Let’s say you are the typical Canadian family of four; both spouses work, but one – usually the husband (but not always) – is the main breadwinner; the wife works full time, but her income is not as high, since she took mat leave, and some further time off when the two kids were infants. The husband has a pension. The wife does not, but she has an RRSP. They jointly own their home, which is mortgaged. They have RESP’s for the children, though not as much as they wished. There are credit card debts, and the Line of Credit secured on their home is drawn on more than either wants. Their daughter is in primary school, and the son just started high school. Both play competitive hockey. It’s a 2 car household.
They’ve tried marriage counselling, but it’s just not working anymore. So they’ve talked about it, and decided to separate. They did not have a marriage contract. What now??
What are the financial obligations when this happens?
- Monthly Child support: No matter what the arrangement reached between the spouses on custody, or ordered upon them if they cannot agree, the Child Support Guidelines will have to be applied. How this works, depends on the custodial situation. What if both children live primarily with one parent? Or, they live more or less equally with both parents? Or, 1 child lives mainly with the father, and 1 child lives mainly with the mother? Each situation will call for a different ongoing monthly child support amount to be payable.
- Special or extraordinary expenses for the children: these are over and above the monthly child support amount payable, and are to be divided between the parents in proportion to their incomes. This includes hockey. It may include other “big ticket” items like braces, and later on in life, post-secondary education expenses.
- Spousal Support: In this case, the husband, in all likelihood, will have to pay monthly spousal support to the wife. How much? The Spousal Support Advisory Guidelines will be the first source referenced to determine the amount.
How long? That depends. The longer the marriage, or cohabitation, the more likely that the obligation to pay will be indefinite. Sometimes a lump sum amount is agreed to or ordered.
- Life Insurance: any spouse having an obligation to pay either child support or spousal support, must secure that obligation by maintaining an appropriate amount of life insurance.
- Benefit Plan: both spouses may have benefit plans through their work, which will have to be maintained for the children, and can be maintained for each other, usually until a divorce occurs;
- Property Division:
- The husband’s pension that was earned during the marriage will have to be divided; a pension value is required.
- All other property owned will need to be valued as of the date of separation, including the home, RRSP`s, bank accounts, etc.
- Debts, including the mortgage, and line of credit, credit cards will need to be determined as of the date of separation
- The house will have to be valued; 1 spouse will buy out the other, or it is sold;
In the simplest terms possible, property division is achieved in the following way: each spouse adds up what they own to the date of separation; they subtract what they owe on the date of separation, and they subtract what they owned on the date of marriage (except for the matrimonial home); this results in each spouse’s “net family property” value; whichever spouse has the higher net family property value must pay one-half of the difference to the other spouse. The Ontario Family Law Act calls this “equalization of net family properties”.
How does all of this get calculated? How do you know that you are doing it right and that you can count on the final figures reached not being challenged in the future?
The only safe way, so that you can rest assured that your financial obligations upon separation have been met, is to obtain proper, experienced family law counsel to assist, and to finalize your separation agreement, or alternatively, to pursue your claim(s) through Family Court.
Graeme Fraser has that experience and knowledge to ensure that your rights and financial obligations upon separation have been fully met and protected. He has represented literally thousands of separating spouses over his 26 years of practice, and will represent and guide YOU to a successful and beneficial conclusion to your separation.