Post-Divorce Reconciliation
Colin and Cevey married in 1999 and divorced in 2008. Less than eight years
after paying what was at the time the largest divorce settlement known
to Britain (£25million), Collins has now reconciled with his former
spouse and they are reported to have been cohabiting now for approximately
six months.
Collins and Cevey’s record-breaking
divorce and recent reconciliation raises questions of how the couple should treat
their finances going forward and what will happen if they remarry. Having
experienced the turmoil that separation and divorce can bring into one’s
life, individuals considering post-divorce reconciliation (and anyone
entering into a second or subsequent marriage) may understandably worry
about how to best protect their assets and other interests in the event
of future breakdown of the relationship.
As for any soon-to-be spouses, reconciling couples should take precautions
to protect the assets they bring into the relationship. In Ontario, the
Family Law Act (FLA) provides that married couples are entitled to share equally in all
wealth accumulated by the couple during the relationship. On separation,
each spouse is entitled to exactly half of the value of the parties’
combined net family property. This means that the person with the higher
net family property must pay the other person half of the difference between
their net family property values. This payment is referred to as an equalization payment.
Put simply, a spouse’s
net family property is the difference between the value of his or her net worth (assets less
debts and other liabilities) on the date of marriage and the value as
of the date of separation. However, there are special rules pertaining
to the matrimonial home, the definition of which includes any property
or properties that ordinarily occupied by the spouses as their family
residence, and there are other exceptions with respect to net family property
and equalization payments.
Because the calculation of net family property essentially allows parties
to get credit for property brought into the relationship, it is a good
idea to obtain and keep documentation of the value of any assets owned
on the date of marriage. This will make it much easier to receive the
credit for the value of assets brought into the marriage in the event
of separation.
It is important to keep in mind, however, that a complication arises with
respect to any pre-marital property that becomes a matrimonial home and
remains a matrimonial home as of the date of separation. This is because
the FLA provides that the deduction from net family property, which ordinarily
applies to other pre-marital assets, does not apply to the matrimonial
home. The rules pertaining to matrimonial homes can result in a devastating
reduction in one’s date-of-marriage deduction from net family property
and the result is that the value of the matrimonial home must be split
equally even if one spouse brought the entire asset into the marriage.
As such, anyone considering reconciling with a former spouse, like Phil
Collins, (or anyone considering marriage or remarriage), should think
twice before allowing a home owned prior to the marriage to become a matrimonial
home. It would also be wise to consider entering into a marriage contract
prior to the date of marriage.