This newsletter is based on the assumption that there is no Cohabitation Agreement or Marriage Contract in place, setting out how household contents are to be divided upon a breakdown of the relationship.
For separating couples, in addition to all of the other issues that they often times are faced with and have to address, there is often an issue as to how their household items and contents will be addressed and treated between them.
The first point is to distinguish between household contents and personal belongings.
Clearly, each spouse is entitled to retain his and her own personal belongings upon a breakdown in their relationship. For instance, the wife is entitled to keep her own sporting equipment and jewellery, and the husband is entitled to retain his tools, etc.
This does not mean that these items are not accounted for, for equalization purposes. In other words, even though each spouse is entitled to retain his or her own personal belongings, these belongings may have a significant dollar value, which will have to be included in their net family property for equalization purposes. For example, if the wife’s jewellery has a fair market value of $20,000 as of the date of separation, she will certainly be entitled to retain this jewellery; however, she will have to include it as property owned by her on the date of separation for equalization purposes.
For non-married spouses (common law spouses) the equalization scheme under Ontario’s Family Law Act does not apply. Therefore and absent a trust claim in the interest of the property owned by the other, each common law spouse is entitled to retain his and her own property, free from any claim by the other spouse. For common law spouses, there is no “equalization process”, and each spouse is entitled to his and her own property, without any claim by the other spouse (again, absent a trust claim).
Household items and contents are generally considered to be jointly owned property, owned by both spouses regardless of whether one of the spouses actually purchased a particular item. A stereo system purchased on one’s credit card during the marriage, for example, is commonly considered to be jointly owned property.
There are different ways to deal with the issue of household contents and items, at marriage breakdown.
DIVIDE IN SPECIE (EQUALLY): Firstly and most commonly, household items and contents can simply be divided in specie. This means that the household items and contents are divided equally between the spouses, such that each spouse feels that he or she has received a fair share of the items, having regard to their overall dollar value. In such event, the household items and contents are left out of the equalization process, as each side would be deemed to have received approximately an equal value of the household contents.
If they want to divide the items in specie, there are a few different ways to go about doing so. First, the parties can themselves agree on how the items will be divided (who gets what). They both get the items that they really want to have, and simply agree to treat this division as a set-off. Second and if the parties cannot agree on who gets what items, a comprehensive list of items can be constructed by both parties and, upon a flip of a coin, the parties take turns choosing items until all of the items on the list have been exhausted. Third, a less common method is for one of the spouses to create two mutually exclusive lists (both lists combined containing all of the items), and for the lists to be presented to the other spouse, who then gets to choose one of the lists. This method ensures that the spouse creating the lists will do so in such a way that there is more or less an equal value to both lists, otherwise running the risk that the other spouse will take the more “valuable” list!
DIVIDE AND ADJUST: Rather than dividing the items in specie and treating them as a set-off for equalization purposes, a second way to deal with the items is for the spouses to divide the items unequally, and to have this unequal sharing of the items reflected in the equalization process. For instance, if the wife received approximately $5,000.00 of household contents, such would be noted in her net family property. If the husband received $3,000.00 of the contents, this would be noted in his net family property. For equalization purposes, the wife will be deemed to have received $2,000.00 more in household contents than the husband.
In such instance, it may be necessary to retain the services of an appraiser/auctioneer, to provide an estimated fair market value of the household contents and items. Generally and in such event, spouses are shocked at how low a value is attributed to their household contents. The reason for this is that the household contents are appraised at their “garage sale” value, not their replacement value, purchase price, or insured value.
SELL EVERYTHING: If the parties are unable to agree on a division of these joint items, the parties can simply proceed to court for determination. However and if the parties end up proceeding to court, undoubtedly the judge will simply order that all of the contents be sold, with the net proceeds of sale divided equally between the parties. This is really the last resort for the spouses as, once again, both spouses will end up receiving a fraction of the replacement cost of these items, once they are sold and the proceeds divided equally between them.
In the end and as difficult as it may be, the spouses are best off dividing the items between them, and either treating the items as having been divided in specie, or agreeing on the necessary adjustment to be made to their respective net family properties in order to reflect the fact that the items were divided unequally. Sentimental value of items aside, this is clearly an issue where the cost of arguing over “who gets what” will very quickly outweigh any financial benefit that is derived from being able to retain the items in dispute.