By Heather Compton
Back when I was active in the investment industry, concerned fathers and mothers regularly came to me asking if I could please have “the talk” with their daughters or sons. No, I’m not talking about the full disclosure of bedroom history and sexual health issues that often (or certainly should) occur when entering a new relationship. I’m talking about the equally important – or perhaps even more important conversation that couples need to have disclosing their financial situation. What do you have for assets and liabilities? What are your financial obligations to former spouses or children? Who is the Executor of your will and who is named as your Attorney? Where do you bank and who holds your investment accounts?
Formerly it was concerned parents worried about their newly independent adult child taking up with a “ner do well” or a “gold digger”. They wanted to be sure their child understood the implications of co-mingling bed linens and financial assets – particularly when it was their view that all the financial cards were held by their precious progeny and the “other” was simply an opportunist.
Love the Second Time Around
Now that people are living longer, it’s becoming more and more common for older widowed or divorced couples to find love a second time and ironically the tables have turned. Now the progeny are coming to ask that I have “the talk” with Mom or Dad and wonder whether their parent has taken up with an “unsuitable other”.
Suitable partner or not, the “kids” have a legitimate concern. Young people starting out and making the decision to co-habitat or marry likely have few financial assets and little baggage to cloud their planning. As we age and earn a few more grey hairs we have also accumulated greater financial assets and more (I say this fondly) baggage. That baggage may have their own interests in how and if our assets become co-mingled with a new partner!
As Lynne Bultler, lawyer and senior estate planner, says “Marrying someone creates a legal obligation to that person. All of a sudden, that person you’ve been dating has a right to some portion of your estate. This is why marriage automatically revokes whatever Will you had in place before you were married.”
“You can’t leave the new partner out of your Will without a risk of it being contested. The unfortunate side of all of this is that older adults often think that if they don’t marry and simply live together, they by-pass the obligation to the other person. That is simply not the case. In Alberta for example, if you live with someone for three years, they automatically have the same rights as a legal spouse for the purpose of inheriting. And because people in this situation don’t realize they have the obligation to support the common law spouse, they probably never did make a new Will. Therefore they end up passing away with no Will, a common law spouse, and a group of adult children who are furious that Mom or Dad didn’t take care of making a Will that would protect them.”
Lynne goes on to say “Pre-nuptial agreements are a very good idea for second marriages. This is not so much to exclude a spouse from getting anything, but to state your goals for your children, define the property that each spouse brought into the marriage, and clarify your understanding of what will happen when one spouse passes away.”
Of course there are other issues that require discussion – who will be named as Attorney on the Power of Attorney for health care and/or property if we don’t pass away but instead are unable to make decisions for ourselves? Our new partner, our adult children?
If you are contemplating cohabitation or marriage, it’s important to include your partner, your adult children and an estate planning lawyer in a discussion about how it will affect your future finances.
Going Your Own Way
Of course, planning for our untimely death and related estate issues are important but those finding love in later life are unfortunately not immune to relationship breakdown and there may well be litigious issues over who is entitled to a share of our assets if we each go our separate ways. Be sure to talk to a lawyer but you can also do some research online at a site like CanadianDivorceLaws.com.
The matrimonial home
In most provinces, when your marriage ends, the value of any property you owned before you married is yours – it is not divided. No so with the matrimonial home, it’s a special case. Even if it is “your” home on your wedding day, your home is divided between you and your spouse on marriage breakdown. Not true in the case of a common law separation.
How long until we are considered common law spouses?
It depends on whether the issue is federal or provincial, and in what province you live. Federal issues cover items such as federal government pensions and Canada Pension Plan. Property division is determined by provincial law and each province has its own definition of what a common law spouse is. We also need to keep this in mind if we move from one province to another.
Get Over It!
Recently Piers Morgan, Larry King’s replacement on CNN, was interviewing shock-jockey Howard Stern for whom it would appear absolutely no subject is taboo. Immediately after a discussion regarding the size of his personal “equipment” he declined to answer a money question, admitting he’s never felt comfortable discussing money. Most of us aren’t! Having “the talk” when it comes to money and finances is difficult but if we are going to share bathrooms, bedrooms and toothpaste tubes, we need to lift the covers on finances too!
About the Authors: Heather Compton has presented seminars on financial and retirement lifestyle issues for over 30 years. She retired as Vice President and Senior Investment Advisor with a major financial services company. Heather and husband Dennis Blas co-present retirement seminars for a variety of corporate clients and are the co-authors of Retirement Rocks! Canadian Boomers Invest in Life. You can find their book, online or in independent bookstores. See more of their advice at Retirement Rocks.