As is common knowledge, divorce is often accompanied by splitting assets and the associated financial costs for one or both parties. Every time we go into a relationship, we hope that it will last, but then there are times when it doesn't. According to the Canadian government, divorce rates are now at about 40%. The breakdown of relationships is one of the most dangerous things that could happen to an individual's financial plan. Although it is a common misconception that living with another person or being in a common-law relationship provides much protection, that is not the case. Before you are about to walk into a relationship, you should become familiar with the following definitions contained in the Family Law Act of BC:
Marriage/Marriage-like Relationship
Generally, a marriage-like relationship is defined as the existence of a couple who have been living together continuously for at least two years, either by law or by choice. Regardless of whether the two years are met or not, spousal support claims can be made if there are children in the relationship. There are several indications of a marriage-like relationship, such as sharing a shelter, engaging in sexual activity, attending social gatherings together, providing financial support, and doing life together in general. In circumstances where a marriage-like relationship is present, then any family assets are subject to being divided in the event of the breakdown of the relationship.
Family Property
In the event of a divorce or separation, the property owned by the family includes all assets and debts that were amassed during the marriage or close relationship. When both partners bring assets into a relationship, any growth in those assets will be the family's property. A joint asset is one that has been placed into the family property after being put into joint ownership. As the sole property in the relationship, it falls to each person to prove their assets, that they should be excluded from the property, and that their assets are still intact and have not been changed to a joint asset.
Excluded Property
A person's existing assets, assets brought into the relationship that are still intact, gifts (or inheritances) meant for the one person, an insurance settlement or settlement money intended for the one person, and property held in trust for the benefit of the one person will not be considered joint property. In addition to that, everything else, including private company shares and pensions, is also subject to division.
Prenuptial Agreement
In the event of a separation, it is important to have a prenuptial agreement that outlines what assets each individual is bringing into the relationship and what assets would be excluded.
Final Thoughts
Knowing these things will enable you to make well-informed decisions in case of a breakup. You will be able to discern what assets are yours and how to protect them. Contact an expert accounting firm to keep a sharp eye on your finances, whether personal or professional. Experienced and highly skilled accountants can help you keep your finances under control and protected.