How to protect your assets from child's ex

Divorce numbers are trending upwards and parents are more mindful of keeping wealth in the blood line

How to protect your assets from child's ex

Love does not always conquer all … and watching your assets get swallowed up when your child divorces can only accentuate the family’s pain.

With separations trending upwards – including the grey divorce of people splitting after 30-40 years together – there is often the issue of how assets are divided. This is especially true with more parents deciding to support their children while they are still alive.

Chris Buttigeig, director of BMO Wealth Institute, said marriage contracts and pre-nuptials are not conversations people necessarily want to have when life’s rosy and they are in love but that it’s a discussion that can help foster a successful marriage and prevent any unknowns in the sad event of a split.

He said: “Parents want to make sure what they are gifting is staying within the family or stays in the ownership of the child they are giving it to should they separate or divorce from their significant other.

“I think when you’re gifting these assets - even before you’ve done so - it merits a conversation with the adult child. The discussion is first and foremost the most important thing. You’re talking with the child about important things like assets you’re are passing along and what the significance of them is.

“Are they what you would consider legacy assets that stay within the blood line? Or are they marital assets that can be shared with that person’s spouse or significant other?”

Buttigeig said there are a number of things to consider for parents before they gift their child assets if they want to keep it separate from his or her other half. One is to make sure money is not co-mingled by making sure, for example, that a cheque is not deposited into a joint account.

Another way to protect assets is via a marriage contract, often referred to as a marriage agreement or co-habiting agreement, or a pre-nuptial agreement, which is the legal binding document that can be used to by-pass laws in Canada in terms of how property will be separated according to family law.

Buttigeig said: “The matrimonial home is treated differently. They are ways you can gift a home but then there are certain things and protective measures you could be putting in place.

“By gifting the home to your child and their spouse, you can attach what we call a demand promissory note to the couple’s matrimonial home so should there be a separation or divorce, the parents can demand repayment of that promissory note on that property to protect the asset from the separation.”

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