December 29, 2014
Do you think your relationship is coming to an end? Do you know what to do to ensure that your life after separation and divorce at least approximates the lifestyle you enjoy while with your spouse?
Many people focus on the social side of separation and divorce, and while this is an enormous part of a relationship break up, it is also important to focus on how you will finance your life post separation.
The first and most important thing to remember is that knowledge is power. Do you know where all the bank accounts are? Whose name they are in? Where and how much is in retirement accounts, pensions and RRSPs? What property do you and your spouse own and whose name is it registered in? Do you know what kind of debt you hold and whose name it is in? Is your credit card held jointly with your spouse? Does your spouse have a card on your account and can they use the credit privileges? Do you have a joint line of credit?
All of these questions should be easily answered if you have a good grasp of your finances. If you cannot answer them, then the first step is finding out the information you need, so you can make rational and financially prudent decisions.
After separation you will need a place to live and you will have to be able to finance your life and everyday expenses. Knowing what you own and what you owe is the first step in managing and achieving this goal.
If you do not have any credit in your own name, now is the time to get it. Open a credit card in your own name. Use it, AND PAY THE BILL PROMPTLY. Doing so starts to establish your credit history and paves the way for future requirements. If you do have your own credit cards, make sure your spouse is no longer allowed to charge on them and keep your payments current. Good credit will make future financial issues easier to deal with.
If you have a joint line of credit with your spouse, ask your financial institution to make this line a “pay down only” until you have worked out your finances. You do not want your spouse taking a large advance on the line that you are equally responsible to pay.
Discuss with your spouse the continued payment of your regular bills and try to ensure none of them become delinquent. It is usually easier to adjust payments between spouses than to recover from the bank downgrading your credit rating.
If you are financially solvent, then the discussion will be about dividing your assets and separating out your debts. However, if that is not the case, then the discussion may be about selling assets and paying off debt.
Also keep in mind that what the law requires in terms of dividing your assets will be very different depending on whether you and your spouse are legally married or living together in a common law relationship. An early conversation with a matrimonial lawyer who can explain your rights and obligations in detail, will go a long way to preventing you from making mistakes that you may not be able to recover from.