Parental union: useful information to avoid unpleasant surprises

While integration into Quebec’s new parental union regime is automatic, new parents should ask themselves some questions to avoid unpleasant surprises in the event of separation or death.

Since June 30, as soon as a child is born or adopted, the parents are integrated into the parental union regime, if they are common-law partners.

The parental union regime was created to clarify the rights and obligations of spouses who have children. The majority of births in Quebec, 65 per cent, occur outside of marriage.

This new regime does not apply to married individuals or parents who are not in a relationship at the time of the birth. Parents who had children before this date can voluntarily join the new regime by notarial deed.

In the event of separation, spouses in a parental union will share fewer assets than married couples.

Retirement savings are notably excluded from parental union assets, unlike marriage, explained tax lawyer and financial planner Serge Lessard. “It’s still a huge difference,” emphasized the Assistant Vice-President at Manulife Wealth Management.

Thus, the employer’s pension plan, registered retirement savings accounts such as RRSPs, LIFs, RRIFs, LIRAs, or the Quebec Pension Plan (QPP) are not included in parental union assets, Lessard listed.

He suggests meeting with a financial planner to plan for retirement, based on various scenarios.

Like marriage, parental union assets include the family residences, the furniture in them, and the vehicles used for family transportation.

Unless you were married under a separation of property regime, a divorce also results in the division of other assets, such as savings, company shares, investments, and income-producing properties. This is not the case in a parental union.

Child support

Regardless of the form of the union, there is always a possibility of child support. The difference with married couples is that a parental union does not provide for child support for the former spouse.

“Two people have been married for 20 years and there is a huge income difference between the two,” Lessard explained. “It is very possible that there will be spousal support, and it can last for years. This exists in marriage. It does not exist in a parental union.”

The parental union regime, however, provides a compensatory allowance for spouses who have given up income to allow the other spouse to enrich themselves.

Lessard gives the example of a person who worked in their partner’s business. The partners in love and business held important roles, but paid each other a modest salary in order to invest more money in developing the business.

At the time of separation, the business was worth $5 million, but only one of the spouses owned this asset.

“In this situation, one spouse became richer, the other poorer,” explained Lessard. “They could receive a compensatory allowance. A judge could decide that one spouse must make a payment to the other. The amount can be quite substantial.”

Spouses as Heirs

In a parental union, spouses become heirs in the event of death without a will, which was not the case previously. The spouse would inherit one-third and the children two-thirds, just like married couples.

“People think that the spouse will automatically inherit if they die, but only a third goes to the spouse,” noted notary Geneviève A. Cloutier in an interview.

Drafting a will could prevent “big problems” for the surviving spouse, emphasized the notary, who works in Saint-Colomban in the Laurentians.

She gave the example of a spouse who becomes a co-owner of the family home with minor children. “There are people who were almost bankrupt because they didn’t have the money to buy out the children’s share,” the notary explained. “Then they find themselves with only a salary. A third is better than nothing, but it’s not perfect.”

Not set in stone

Not everything is set in stone with the parental union regime. It is possible, for example, to plan your estate differently with a will.

Spouses can also choose to withdraw from the parental union patrimony, to withdraw certain assets, or even to add to them, if it is deemed fairer to share retirement savings, for example. “Both spouses must agree,” Lessard specified.

It is impossible to opt out of the division of parental assets before a birth or adoption. Spouses have 90 days to prevent the creation of joint assets after the happy event.

Be careful, it’s false to say that it’s too late afterward, insisted Cloutier, who said she’s heard this information circulating. The parental assets will, however, have existed from the birth until the time of withdrawal. “You can do it after 90 days. It’s just a little more complex. There are calculations to be made.”

While you can opt out of the parental assets, you cannot opt ​​out of the regime, Cloutier clarified. She cites the protection provided for the family residence as an example. “That’s one of the things you can’t opt ​​out of.”

Even if a spouse is the sole owner of the family home (paid in full before the child’s birth) or the sole signatory to the rental agreement, they cannot evict their ex. The court can grant temporary use rights to the residence to the spouse who is not the owner.

“This is really to avoid this situation: being kicked out of the family home with the children because you didn’t own the house,” explained Cloutier.

–This report by La Presse Canadienne was translated by CityNews