Dividing your finances when you separate or divorce
Organize your finances
The first step in dividing your finances is making sure you know exactly what you own and owe, both as an individual and as a couple.
Collect important papers
Write down the names of financial institutions and account numbers for your chequing and savings accounts, credit cards, loans, insurance and investments.
Make sure you have copies of important financial information, such as:
- current statements for loans
- recent pay stubs
- your tax returns for the past three years
- bills and receipts for expenses related to your family
- investment statements
Make a list of what you own and what you owe
Making a list will help you decide how to divide your property.
Make a list of what you own (your assets) as a couple and as an individual.
Your assets may include:
- joint or separate bank accounts
- insurance policies
- your home
- CPP or QPP credits
- employer-sponsored pensions
Make sure you know what everything is worth now. Consider what it’s likely to be worth in the future. A financial advisor may help you figure out the future worth of some of your investments.
Make a list of what you owe (your debts) and how much you owe as a couple and as an individual.
Your debts may include:
- a line of credit
- a personal loan
- credit card debt
- a mortgage
- a car loan
- student loans
Note that any borrower listed on your loan agreement is responsible for the full amount of the loan.
Consider working with a financial advisor
Consider asking an accountant, financial planner or advisor for help when you separate or divorce. They can help you understand the financial and tax implications of separation and divorce.
Deal with joint accounts and joint debts
You should decide right away what to do about any joint accounts or debts you share with your partner. This includes any bank accounts, lines of credit, credit cards and other loans.
Closing joint bank accounts
If you don’t close joint accounts, both of you will continue to:
- have access to the money in the account
- be legally responsible for repaying any debts
This is the case even if your separation agreement says only one person is responsible for debts or can access the funds in the account.
Keeping a joint account open
You and your former partner may decide to keep a joint account open for a period of time. For example, your mortgage payments could continue to come out of a joint account.
It’s a good idea to get advice from a lawyer or help from a mediator if you decide to keep your joint account open. You may choose to make a formal agreement about what money each person needs to deposit each month, and what bills you’ll pay from the joint account.
Work with your financial institution if you decide to change the way you manage the joint account. For example, you may make it a requirement that both partners must approve withdrawals from the account.
Get key details from your financial institution on your joint account
You may have signed a form to say you don’t want to receive information from your financial institution about your joint account. Now that your situation has changed, ask your financial institution to start sending you bank statements and all other information about your joint account.
Joint credit cards
If your former spouse or partner is an authorized user on your credit card, remove them from the account. If you don’t remove them as an authorized user, they will still have access to the account and you'll be responsible for any money owing on the account.
If you're a co-borrower on a credit card with your former spouse or partner, cancel the account. As a co-borrower, you both have access to the credit card account and are equally responsible for any money owing on the account.
Check your credit report after closing joint accounts
Once you’ve closed joint accounts or paid off joint loans, check your credit report to make sure your financial information has been updated. The information may take one to two months to appear on your credit report.
Update your beneficiaries
Review and update who you’ve named as beneficiaries for:
- CPP or QPP
- employer-sponsored pensions
- Registered Retirement Income Funds (RRIF)
- Pooled Registered Pension Plans (PRPP)
If you don’t remove your former partner as a beneficiary, he or she can get benefits even though you’re no longer together. In some cases, you may need to get your former partner’s consent to remove his or her name as a beneficiary.
Inform the Canada Revenue Agency
Inform the Canada Revenue Agency about your separation or divorce. A change in marital status may affect your eligibility for certain benefits and credits.
Transfer registered plans
You and your former partner may have to divide registered savings plans you own.
These may include:
RRSP and Registered Retirement Income Fund (RRIF)
A Registered Retirement Savings Plan or RRSP is a savings plan registered with the federal government.
You must convert your RRSP into a Registered Retirement Income Fund by the year you turn 71. You can then withdraw money from the fund.
You usually have to pay taxes when you withdraw funds held in your RRSP or fund.
Consider consulting a financial advisor or accountant about how to divide your RRSPs and Registered Retirement Income Funds without having to pay tax.
Tax-Free Savings Accounts
A TFSA is a savings account registered with the federal government. You can contribute up to a certain amount each year.
Dividing CPP or QPP credits
The Canada Pension Plan or CPP and the Quebec Pension Plan or QPP provide monthly payments to people who contribute to the plans during their working years.
In certain circumstances, the QPP may also allow you to split your pension credits.
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