Boomers are booming on the love front. According to Statistics Canada, many seniors enter into a second union after a divorce, separation or the death of a partner.
In 2011, 76 per cent of men and 55 per cent of women who had been divorced or separated eventually became part of a separate union, and about three-quarters of seniors who entered into a second union got married again, with the rest living as common-law partners.
It’s good news when boomers find a second love, but it can lead to financial and other complications, especially for relationships that include children from previous marriages, unfinished separations and divorces.
Here are some tips for navigating your new financial life together.
Common-law and non-traditional relationships – Boomers may bring different financial resources, objectives and obligations – especially if one or both were previously married. Start with a thorough discussion about each partner’s expectations and responsibilities for the family’s financial affairs, including how each of you will spend, save and invest your money. Discuss matters with a lawyer, and possibly have them prepare a cohabitation agreement that defines the financial terms of your relationship.
Update your wills and list of beneficiaries for your investments held within your registered accounts and insurance policies, as well as who will be granted power of attorney.
Married or common-law – When it comes to things like a right to a division of family property at separation, and rights to inherit, the rights of common-law partners can differ quite drastically between provinces. But when it comes to income tax, common-law couples benefit from the same tax advantages and suffer the same tax disadvantages as married couples.
Advantages: Split pension income – a potential benefit when one partner makes significantly more pension income than the other.
Make spousal RRSP contributions on behalf of your partner.
Roll non-registered property to each other without triggering a capital gain or loss.
Roll registered property to each other at death without triggering income.
Transfer unused tax credits and claim the Spousal Credit if your partner is earning very little income.
Disadvantages: If one, or both, of you has a child, you will no longer be able to claim the Eligible Dependant Credit for that child.
Only one of you can claim the principal residence exemption if one of you owns an urban home and the other a cottage.
Your income is pooled when determining the right to claim GST credits, the Canada Child Tax Benefit and the Guaranteed Income Supplement.
Child care expenses may not be as valuable because the deduction must be taken by the lower income-earning partner.
Andy Erickson is the division director with Investors Group, Vernon. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.