special feature on relationships and finance

the dollars and cents of marriage

by Kasum Sen

Couples with no financial secrets are those with the best chance of surviving financial challenges that will come up throughout the years of marriage. More than 67% of newlyweds believe the most serious conflict in their first year of marriage is about money.

Understanding your financial personalities early on and routinely discussing your finances will help build a successful, healthy relationship. Ask one another: Are you a saver or spender? Are you frugal or an impulse shopper?

Set parameters and roles for your relationship: Will you share a bank account? Who will pay the bills? What is a reasonable spending budget for each of you?

Is there existing debt? If either of you are bringing financial baggage into the relationship, agree to work together and clean it up as soon as possible.

MAKE THE MOST OF YOUR DOLLARS AND CENTS
• Pay yourself first
• Learn how to spend
• Save for the long term
• Plan for the unexpected

PAY YOURSELF FIRST
Try to live on 80% of your income and put the other 20% towards retirement and major financial goals. This concept develops the foundation of good family finances. Decide how much you will save for: emergencies, vacations, retirement.

SAVE OUT OF EVERY PAYCHEQUE BONUS AND RAISE
Every couple should discuss: When do we want to retire? What sort of home do we want to own? How should we budget and spend? What kind of spending habits do we each have? Learn how to spend. The key is to stay out of debt, don’t carry credit cards with you. It is very important to decide on a threshold at which you will check in with one another before making a purchase.

SETTING UP A BUDGET
You will be in control of your finances if you list all sources of income and monthly expenses and compare expenses to income to help you decide on monthly savings. Discuss how to manage your bank accounts. Will you have separate accounts or joint accounts and what will come out of each account? Will one of you handle all the banking? It is advisable to keep the number of accounts to a minimum so you streamline your household book keeping.

WE ALL NEED TO PLAN FOR THE UNEXPECTED
Facts from a recent study have shown....65% of widows and widowers whose spouses died prematurely (between the ages of 30 to 55) stated that the death had a devastating financial impact on their family’s financial security. The death required the family to make significant financial adjustments such as: work additional jobs or longer hours; withdraw money from savings; investments and retirement accounts; move to smaller and less expensive homes; reduce children’s education savings and borrow money.

Ensure you have a plan for the unexpected – Life insurance, a will – appoint an executor/power of attorney. Determine your life insurance needs, expenses that will need to be covered, sources of income so you can plan the amount of insurance required.

Why is a will important and does everyone need one? Yes – a will helps ensure your personal wishes are followed. Anyone who has personal assets and/or children should have a will. Keep your will current and revise your will if changes in your life occur. Make sure to keep a copy of your will in a safe and accessible place. Appoint an executor to carry out the instructions in your will.

What is a Power of Attorney? There are 2 types: a Property power of attorney will make financial decisions on your behalf. A Healthcare power of attorney will take care of your health care needs.

Did you know the cancer survival rate has doubled since 1970? More than 3.8 million Canadians aged 15 and over have some level of disability. 38% of Canadian women and 41% of Canadian men will develop cancer in their lifetime (Canadian Cancer Society).

ENSURE YOU HAVE A PLAN TO PROTECT AGAINST:
Disability; Critical Illness; Long-Term Care; Personal Health coverage. CPP/QPP/Company benefits programs are valuable resources, but limited.

Create a financial plan and try to stay with it as much as possible. It is vital for you to determine your short, medium and long term goals. Most importantly, save systematically using the “Pay Yourself First” technique.

Kusum Sen is a Life Member , Million Dollar Round Table, with 15 years experience in the insurance and investment field. She is an advisor at Sun Life Financial, 1 University Avenue, Suite 201. You can reach her on her office number 416 366 8771 ext 2297 or her cell # 416 606 6088.
_________________________________________________

Women in Transition

By Eva Sachs

Did you know…The majority of women will spend almost one-third of their adult lives on their own financially. At one point in their lives, most women will enter a time of transition.

Women enter times of financial transition when they become widows, divorce, start working, and retire. Women seem to have less time than men to learn how to manage their financial resources. Women live longer than men, by an average of seven years. 50% of all women older than 65 are widows. Widows frequently suffer a sharp drop in their standard of living. 50% of all first marriages end in divorce. 60% of all subsequent marriages end in divorce.

A woman’s stnandard of living declines as much as 45% in the year following a divorce. Most divorced women have spent their divorce settlement within two years of their divorce. Regarding divorce, with proper planning and expert help from professionals specializing in financially equitable divorce settlements, you can increase your chances of arriving at a settlement that fully addresses your long-term financial needs.

Developing comprehensive insight of the short-and long-term financial effects of divorce can save valuable time, money and distress, especially if the process is conducted early in the legal proceedings. Many separating couples seek individual legal assistance before assessing their financial situation. While lawyers serve a crucial role as individual legal advocates, they are not necessarily there to explain financial consequences in detail.

It’s important to realize that divorce is the break-up of an economic unit, as well as a family unit. The process should be approached as a dissolution of a financial partnership, with each party attempting to remove the emotions from the process in order to develop a workable plan.

It is difficult during times of financial and emotional transition to think and plan clearly. However, these are the times women need to be their most financially astute. Be aware and know there is support out there to help you focus on your future.

Eva Sachs is the founder of Women in Divorce Financial, providing clarity, compassion and confidence for women navigating divorce. She is a Certified Divorce Financial Analyst (CDFA™) and has her CFP™ designation. She is a member of the Institute for Divorce Financial Analysts and is a member of Collaborative Practice Toronto. She can be reached at esachs@womenindivorce.ca Please visit her informative website at www.womenindivorce.ca

_________________________________________________

Marriage Contracts: A Cynical Tool or a Good Idea?

By Ingrid van Weert

For most people there is nothing that can take the romance out of an engagement faster than the request for a marriage contract. Somehow marriage contracts seem inconsistent with the commitment that is the essence of marriage. However, sometimes a marriage contract may be a good idea.

A marriage contract defines rights and obligations during marriage or on separation, divorce or death. In the absence of a contract, these rights and obligations are governed by the family law legislation in effect in Ontario. Because it must be applied to many different fact situations, the legislation is not tailor-made. It also gives a lot of discretion to judges, making it quite unpredictable on occasion. Many different judges, with many different points of view, hear family law cases. Finally, the legislation can change. Ontario has had two major revisions of its family law legislation since 1978. The laws that would govern your rights if you were to divorce today may not be the laws that will govern your rights if you divorce in the future.

A marriage contract permits couples to design a tailor-made result rather than being governed by legislation. They may do this because the legislation does not seem fair to them, because it does not suit their needs or because they want to try to avoid litigation if the marriage ends. Seen in this light, marriage contracts are not cynical; they are simply a tool couples use to define and tailor their rights.

For instance...
There are many reasons to contract out of the legislation. In general terms, the legislation provides that spouses jointly share their net increase in wealth from the date of marriage to the date of separation or death. If one spouse is very wealthy at the time of the marriage, the legislation could result in a windfall to the other spouse. Through a marriage contract the spouses could agree to an unequal division in the increase in wealth. This does not mean the poorer spouse gets nothing; the spouses can negotiate a fair result. For instance, they could agree that the property division would vary depending on the number of years the marriage lasts.

A couple may also wish to contract out of the property provisions of the legislation if they are both financially independent and don't want any claim to the other's assets, or if either spouse has children from a previous marriage. In the latter case a marriage contract can ensure that the majority of the spouses' assets go to his or her children and not to the second spouse. As in the first example, this does not mean that the spouse is treated unfairly; the marriage contract can balance the interests of the spouse with the interests of the children.

Marriage contracts do not need to be signed before the marriage. They can be negotiated at any time. Sometimes they actually help couples in trouble make their marriage work. If a couple has experienced troubles in their marriage they may want a marriage contract going forward. Being clear about what would happen if a relationship ends (ie. knowing you will be treated fairly) can help some couples rebuild the trust they need to stay together.

What cannot be contracted
One large advantage marriage contracts have over legislation is flexibility - they can deal with one issue or asset or many issues and all assets. With the exceptions noted below, the potential terms of a marriage contract are limited only by the imagination. However, marriage contracts cannot deal with custody of or access to children or a spouses’ right to possession of the matrimonial home. Further, any provisions in a marriage contract relating to the support, education or moral training of a child may be disregarded by a court if it believes the provision is not in the child's best interest.

Cohabitation agreements
The law in Ontario also recognizes cohabitation agreements. People who are living together, or who intend to live together, may enter into a contract outlining their rights and obligations during or after their cohabitation, or on death. Cohabitation agreements are often a very good idea because the law in Ontario does not do much to protect the property rights of common law spouses. If you are in a common law relationship it would probably be a very good idea to define your property rights by contract. However, these contracts must be drafted carefully because unless it provides otherwise, a cohabitation agreement becomes a marriage contract if the parties marry each other.

In short, if your partner proposes a marriage contract or cohabitation agreement don’t assume it means they don’t love you as much as they should. There are lots of times such contracts make sense. In fact, you may want to consider one yourself.

_________________________________________________

Marriage or common law: is there a difference?

By Ingrid van Weert

It seems that every time I am in a supermarket checkout line I can pick up a gossip magazine and find a Hollywood starlet quoted as saying about her common law relationship: “Oh, we’re not getting married. Marriage is just a piece of paper.”

Maybe in Hollywood marriage is just a piece of paper (although I doubt it), not so here in Ontario! If you’re living in a common law relationship and think you have the same rights as if you were married, you’re mistaken. That mistake could cost you very dearly if your relationship ends. And for reasons I’ll explain below, that mistake often costs the woman more dearly than the man. At the end of a relationship, whether marriage or common law, the five main issues are custody of children, visitation rights for the non-custodial parent, child support, spousal support and division of property. There are many other issues that may come up as well – possession of the matrimonial home, life insurance, immigration status, wills and powers of attorney to name a few – but those are the big five.

In the first three categories there is not much difference between being married and living common law. The law tries to treat all children equally so the rights of children born in common law relationships are generally the same as those born into marriages. However, when it comes to spousal support and dividing property accumulated during a relationship there are very important differences between marriage and common law relationships.

Spousal support
If you are married you can claim spousal support under either the Divorce Act or under the Family Law Act. If you cohabit you don’t have spousal support rights under the Divorce Act. And the difference between the rights of married spouses and the rights of common law spouses under the Family Law Act is apparent right in the definition of spouse. A married spouse is a spouse - and hence has spousal support rights - from the instant they are married. A person is not even considered a spouse in a common law relationship unless they have been cohabiting continuously for three years or they are in a relationship of some permanence and are the natural or adoptive parents of a child. In other words, at the end of a common law relationship you can’t even seek spousal support unless you cohabited for more than three years or you and your partner have a child together.

Property rights
The difference in spousal support rights is minor compared to the difference in property rights between married and common law spouses. This is where I see people - normally women - seriously hurt by the common assumption that the law treats married couples and common law couples equally. In Ontario the Family Law Act gives married spouses very specific property rights; it does not give any property rights to common law spouses. A common law spouse can assert a property claim under a doctrine called constructive trust but these claims are difficult and costly to prove and are far less generous than the rights given to married spouses by the Family Law Act. In other words, if you let your partner put all or most of the property in his name in a common law relationship you may find he gets to keep it all, even if your income and work helped buy it.

Why do I say this difference in property rights affect women more than men? That’s my opinion based on my experience in family law. Whether married or common law, men still seem to accumulate more property than women. This may be because men often earn more than women but even if they don’t earn more, they often run the finances in the household. Time and again women – including highly educated, successful, working women – come into my office and tell me that they left running the finances to their partner. Even in a marriage that’s not a good idea - is there is any evidence at all that men are any better at running the finances than women? In a common law relationship you MUST be involved in the finances. You must ensure that your name is on title as an equal owner of property accumulated during your relationship. If you don’t do this, you may find you have no property to speak of if your relationship ends.

Ingrid van Weert is a compassionate and dedicated family lawyer with extensive experience in both divorce law and in all forms of dispute resolution available in the divorce process - negotiation, mediation, arbitration and litigation.  She can be reached at ingrid@ontariodivorcelaw.ca or at 416-214-1501.