When people find out that I practice family law, they usually look at me with shock and horror on their faces and then they often ask me two questions. One is - How do you deal with that stuff every day? The second question is - What's the most common reason for couples splitting up?
I'll answer the second question here. During close to a decade of practicing family law, I have found that the most common reason that people split up is money. There isn't even a close second. Financial issues tear people apart. Often one person is a spender and the other is a saver. Sometimes one person likes to take financial risks while the other is morally opposed to the concept of debt. Obviously difficult economic times take their toll on relationships. A person losing a job causes a great deal of stress between couples. Some couples stick together and get closer under times of financial strain while others simply fall apart.
Married couples need to know that they share in each other's debts even though the debt may only be in one person's name. Division of property for married couples who separate involves something called equalization of net family properties. A mathematical formula is used that essentially calculates each person's change in net worth (or something similar to that) during the marriage and the person who has a greater increase in net worth pays the other person half the difference between their changes in net worth. The reality of this formula is that a person who has debt in his or her name alone decreases his or her net worth, resulting in a larger equalization payment from the other. This is the main way that a married person shares in his or her ex-spouse's debt because a greater equalization payment is owed as a result of the debt. It is somewhat counter-intuitive to think that just because a married spouse has a debt in his or her name alone that the other person would owe the debt-ridden spouse more money on separation.
The legal principle behind equalization is that a marriage is a joint venture and that all property accumulated by the spouses during the marriage is to be divided. Sometimes property includes debt and that is also a divided responsibility. There is an exception in the Family Law Act that allows the equalization payment to be modified to more or less than half the difference between the parties' net family properties (essentially their net worths) when strict equalization would be "unconscionable" or "shocking to the conscience" based on at least one of several factors such as a short period of cohabitation (less than five years) or reckless depletion of property. The test of unconscionability is extremely high and a judge has to be satisfied that strict equalization would be completely wrong and shocking in the circumstances of the case.
Division of property for unmarried couples who live together is fairly simple for the most part as there is division based on ownership only. There can be trust claims for beneficial interest in property but this would be information for another article. When it comes to debts for common-law couples, the debt is the responsibility of the person or persons who are named on the debt.
Be careful about what debt has your name on it as your loved one might just rack up a joint line of credit to its maximum without your knowledge. Try to be open with your partner about finances. Nobody likes surprises when it comes to money. Keep yourself informed. Save for a rainy day instead of living beyond your means. Good communication regarding budgets, debt as well as long-term financial goals will be very important to a successful relationship and avoiding the need for a family law lawyer.
This blog post is provided for educational purposes only. It is not intended to be advertising, and it is not intended to be and should not be relied upon as a source of legal advice. You should not rely upon the content without first seeking the advice of legal counsel. The author of this blog post and his employer, Mckenzie Lake Lawyers LLP, expressly disclaims all liability in respect to actions taken, or not taken, based upon the content of this blog post.
