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Getting divorced or separated

  1. Make a list and keep the bills
  2. Agree to the terms of separation or divorce
  3. Make your balance sheet and budget
  4. Review your insurance needs
  5. Make or review your will

After 2, 5, 10 or more years of marriage, you find that now it's over. Whether it's a decision you have both come to together, or one of life's very bad surprises, there will be major financial consequences.

So that you don't have any additional stress at an already difficult time, here's how to take care of your finances in 5 steps.

To have a clear idea of your situation at the time of de facto separation, there's nothing like having a complete and accurate list. The list should include the following items:

  • personal property (investments, bank accounts, RRSPs, TFSAs, etc.)
  • joint debts (mortgage, car loan, etc.)
  • joint expenses (rent, daycare, etc.)
  • joint property (house, car, etc.)

While waiting to reach a formal agreement, write down everything you spend on the family: child care (groceries, clothing, day care, extracurricular activities, etc.); maintenance on residence or cottage; payments on joint debts, etc.

Keep proof of spending: it will be much easier if you have proof of such spending when you go to make the legal separation agreement.

Cancel joint accounts

A separation that starts out amicably can become tense as time goes on. To avoid exposing yourself to impulsive actions by your ex (and to avoid being impulsive yourself), contact your financial institution to find out how to close all joint accounts and joint credit cards.

Useful links

  • Department of Justice Canada. In the section entitled Supporting Families, you'll find information on parenting arrangements, child support, property division, etc.
  • Ministère de la Justice du Québec. In the Spousal Relationship Breakdown section, on the Justice Québec website, you'll find information on family property, filing for divorce, alimony, etc.
  • Ministry of the Attorney General of Ontario. Under Family Law, Droit de la famille, you'll find information on divorce and separation, child custody, family mediation, etc.

The way you separate has a significant impact on finances. Where it is possible to get along amicably, legal fees are much lower than when you tear each other apart in court. Here are some examples of how to keep the cost down.

Everything in mediation

If you have children, going to family mediation can be a big help in coming to a draft agreement for a lot less money. You're entitled to 6 free sessions with a certified mediator. The purpose of these meetings is to help you draw up a draft agreement regarding child custody and property division. For more information on family mediation, see the Justice Québec website: Family Mediation.

If you don't have children, were not married long and have few joint assets, you may want to divorce without a lawyer. However, it's essential that you get along very well and know your rights before considering this approach. You also need time to properly prepare documents and perform legal procedures.
For more information, see the Justice Québec website: Joint Application for Divorce on Draft Agreement.

If you're in a civil union, an amicable procedure is possible before a notary, on 2 conditions: that you have made a draft agreement and that you don't have children from your relationship. If you do have children, you can submit a joint application for divorce on draft agreement to the court. For more information, see the Justice Québec website: Dissolution of a Civil Union.

Common-law spouses

For couples in a de facto union, the existence of a cohabitation contract greatly facilitates the separation process. This document sets out the consequences of separation and provides for division of joint property, child support or financial compensation to the ex-spouse.
For more information, see the Justice Québec website: Union de fait : contrat de vie commune (in French only).

When you have a good idea of your financial obligations and property division, you'll have the information necessary to proceed to Step 3.

Yet it is crucial that you have a clear picture of your financial situation, which has now been completely changed. Making a new balance sheet and budget will save you from running into financial problems, the last thing you need right now.

The balance sheet

The balance sheet gives you an overview. It lists what you own (your assets) and what you owe (your liabilities). To do this, use Your personal balance sheet (PDF, 211 KB).

If your net worth is positive, you can take a breath and leave some—but not all—financial decisions until later. Your personal insurance needs have changed, especially if you have children. See Step 4 and consult with a financial planner to help determine your needs.

Remember to review your balance sheet in a few weeks when the dust settles. It will be especially important to see whether you want to keep all your property and if your savings strategies (RRSP, TFSA) need to be changed in view of your new situation.

If your net worth is negative, take the time to get back on track. The action plan entitled 5 steps to organizing your finances will help you clean up your finances.

The monthly budget

Drawing up a monthly budget after a separation is essential since your expenses and perhaps your income will change significantly: moving, child support, savings, etc.

Compile all your expenses and write them down in minute detail. This may seem tedious at first, but the more accurate you are, the easier it will be to correct the problem if you find out you're in the red. You can use the action plan entitled Draw up a monthly budget in 3 steps.

The tax impact

If you stop living together less than 90 days before the end of the year, you'll still be considered spouses for that fiscal year.

Try to assess the tax impact of your separation if it occurs more than 90 days before the end of the year. This will help avoid any unpleasant surprises. Indeed, being considered single may change your tax bracket, as well as any credits and tax deductions to which you were entitled as a spouse: spousal amount, GST and QST credit, etc. Consult an accountant or a tax professional if your situation is complicated.

Tools and tips

Your personal balance sheet

Calculate your net worth by listing what you own and what you owe.

Do the math - Your personal balance sheet

The importance of a monthly budget

How to establish an effective budget in 3 steps.

Read tip - 3 steps to drawing up a monthly budget

Your budget

This tool shows you how to calculate your earnings and expenses, and draw up a monthly budget balance sheet.

Do the math - Your Budget

Why some budgets don't work

Read tip - Why some budgets don't work

My budget tool

Available exclusively to Desjardins caisse members, the My budget management tool gives you an accurate picture of your everyday income and expenses.

Learn more  about Budget management tool - My budget

If you cease to be covered by your spouse's group health insurance plan, be sure to transition to the group insurance offered by your employer or to the Quebec drug insurance plan.

If you have life insurance, you may want to change the beneficiary if it's your former spouse. If you have no life insurance, and you have dependent children, you might want to see if such coverage is appropriate for your new situation. A financial planner can help you assess your needs and budget.

Likewise, you may want to subscribe to salary insurance or critical illness insurance to protect your savings in case of disability or health problems.

Tools and tips

How to choose life insurance

Read tip - How to choose life insurance

This is just more paperwork, you might think. First the lawyers, now the notary—it never ends! Yet, each new stage of your life, including divorce and separation, is an important time to see to your estate.

You don't have a will? Making a will can give you peace of mind about what happens after you die. At the same time, having a will is going to greatly facilitate things for your liquidator (executor) and your heirs.

If you already have a will, the separation can change things dramatically, and you will have to change some important provisions. For example, do you really want your ex-spouse to inherit your RRSP, bank accounts or car?

Did you know that RRSP contributions and QPP accumulated during the union are part of the family wealth that is to be shared between married or common law couples? This will impact your retirement strategy and estate plan. Take time to consult your financial planner or notary so that your estate strategy is in the interest of your heirs and minimizes the tax bite upon your death.

Useful links

Justice Québec: Wills
Éducaloi: Les testaments (in French only)

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