A lot of cooped up couples are calling it quits as divorce rates jump during the COVID-19 pandemic.
Not to mention Christmas holidays are approaching, and the months following happen to be the busiest for divorces. There are a lot of financial implications for anyone going through the difficult process.
A prenuptial agreement or co-habitation agreement, if living common-law, can it make it a lot smoother.
“This is an agreement that is drafted by your lawyer before you get married.” Robyn Thompson personal finance expert and certified financial planner, told Yahoo Finance Canada.
“This kind of agreement is a written contract between two people who are about to marry or live together in common-law, and it sets out the terms of possession of assets, treatment of future earnings, control of the property of each, and potential division if the marriage or common-law arrangement is later dissolved.”
But hindsight is always 20/20. If you didn’t get one beforehand and are thinking about pulling the plug, Thompson says it’s important to know what the hard numbers are and to establish a relationship with a family lawyer.
“It’s your money, even if it is combined with your spouse. You have a legal claim to the assets, and half the debts,” she said.
“Make it a point of first importance to find out where you stand financially.”
Mistakes could be costly for years to come. Thompson estimates it takes the average person 15 years to recover financially from a divorce, and some never do.
Kids and the family home
Unless the couple rents, the family home is usually the largest asset involved in a divorce.
“If you received the family home in the settlement and choose to live in it for sentimental reasons, ask yourself, how will you pay for the family home?,” Diana Isaac, Partner at Shulman & Partners, told Yahoo Finance Canada.
“Will you have enough income to maintain your home and the lifestyle you and your family had prior to the divorce?”
A divorce can get particularly ugly when children are involved. There are the usual considerations like custody and childcare payments, but there are lesser-known tactics to make sure the kids are protected financially.
“Many divorce decrees include a clause that allows you to purchase life insurance on your ex-partner to insure the value of the support payments,” said Isaac.
“Consider this an essential action item on your list. You should also ensure you are either the owner or the irrevocable beneficiary of the life insurance taken out on your ex.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.