When his life partner suddenly decides to break up, his whole world often comes crashing down. In addition to being caught in a whirlwind of emotions, financial questions arise quickly. Especially if his rear wasn’t well protected when things were going well. But it’s step by step that we get out of it.
The situation
Gilles* was flabbergasted when his spouse decided to leave him after 28 years of living together, including 7 in a civil union without them having previously assessed their respective assets or signed a contract. While he has always felt privileged, he is now plagued by financial stress. He does not know what will happen to him considering that his annual income is greater than that of his ex-spouse.
Since they have two adult children, still in school, Gilles also wonders if he will have to pay child support. Then he wonders whether he should buy half of the house from his wife. Now 58, he is also concerned about his retirement. Finally, he tries to assess his new monthly budget and determine if it will be sustainable. “She was the one who managed everything”, specifies Gilles, distraught.
Numbers
Age: 58 years old
Children: two adults still in school
House: value of nearly $700,000 with mortgage of $90,000
Registered Retirement Savings Plan (RRSP): $275,000of which $110,000 date from before the civil union
Registered Pension Plan (RPP): $143,000of which 15% was acquired before the civil union
Annual income: approx. $185,000varying slightly depending on the annual bonus
Estimated monthly cost of living: $5000plus the costs related to the separation, such as those of the lawyer and the notary
Life insurance: one from his employer which covers his annual salary and doubles it in the event of an accident at work, as well as one from $100,000
The civil union
First, Hadi Ajab, independent financial planner and mutual fund representative with PEAK Investment Services, would like to congratulate Gilles for having the courage to ask for help. “And I encourage him to continue because he will need it to take good care of himself in this difficult period, whether financially, legally or psychologically,” he says.
The expert first stresses the importance, when living together, of foreseeing what will happen if ever a separation occurs. “It’s easier and simpler for everyone to determine clear parameters when the two people have a harmonious relationship,” explains Hadi Ajab. But, in the case of Gilles, it is less complicated to find his financial data from the start of their civil union 7 years ago than if it had taken place 28 years ago. »
PHOTO MARTIN TREMBLAY, PRESS ARCHIVES
Hadi Ajab, independent financial planner and mutual fund representative with PEAK Investment Services
Despite certain particularities, the civil union is comparable to marriage in the sense that the rights and obligations are the same for the spouses, particularly in matters of family patrimony, alimony and inheritance. Moreover, the civil union was created in Quebec in 2002 when marriage was not accessible to same-sex spouses to offer them practically equivalent protection. “With the civil union, we speak of dissolution and not of divorce as with marriage”, specifies Hadi Ajab.
As they have not chosen a matrimonial regime, it is that of partnership of acquests that applies. “This regime favors the sharing of the net value of property accumulated during the union, called acquests, while allowing each to exclude certain assets, called personal property, such as an inheritance, a gift, or property acquired before marriage. union,” explains the financial planner.
But, regardless of the matrimonial regime, the rules related to the division of the family patrimony take precedence. “All the property that was used to meet the needs of the family during the years of the civil union, such as the residence, even if it is in the name of only one of the two, the furniture and the vehicle make it part, lists Hadi Ajab. But you also have to think about pension plans, RRSPs, the Quebec Pension Plan (QPP). »
Then, it will be necessary to look at the partnership of acquests. “For example, he indicates, a tax-free savings account (TFSA) is not part of the family patrimony, but depending on their source, the contributions that were made during the years of the civil union will form part of the acquisitions. »
Property and alimony
Thus, Gilles and his ex-spouse will each end up with a list of different assets and their market value that they will have to share with the other, as well as the related debts. “They will separate the market value of the goods, less the debts which made it possible to acquire them, to maintain them or to improve them, specifies Hadi Ajab. So, when we know how much Mrs. owes to Mr. and how much Mr. owes to Mrs., we will arrive at a net amount that one of the two will have to pay to the other. »
Gilles also underlines his fear of having to pay child support. “Indeed, since he specifies that his income is much higher than that of Madame, it is possible that he has a periodic amount to pay her, or a fixed sum, indicates the financial planner. Everything is assessed based on the needs and situation of the former spouses, as well as the number of years the civil union lasted. »
He adds that for children, it is also possible that child support must be paid to them even if they are of legal age to meet their basic needs since they are still studying.
Home, Retirement and Estate
It is therefore a lot of work that must be done before we can look at Gilles’ financial future. “I invite him to take it step by step,” says Mr. Ajab. First, he must make his current budget and consider the expenses associated with the dissolution, such as lawyer and notary fees. Then, he must know what will be left to him once the division of property has been made with his ex-spouse. »
Then he will have to decide what to do with the house. “Considering his income and the fact that the house is already largely paid for, if his credit is good, he should have no difficulty in qualifying for the mortgage loan, assesses the financial planner. But it’s not just a financial issue. He will also have to ask himself if he wants to continue living there, or if he prefers to sell it and start afresh. »
Once these steps are behind him, he can plan his retirement. “For example, will he be able to take her soon, or will he have to delay his project, or save more in order to take her at the desired age? It will be to see. »
Gilles will also have to think about his succession. First, he has his life insurance. “He will have to verify his beneficiaries, because the dissolution of the civil union renders any designation of the spouse null and void,” specifies the financial planner.
He adds that Gilles will have to update his will and his choice of liquidator, as well as his protection mandate. “He has to think about who will take care of him and his finances if something happens to him,” says Hadi Ajab.
All these elements are of course complex. “That’s why it will be important for Gilles to be accompanied by professionals,” he adds. That’s how, step by step, he will eventually see the light at the end of the tunnel. »
* Although the case highlighted in this section is real, the first name used is fictitious.
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