Lifestyle | When the couple’s finances are handled unfairly

Finances are the main source of conflict in couples and it is often difficult to address contentious points. Especially when inequity has persisted for decades and a balance of power has set in.

Martine Letarte
special cooperation

The situation

Gervaise*, 64, has been a de facto spouse for 42 years. She earns $43,000 a year. “Health is good and I love my job. I was thinking of opting for part-time in September, when I turn 65, but I don’t think I will be able to afford it. She has $60,000 in her Registered Retirement Savings Plan (RRSP) and currently contributes $50 a week.

Her husband, Richard*, retired five years ago. The residence where the couple lives is his only. “But, for all these years, I have maintained the house in an exemplary manner, both inside and outside”, specifies Gervaise.

He asks her for $140 a week to cover some of the house and insurance costs. The couple made a will in 1983, when their daughter was born. Gervaise and Richard bequeath their investments and property to each other. The residence will go to Gervaise if Richard dies.

The two spouses have each been paying $100 a month for three years to repay their daughter’s student loan, who “earns a very good living”.

Richard has just purchased a vehicle worth over $70,000. Even though Gervaise barely drives, he asks her to contribute to the payments to the tune of $200 per month. In addition, Richard tends to multiply the grocery stores and the bill often rises to more than $250 a week, which does not suit Gervaise.

“As I had very little leeway, I applied for my pension from the Quebec Pension Plan [RRQ]. I don’t have money set aside for the unexpected. I feel like I have nothing, like a feeling of emptiness. What can I do to improve my situation and feel better? »

The answer

When a spouse does not own the house

“Gervaise’s situation is delicate,” says Marie-Ève ​​McLean, financial planner at Proactif Services Financiers, in Saint-Jean-sur-Richelieu.

The first point that does not work, in his eyes, is the question of ownership of the house. As it is in the name of Richard, if the couple separates, Gervaise would leave with nothing even if she has paid part of it for 42 years and maintains it.

“To protect themselves, common-law spouses can sign a cohabitation agreement that specifies what will happen in the event of separation,” says Ms.^me McLean. We can foresee that the one who is not the owner will receive compensation to recognize his involvement in the expenses of the house. Normally, we make this agreement at the beginning of our life together, when everything is going well! »

If the couple were married, this question would not arise since the residence would be part of the family patrimony and each spouse would be entitled to half of its value in the event of divorce.

At least the will protects Gervaise in the event of Richard’s death. “Without a will, as they are common-law spouses, Richard’s assets, including his house, would go to his daughter,” says Ms.^me McLean. But I recommend that the couple update their will. It is suggested to do it again every five years, or as soon as there is a change in the situation. »

Common expenses paid in proportion to income

It often happens that the incomes of the two people who form the couple differ. “To be fair, it is advisable that everyone pay a share of common expenses in proportion to their income,” says Ms.^me McLean. Thus, everyone will be able to release the same percentage of their monthly income for personal expenses and savings. »

So if Richard has about 10% more income right now, he should be paying 10% more on common bills.

“We also have to agree on these expenses,” says Ms.^me McLean. If Gervaise did not agree to buy this vehicle and she did not sign to become co-owner, she should not pay for it. Unlike Richard who has already secured a comfortable retirement, she needs to save and to do so she must stick to her spending priorities. »

The financial planner also wonders about the $100 paid each month by Gervaise to repay her daughter’s student loan. “The student loan doesn’t have a high interest rate and you get a non-refundable tax credit for the amount paid in interest, so it’s not a priority debt to repay. In addition, her daughter earns a very good living: if I were Gervaise, I would have a discussion with her to explain my need to save and I would let her repay her loan. »

Marie-Ève ​​Mc Lean thus believes that Gervaise could easily free up at least $300 a month by eliminating the vehicle and the student loan from her expenses to build up an emergency fund, then to save for her retirement.

Government pensions

The financial planner also considers that Gervaise did not help herself by withdrawing her QPP pension before age 65. “She will be penalized in terms of her pension until the end of her days and in addition, she has come to increase her cost of living because she now spends these $700 each month and it will have to be taken into account in the preparing for retirement. In addition, as Gervaise is still working, she has a higher tax rate than when she retires. »

She advises Gervaise to catch up with the Old Age Security (OAS) pension. “If her health remains good and she continues to work, her pension will be increased by 0.6% for each month that she will not request it from the age of 65. It is possible to postpone the OAS for a maximum of five years, which would allow to reach a bonus of 36% until the end of his life. This is major considering that she has a 25% chance of living to age 96, according to the standards of the Institut québécois de planification financière. »

Make a plan for retirement

Once Gervaise has reduced her expenses to the essentials and pays those of the couple in proportion to her income, she will be able to assess her monthly cost of living. Then she can see how much savings she will need to retire.

“I don’t think his lifestyle will be very high,” says M^me McLean. Then, she will be able to save good amounts each month, perhaps even all of what she receives in QPP. She could therefore use this amount to contribute to her RRSP and also reinvest the amounts she will have in tax refunds. She would thus approach her retirement goal more quickly. »

However, she will have to make sure that her investments will give her enough returns. “While respecting her investor profile and her investment horizon, she must avoid investments whose return is insufficient to cover inflation, which is approximately 2% per year,” explains Ms.^me McLean. Thus, it will preserve its purchasing power. Generally, the part of the savings that will be used in the long term is put a little more at risk and the part that will be used in the short and medium term is less at risk. »

One thing is certain, to try to change things, Gervaise has every advantage in discussing with her spouse.

“It’s always tricky, but maybe he doesn’t even know how Gervaise feels about her finances,” says Marie-Ève ​​McLean. Everyone has to be comfortable and, to achieve this, they will have to find solutions together. The ideal is to be accompanied by a financial planner who will look at the different possibilities and assess their impact on the couple’s finances. »

* Although the case highlighted in this section is real, the first names used are fictitious.

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