalization is determined.

Exclusive Possession Orders for the Matrimonial Home

An exclusive possession order grants one spouse the right to live in the matrimonial home while excluding the other, regardless of ownership.

In asset-protection contexts, exclusive possession may:

• Prevent forced sale or improper disposal of the home
• Preserve housing stability for children
• Reduce conflict that can lead to financial misuse
• Clarify responsibility for mortgage, taxes, and upkeep

Interim Financial Arrangements

Courts may impose interim financial orders to stabilize the parties’ financial positions while litigation is ongoing.

These may include:

• Interim spousal or child support
• Orders governing payment of household expenses
• Temporary business income arrangements
• Directions regarding debt servicing and credit use

Interim orders reduce uncertainty and prevent one spouse from leveraging financial pressure to force unfair concessions.

Enforcement Options When Orders Are Breached

When a spouse violates a court order, Ontario courts have several enforcement mechanisms available.

Common enforcement tools include:

• Contempt of court proceedings, which may result in fines or penalties
• Cost awards against the non-compliant party
• Orders reversing improper transactions
• Adverse credibility findings affecting final decisions
• In extreme cases, incarceration for persistent contempt

Courts expect strict compliance with asset-related orders, and breaches can seriously undermine a party’s position in a contested divorce.