Your financial life as a couple after a separation

It's best to set up the terms of a new relationship (and any
eventual separation) while things are going well.

Caroline Arbour | Journalist

When a couple splits up, one door closes... but often another opens. Before you move in with a new love interest though, it's a smart idea to set your finances straight right from the start, whether or not children are involved.

Starting off on the right foot
Dominique Bigras, a lawyer and a trust manager with Desjardins Wealth Management, notes that it's best to set up the terms of a new relationship (and any eventual separation) while things are going well. The second time around, couples are more likely to find themselves living together in a common-law relationship. A cohabitation contract will protect you by identifying what you've each brought to the relationship, what you've acquired together, and how you'd split it all up if you were to part ways.

Managing your money
"There's no one way to divide the expenses of a new household," says Angela Iermieri, a financial planner at Desjardins Group. It's up to each couple to determine what works best for them, but it's a good idea to have a personal account for your own expenses and investments and a joint account for your shared financial obligations.  You might also want a separate account for any money involving your children (support payments, tax benefits, etc.) 

Understanding your rights
Rules governing the division of property and marital status can vary between provinces, so it's important to seek legal advice. Just because you have cohabitation agreement doesn't mean you're automatically entitled to split everything. If you move in with someone and only pay day-to-day expenses, it's considered the equivalent of paying rent. If you were to separate, you'd have to show proof of ownership to avoid a dispute. You should see a notary or lawyer to make any necessary changes to your legal documents, if this is the will of the house's owner. 

In Quebec, in a marriage or civil union, any appreciation in value during the marriage or civil union will be considered family property (known as family patrimony). However, this still doesn't entitle you to ownership of the property: you're entitled to receive the  
value, which is half of what was acquired during the marriage. The owner of the property may give their spouse the equivalent value in cash and keep the house.

And what about the kids?
Whether a couple is married or living common-law, a new partner has no legal or financial obligations toward their partner's children. Adoption is the only way to create legally binding ties; it is necessary that the other parent is deceased or deprived of parental authority.  

However, your partner can always choose to contribute financially to your child's life. For example, they may decide to include your child in their will, help cover daily expenses or contribute to your child's RESP. There's no limit on the number of RESP accounts a child can have in their name; the only limit is on the amount of grants and contribution they can receive.

Protecting your new partner without shortchanging your kids
In Quebec, if a couple is married or part of a civil union, even if there is no will, the spouse will inherit the deceased's property. In a common-law relationship, your partner is not automatically provided this same protection. The solution is to update your will and your life insurance policies. A trust for the exclusive benefit of the spouse can also be a particularly interesting option. This type of trust makes sure that what your partner inherits is then left to your children when your partner passes on. The parent indicates the terms of distribution in their will.

* Angela Iermieri is a financial planner and mutual funds representative with Desjardins Financial Services Firm Inc., and Dominique Bigras is a trust manager with Desjardins Wealth Management.

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