Once the ink is dry on a separation agreement, many couples may not take that final step to make the divorce official with a court order. And if you don’t plan on going down the aisle again, maybe you don’t feel you need to. But in many provinces it can complicate your estate plans. Francois Desmarais, Tax and Estate Planner at TD Wealth, joins Kim Parlee to discuss some reasons you might consider finalizing your divorce.
Francois, great to see you again. Question is, I've been separated from my ex for over a decade. And I have a new live-in partner. If I do not want to get married again, do I need a divorce?
- I think you can-- I guess technically you don't need to get a divorce. And when you say I don't want to get married again, that would be the first thing. You see, if you want to get married again, you need a divorce. But legally no one can force you or ask you to divorce.
Having said that, it may create all kinds of difficulties. You see, I'd say under the Income Tax Act, the Canadian Income Act, if you are still married and have a common law partner, under the act, both would be considered as being your spouse. So it means that both could benefit of the rollover of your RSPs, you see, your registered Retirement Savings Plan. So is it really what you want?
In some provinces, again, you could technically die with two spouses. And if this is happening without a will, again, that may create some difficulties of who's receiving your assets because two different individuals may be able to claim being your spouse. So I guess obtaining a divorce is certainly something quite important.
- Is there a way-- I mean, I guess I think for some people-- and correct me if I'm wrong. They may not want to get an official divorce for maybe benefits, or maybe there's some insurance or other reasons they're not doing that. But if they decide not to get a divorce, can a will help provide that clarity? So instead of just leaving it to my spouse of which there's two people who are going to stand up and say, I'm the spouse, but if you name them and say, this person, does that help clarify things?
- The answer is yes. That is going to help. You see, having a will in place-- and in fact, having a will in place for everything is important. But for this situation, where in your will legally it could be considered having two spouses, in your will you could say, I bequeath my assets to so and so. And this would certainly help reducing any confusion and making sure that your assets, or some of your assets I should say, are transferred to the individual you want them to receive.
Where when I say some assets, life insurance is a tricky one because you may designate a beneficiary of your life insurance. And if it says your spouse, in fact, the divorce in Canada would remove your spouse from being a beneficiary. But if you do not get the divorce, then your spouse is still considered your spouse.
So from the life insurance standpoint, make sure that you either get the divorce or you ensure that you have the right person as being the designated beneficiary under the life insurance policy to make sure that it does not create any difficulties the day you pass away. The other thing would be related, I'd say, to power of attorney, where if you do have a power of attorney, which is something we recommend as well-- and by the way, in Quebec they're called protection mandate, the same thing. It's like enduring power of attorneys. A protection mandate is a document in which you grant authority to someone to make decisions on your behalf.
When you sign this document, you are the one deciding. If don't, if you decide not to sign such a document, then you're leaving it up to the court or the law or the government to decide. And then, yeah, it could be your ex-spouse becoming in charge of making decisions for you if you are incapacitated. That may not be exactly what you wish.
- If I go back to the original question, Francois, the question was, someone who is separated but not divorced but has a new live-in partner. And then, of course, you have to deal with definitions of common law arrangements, I'm expecting, as well. So what does that mean? And again, tell us maybe about Quebec, and then maybe tell us about some other parts of Canada.
- When talking to my colleagues across the country, for now in Quebec, common law partners are a total stranger to the estate. That's the way it is now. And when I say we, the government is working on changing this. But you and I can understand that in the last two years, they had many other things to deal with.
But, yes, they are working on refreshing the law, making sure that common law partners would be recognized for estate purposes. But for now, let's say you have a man and woman not married, having children, woman passing away. Man is receiving nothing. He's a pure stranger to the estate.
All assets from the woman who passed away would go to the children, with all the difficulties that this may create. The first one that I see as being for the man being co-owner of the house with minor children, you see? It can easily be a nightmare. So hopefully we're working on that. And I know across the country it's very different from one province to the other.
- Yeah, and everyone needs to check the provincial legislation. Francois, thanks so much.
- It was a pleasure.
- Francois Desmarais. And if you have any questions, you'd like to ask MoneyTalk a question, please send an email to firstname.lastname@example.org with Ask MoneyTalk in the subject line. Ask your question. We will find the right person to answer that question. Then check on moneytalkgo.com for that answer.