Why couples need a financial plan for a trial separation

Couples considering a trial separation often do so in the hopes that some time and space apart will provide the perspective required to save a faltering marriage, or to decide on the best course of action. If handled correctly, a trial separation can bring positive change and even strengthen a relationship.

Couples trying a temporary separation should set a time frame, clear boundaries and expectations about communication, and commit to outside help in the form of personal and couples therapy.

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Apart from these softer issues, couples should establish clear legal agreements around parenting time and financial obligations. While people often fear that putting a plan on paper with a lawyer crystallizes the separation, it’s better to understand the implications of a trial separation beforehand.

Here are issues that should be discussed in advance.

Time with the children

This can turn into a minefield. A parent deciding to leave the family home, even for what is initially believed to be a temporary period, should consult a family law lawyer to fully understand the implications. Future parenting rights may be impacted if the parenting schedule is not crystallized in a written agreement.

Bill payments

It is usually advisable to continue paying family expenses in the same manner as before the trial separation. This keeps the family finances stable and avoids additional stress. If this arrangement is not feasible or recommended, the parties should make a plan for how the bills will be paid.

For example, different arrangements may be necessary when one spouse is reckless with money or has addictions, and may drain other family resources. If parties are jointly named on a mortgage or credit card, both are legally liable toward the financial institution, so they both have to ensure that payments are being made.

Read: Protect gifts toward a matrimonial home from divorce

Kids’ payments

Similarly, the couple should take stock of the children’s upcoming registrations to various activities and payments due, and agree on how the payments will be made.

Paying for two residences

Running two households can be expensive. Couples should agree on how they’ll pay for both the matrimonial home and the cost of renting a second residence—and whether they can afford it. It’s common for the housing expenses for both spouses to be jointly funded during the trial separation.

Mortgage renewals

Couples should determine what they’ll do if the mortgage is up for renewal during the trial separation period. It may be simpler to renew with the same financing institution than to embark on a renegotiation with a new institution. Speak with a mortgage broker to understand your options and how a separation impacts your ability to qualify.

Budget

While a trial separation may have limited impact on high-net-worth families, less affluent families need a plan for managing larger expenses, such as anticipated home or car repairs. A financial planner can help with a detailed budget. However, a simple plan can include vacations and even a contingency fund for emergency costs, with agreements on how to pay for them. Without careful planning, it may not be possible to continue funding the family expenses at the same rate as before.

Investments

Joint investments will be divided equally if there is an eventual permanent separation. When it comes to RESPs, it may be wise in some circumstances, finances permitting, for couples to continue investing in the same manner as they had been. RESPs are important for the kids and benefit both parents in the long run. Without the yearly contribution, couples will miss the opportunity to receive the government grant.

Investing in a personal RRSP or a spousal RRSP should be discussed with a family law lawyer. If the trial separation becomes permanent, in most cases a contribution made to your own RRSP during a trial separation won’t have to be shared with the other spouse. Contributions to a spousal RRSP during the trial separation may not be shared back with the contributor.

Read: How advisors can support healthier divorces

A family’s financial plan may already have been established but it is a living document that needs to be adjusted with any major life change. Couples contemplating a trial separation should become knowledgeable about the legal implications on their finances and get advice specific to their circumstances—especially in the event that the trial separation becomes permanent.

Nathalie Boutet is a family lawyer, mediator and certified Family Enterprise Advisor™ specializing in high-net-worth families and business owners. She can be reached at nboutet@boutetfamilylaw.com.

Nathalie Boutet

Tax & Estate

Nathalie Boutet is a family lawyer, mediator and certified Family Enterprise Advisor™ specializing in high-net-worth families and business owners. She can be reached at nboutet@boutetfamilylaw.com.