Les effets d’une séparation sur la retraiteMarch 14, 2017

The Effects of Separation on Retirement

Incomes tend to decline after retirement, and that’s normal. It’s also the time when lifestyles become less dynamic, the children are already in the workforce, and thus most of the expenses and costly activities are behind us. However, an unexpected event, such as an accident or separation, changes things. No matter what the reasons may be, it is necessary to know how to act in case of such a situation. Here are a few tips to help you consider the possibility of separation after retirement.

Quebec divorce stats

First of all, there appears to be a particular trend when it comes to marriage and divorce. You may be surprised to know, but the number of divorces has been on the decline in Quebec over the past twenty years.

However, this is also a reflection of the fact that an increasing number of couples now live in common-law relationships (37% of all couples in 2011), which means there are fewer separations than before. The separation rate has been steady since the late 1980s. According to the current trends, it is estimated that one out of two marriages (49.9% in 2008) ends in separation.

In case of breakup

If you are married or in a common-law relationship, you would usually have to get a court judgement in order to settle separation issues (see the Family Patrimony Act). The court will decide on the beneficiary of the residences, furniture, vehicles, and accumulated pensions (RRSP, QPP and supplemental pension plans). 

The amounts accumulated by each spouse in the QPP, a pension plan or an RRSP will be included in the “family patrimony.” Contrary to what the name of the Act may appear to indicate, family patrimony includes all married couples, with or without children.

Only those amounts that were accumulated during the period of marriage are considered in the calculation of family patrimony. Therefore, if you had been contributing to pension plans for four years prior to forming the union, those four years would be excluded from the calculation.

A simulated split

You can ask Quebec Retirement to conduct a simulation of what effects a breakup would have on you as a couple. Before that, however, make sure that you have all of the necessary numbers, including those for your assets and liabilities, handy. If a split were to occur, eligible employment earnings would be allocated based on the time period you lived together you’re your ex-partner. The QPP contributions statement would indicate the amount that is to be shared.

A few practical tips to round up

Stay honest and open, at least financially. You will benefit from talking to your spouse about your financial situation and plans. If one day you were to decide to change your life, there will be fewer surprises. Find out about family patrimony when talking with a notary and make a list of the assets you own (together with their value). Be transparent about your intentions and signed agreements. Do not leave anything to chance. Make your will and update it as needed. 

Finally, create a budget and update it when the situation changes.

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