Betrayal or Good Economic Sense?
Whose Portfolio is it Anyways?
Have attitudes changed? Or, has the fluctuating economic climate ruffled by horrific world events brought home the need to think hard about one’s own economic future? While the international markets heave about in 2015, can anyone predict the future? Are even pension plans safe anymore? And for the spouse who has moved up the corporate ladder in the family held company may be without a pension plan. The Canadian Payroll Association in their recent 2013 survey found that savings are not sufficient to meet retirement expenses for 73% of Canadians (http://bit.ly/15RtoZN).
Canadians from a young age were instilled to be prudent and save for their future. For some, that meant a long term career working up the ranks and regularly setting aside funds to build a nest egg. Some were able to enjoy a vacation property down south or inherit a family cottage in the Muskokas which properties may now command seven figure prices.
A Legal Duty to Share: Modified by Contract
If one spouse brings into the marriage assets of a significant value, is there a duty to share? Is marriage an economic partnership where each partner is entitled to 50% of the net value of the other’s property? Yes, says the Family Law Act. And the same Act also welcomes spouses who wish to design a property sharing scheme unique to their financial circumstances on the chance that their marriage may fail.
Negative attitudes attached to keeping separate one’s property in marriage – once the norm – is dissipating. Acknowledging the history of effort and the pride in the financial accomplishment earned by one or both spouses, married spouses are deliberately choosing to modify the 50% legislated property sharing scheme which operates at marriage breakdown.
The new contractual arrangements are indeed creative and will be seen, in some cases, to be characterized as responsible. Here are a few custom clauses:
- With an eye to preserving the wealth brought into the marriage by one of them, spouses will plan to share their future financial contributions to the acquisition of new assets by registering the title in joint ownership.
- For the initial years of the marriage, the contracts may stipulate an absolute nix on the sharing of any assets. Over time a stepped sharing plan allows the gradual transfer or quantum of wealth to be shared consistent with the number of years of residing together.
- Providing a life interest in the matrimonial home isn’t an outright transfer of ownership but it does provide security of residence for the life of the non-titled spouse after separation. In that case, title to the home could remain with the owner or be transferred or bequeathed to the children upon attaining a certain age.
Discussion and Planning
It can certainly be a difficult conversation to start about how you want to divide your assets if the marriage ends – particularly before the wedding celebration has occurred. Moving forward should be an informed decision. It’s a decision to be made between the spouses with independent advisors particularly for the spouse being asked to consider signing a marriage contract.
Demand full unfettered financial disclosure from each other. Gather as much knowledge about the possible effects of the decision to be made from different perspectives. How may Plan A affect your retirement? Would Plan B meet life’s unexpected tax obligations? Meet with an independent accountant or certified financial planner to understand all applicable tax strategies and wealth management. Understand your legal rights and obligations in marriage and upon marriage breakdown, the risks and implications of holding joint accounts and joint debt, and other related matters.
Second marriages are often the ones which work because of the lessons learned the first time around. Experience and judgment gained help to guide spouses through the initial emotional reaction to make the decision that works best for today and the long run. Pay for professional advice and understand your rights.
Have you been handed a draft marriage contract to review or been asked to obtain independent legal advice? Do you want your assets protected from automatic equal division upon breakdown of your marriage? Call Lorisa Stein at 416 596-8081 for a consultation or use the Contact Page to ask questions.