Understanding The Financial Aspects Of A Divorce In Canada
Divorce is probably among the most traumatic experiences that can happen in every person’s life. The sentimental aspects of the separation are tough to handle, and the pressure can be compounded by financial consequences as well.
Everybody is aware that divorces aren’t free. As a matter of fact, it may literally cost you a fortune. Along with attorneys and counselors, the cost of a secondary residence (most likely) for one of the two parties concerned and disposition of assets, you may anticipate a long and expensive ride.
The finances usually finalized by a court order mostly fall under three categories – child support, alimony, and the division of assets. These are major issues and can be complicated. Their resolution affects both parties involved in the divorce proceedings for life. That’s why the assistance of a competent divorce lawyer is crucial.
The divorce laws and decision tendencies differ by the state in Canada and continually advance with new regulations and societal changes. Overall, child support levels have been growing to reflect the increasing costs of raising children and the enormous costs of a college education. At the same time, alimony awards have been decreasing, reflecting the increase of two-income families.
Ultimately, if you are absolutely positive that your marriage has come to an end and there is no other alternative except divorce. Then, you have to consider the things that will impact your bank account. So, read below and find out some of the most important financial aspects of divorce you should be aware of beforehand.
General Outline On Property Division
Under the Constitution of Canada, every state and territory is accountable for regulations regarding the division of family or marital property. Those regulations differ from one state or territory to another. In most divorce cases, both spouses can sign an agreement that says how they want to handle everything. That agreement is called a separation agreement and also varies from province to province.
For example, if you live in British Columbia, in order to successfully go through the process of property division, you should get proper legal advice. It would be best to hire a local family lawyer who practices family law and will guide you through the separation agreement BC-wise as well as the other legislations for divorce in the province. That being said, to provide you with a basic understanding of this topic, we give you a general overview of most provincial statutes about the property division during divorce proceedings.
In the eyes of the law, a marital union is an equal partnership. So, whether a partner is responsible for providing family income or running the household, their contribution to the relationship is of equal importance. So, when a marriage breaks apart, that partnership is over, and the property has to be split.
The worth of any property that you obtained during your marriage and the property you still have when you separate has to be split equally between both spouses. Property that you brought into your marital union is yours to keep. However, any rise in the value of that property during the period of marriage needs to be shared. This theory is applied to all the family assets with some exclusions, and one of the main exclusions is your matrimonial home.
Dividing Debts In The Process Of Divorce
Repeatedly even more complicated than the division of the property in a divorce is making a decision who will be responsible for any debt the couple has sustained during the relationship. In order to do that, you must know precisely how much you owe.
Even though you might trust your partner fully, do yourself a favor and get your credit report from every one of your credit reporting agencies. It will show every debt you have under your name, as well as any joint accounts you have with your spouse.
Check your credit reports and recognize which debt is shared and which is under your spouse’s name only. At this stage, it’s crucial to stop the debt from growing any bigger while you’re in the middle of your divorce proceedings. The best way to do this is to cancel joint credit cards, leaving one card under your name in case of an emergency. Once you are familiar with your debts and take steps to make sure they don’t rise, it’s time to resolve who will be accountable for what debt.
Retirement Plan Issues In Divorce
If your spouse has retirement plans, you are entitled (by law) to half of it. You can use that money, for example, for your own retirement, or let’s say, for a deposit for your new home, moving expenses, or other ongoing expenses. Remember, in order to avoid the 10% early withdrawal penalty, make sure to follow the CRA regulations.
The main issue with the division of retirement savings is that although the savings may or may not be enough for joint retirement needs, and most likely, your own retirement needs will be far greater. So, not only do you need to consider how your retirement assets will be divided, but you also need to consider how you will keep contributing to them. After all, that’s in the interest of securing your financial future in your retirement days.
Overview Of Spousal Support During Divorce Proceedings
The federal Divorce Act states the spousal support regulations for spouses who get a divorce. Because the Divorce Act is a federal statute, the laws apply throughout Canada. Furthermore, provincial or territorial legislation set out the regulations for unmarried partners who were common-law couples and married couples that separate but aren’t divorcing.
Under the federal Divorce Act, spousal support is commonly paid when there is a huge difference between the spouses’ earnings after the divorce or separation. Still, that’s not always the case. Sometimes the court can decide that the spouse with the lower earnings is not entitled to spousal support. The court reaches that kind of decision in cases when that spouse has plenty of assets or if the difference in earnings can’t be traced back to anything that occurred during the marriage or relationship.
For instance, under the provincial law of Quebec, common-law partners aren’t entitled to spousal support after the separation. In other states and territories, one of the common-law partners may be entitled to get spousal support from the other. That often depends on how long the spouses have cohabitated together before the separation. In some states and territories, the common-law partners have to live together for over two years before one of the partners is entitled to spousal support.
Final Words
Unfortunately, a divorce will change your entire financial life. It might also bring some big financial decisions you will have to make. However, getting professional advice is crucial for making sure you’re prepared for handling the challenges that will come along. Besides, ensuring you have a plan in position will also help you with reducing stress, which is also vital.
