Julia and Noah were married for 13 years. They have now separated.
On valuation day, Julia the following assets- the matrimonial home held jointly with Noah worth $800,000, with a mortgage held jointly with Noah of $400,000, investments worth $36,000 in her name alone, and RRSP $50,000 in her name alone. The antiques crystal bowls she bought before she was married, are now worth $4,000.
At the date of marriage, she had a savings account of $16,000 and a credit card debt of $6,000. She also bought antiques crystal bowls worth $2,000.
On valuation day, Noah owned the following assets- the matrimonial home held jointly with Julia worth $800,000 with a mortgage held jointly with Julia of $400,000, a stock portfolio worth $40,000 in his name alone, RRSP $80,000 in his name alone and antiques he had inherited from his grandfather uncle during the marriage now worth $20,000.
At the date of marriage, he had savings of $18,000 and student debt of $12,000.
6
Calculate the following-
Note you MUST show ALL your workings to get full marks.
a. Each person’s net worth on valuation day. (2 marks)
b. Each person’s net family property on valuation day. (6 marks)
c. Calculate the equalization payment. (2 marks)
d. Calculate each person new net worth after the equalisation payment. (4 marks)
Solution
Marriage day net worth
Husband (Noah),
Savings = $18,000
Student debts = $12,000
Total = $6,000
Wife (Julia)
Savings = $16,000
Credit card debit = $6,000
Antiques crystal = $2,000
Total = $12,000
Valuation day net worth
Husband (Noah)
Matrimonial home owned jointly ($800,000) = +$400,000
Mortgage held jointly ($400,000) = -$200,000
Stock portfolio = $40,000
RRSP = $80,000
Antiques inherited = $20,000
$400,000 + $40,000 + $80,000 + $20,000 – $200,000
Total = $340,000
Wife (Julia)
Matrimonial home owned jointly ($800,000) = $400,000
Mortgage held jointly ($400,000) = -$200,000
Investment = $36,000
RRSP = $50,000
Antiques crystal bowls = $4,000
$400,000 + $36,000 + $50,000 + $4,000 – $200,000
Total = $290,000
- Net worth
Noah
Matrimonial home owned jointly ($800,000) = +$400,000
Mortgage held jointly ($400,000) = -$200,000
Stock portfolio = $40,000
RRSP = $80,000
Antiques inherited = $20,000
$400,000 + $40,000 + $80,000 + $20,000 – $200,000
Total net worth for Noah = $340,000
Julia
Wife (Julia)
Matrimonial home owned jointly ($800,000) = $400,000
Mortgage held jointly ($400,000) = -$200,000
Investment = $36,000
RRSP = $50,000
Antiques crystal bowls = $4,000
$400,000 + $36,000 + $50,000 + $4,000 – $200,000
Total net worth for Julia = $290,000
- Net Family Property
Noah
Valuation day = $340,000
Marriage day = $6,000
$340,000 – $6,000 = $334,000
Net Family Property for Noah = $334,000
Julia
Valuation day = $290,000
Marriage day = $12,000
$290,000 – $12,000 = $278,000
Net Family Property for Julia = $278,000
- The equalization payment
Julia’s Net Family Property (NFP) = $278,000
Noah Net Family Property = $334,000
Julia has a lower Net Family Property hence is entitled to one-half the difference between the two amounts.
That is, ($334,000 – $278,000) / 2 = $28,000
Noah must pay Julia $28,000.
Equalization payment = $28,000.
- Julia = Net worth + $28,000
$290,000 + $28,000 = $318,000
Julia’s net worth after equalization payment = $318,000
Noah = Net worth – $28,000
$340,000 – $28,000 = $312,000
Noah’s net worth after equalization payment = $312,000
