Written by: Catherine Levesque
Going through a separation is difficult, even more so when children are involved. The emotions experienced during this time affect the family and certainly complicate things when it comes to dividing property and settling everything. The emotional side of separating is often the most talked about, but finances are a non-negligible aspect of separation. When there’s no cohabitation agreement or marriage contract dictating the ins and outs of the union, separating can become as dramatic as a soap opera. Here are some important financial facts you should know.
Many couples use a joint account for shared expenses. Doing so makes managing family finances easier but poses some risks during separation. Since both partners can access the account, one may be tempted to take some of the money without the other person’s consent. The same goes for joint credit cards—caution is advised. In these situations, it’s preferable to close the joint accounts until everything is in order.
The financial commitments made as a couple must also be assessed. You should know that a spouse is generally not responsible for the personal debts of their ex-spouse, except if the spouses are jointly liable. In all cases, it’s important to inform your financial institution of your separation.
The financial impacts of a separation differ depending on your conjugal status. In Quebec, the common-law relationship isn’t recognized by the Civil Code, meaning common-law partners (or de facto spouses) have no obligation to one another. On the contrary, the divorce or separation of married couples is dictated by the legal matrimonial regime. In all cases, dividing property can be tricky and become a sensitive topic. That’s why family mediation—a neutral and impartial process— can prove to be very useful and beneficial. The Quebec Government pays up to 5 hours of mediation, depending on the situation. Mediation helps to settle issues such as child custody, division of property, as well as support payments, if any.
Once things have been clarified, you should quickly take stock of the situation to determine what’s yours and what you’ll need. From now on, you’ll have to assume certain expenses and debts which used to be a shared responsibility. Taking stock and creating a budget will be essential. You can see a financial advisor to help you assess your situation and support you while you get back on your feet. Having a sound financial plan will certainly make the adaptation process easier.
Even though you’re no longer tied to your ex-spouse tax-wise, it’s better to have your ex’s return completed by the same tax preparer. This way, if you have children for example, the tax credits received for your children can be better distributed, as this calls for good coordination between the parents.
Also remember to review your life insurance beneficiaries as well as the clauses in your will in the event of death. You’ll have to review your objectives and wishes following this major change in your life.
A very important thing to know is that naming a minor child as the beneficiary of any inheritance valued at more than $25,000 (including life insurance and even property such as homes) calls for a tutorship council1 being set up until the child reaches the age of majority. A notary can certainly guide you through this process.
Having children in the picture means there will always be shared expenses to meet their needs. If the separated couple is on good terms, maintaining a joint account can be useful. However, this implies keeping a closer eye on transactions and maintaining a certain level of trust. Another option is to cumulate the expenses over a period of time, one of the parents paying the balance to the other on a regular basis, so that both parents’ expenses are even.
It’s important that you update your marital status with the relevant government agencies since social programs are based on it. Whether you have full or joint custody, your status as a single-parent family influences the calculation of family benefits, as the income of the other parent is no longer taken into account to determine the amounts you’re entitled to for your children.
For the purpose of calculating benefits and credits, your status can be modified after 90 days following your separation. If you take too long to update your status, you could risk having a claim made against you.
Online calculation tools are available to help you measure the impact of your separation on benefit amounts:
What about your Kaleido RESP? A change of subscriber is allowed under certain circumstances only (separation, divorce or death). In the case of a separation or divorce, the subscriber can be replaced (completely or partially) by his or her ex-spouse, by court order or judgment, or a written agreement aiming to divide the property between the ex-spouses. For more details, contact your representative or Customer Service at 1-877-710-7377.
Finally, during a separation, whether you have children or not, it’s important to seek appropriate support whenever you need it: family and friends, or a professional like a notary, accountant, psychologist, lawyer or financial advisor. There’s no such thing as too much support!
Note that this information is unfortunately not universal and that it’s strongly recommended to see a lawyer specialized in family law, whether you’re married or not, and have children or not.
Resources and references:
1. A tutorship council usually consists of three members chosen from both sides of the child’s family (maternal and paternal). The tutor (living relative) is not allowed to be a member of the tutorship council, but must be invited to the meetings. The child may also be invited.