The Financial Cost of Broken Relationships
It is well-known that divorce comes with the splitting of assets and financial costs to one or both sides. We all go into relationships hoping they will last, but sometimes they don’t. The divorce rate in Canada is now close to 40%. The breakdown of relationship is one of the biggest risks to a person’s financial plan. Cohabiting or being in a common law relationship doesn’t provide much protection either, despite a common misperception that it does. The Family Law Act of BC has a number of definitions that you should be aware of before you walk into any relationship:
“The divorce rate in Canada is now close to 40%. The breakdown of relationship is one of the biggest risks to a person’s financial plan.”
A marriage-like relationship is defined as when a couple is either married by law or has been living together for a continuous period of two years or more. If there are any children in the relationship, spousal support claims can be made regardless of whether the two years are met. Indicators of a marriage-like relationship include sharing shelter, sexual activity, attending social gatherings together, monetary support, and in general doing life together. If the definition of a marriage-like relationship is met, then any family property is subject to being split on relationship breakdown.
Family property includes all assets and debts that were accumulated during the marriage or marriage-like relationship. If each person brings assets into the relationship, then any growth on those assets is family property. Any assets that have been put into joint are usually considered to have become family property. The onus is on each person to prove what assets they brought in to the relationship, that those assets should be excluded property, and that those assets are still intact and not changed into something that is joint.
Excluded property includes assets brought into a relationship that are still intact, gifts or inheritance meant for the one person, a settlement or insurance money that is meant for the one person, and property that is held in trust for the benefit of the one person. Everything else is subject to be divided, including private company shares and pensions.
It is advisable to have a pre-nuptial agreement outlining the assets each individual is bringing in to the relationship and what would be excluded in the event of a separation. Please note that I am not a lawyer and this is a general information piece to help make people aware of the financial risks associated with entering into any kind of marriage-like relationship.