Separating Later in Life: Pensions, Housing and Estate Plans in a Grey Divorce

Couples who separate in their fifties, sixties or later face the same Family Law Act as everyone else, but the stakes look different. There are fewer working years to rebuild savings, a pension may be the largest asset, and the home is often both the main investment and the place you planned to grow old.

This guide pulls together the issues that tend to arrive at once in a later-life separation: pensions, housing, support, deadlines and the estate plan you made as a couple.

Why a later-life separation is different

The legal rules do not change with age. What changes is how the pieces interact. A pension division affects retirement income, which affects spousal support, which affects whether either of you can keep the house. Decisions that would be separate in a younger couple's separation tend to depend on each other here, so it helps to look at them as one plan.

Pensions: often the largest asset

Under section 84(2)(e) of the Family Law Act, a spouse's entitlement under a pension plan, retirement savings plan or annuity is family property. Pensions are divided under Part 6 of the Act, which has its own rules. Our article on how pension division works covers the mechanics; a few points matter especially near retirement:

• A pension already being paid can still be divided. For many plans, section 117 entitles the other spouse, by giving notice, to a proportionate share of the benefits paid during the member's lifetime.
• You can agree on something other than a split. Section 127 lets spouses make a written agreement dividing benefits differently, including having the member compensate the other spouse with other property instead of dividing the pension. It also allows an agreement that Canada Pension Plan pensionable earnings will not be divided.
• Survivor benefits need attention. Section 125 says entitlement to the member's share of survivor benefits follows the law on beneficiary designations, so check who is named before and after the division.

The home: stay, sell or downsize

For many couples the house carries most of their equity. You may agree that one spouse buys out the other, that the home is sold and the proceeds divided, or that the sale waits until a set date. Our articles on the family home after separation and buying out your spouse's share walk through the options.

After a long relationship, people often assume that property one spouse owned before the relationship, or inherited, is safely theirs. Section 85 does exclude pre-relationship property, inheritances and third-party gifts, but section 84(2)(g) treats any increase in value during the relationship as family property, and the spouse claiming an exclusion has to prove it. After decades, the records needed to trace that property can be hard to find, so start gathering them early. If you plan to downsize, think about where each of you can afford to live afterwards before agreeing to a sale.

Spousal support around retirement

Retirement income, pension division and spousal support are closely linked. Income from a divided pension can affect what support is appropriate, and an agreement or order made while one spouse was still working may need to be revisited when they retire. For more, see spousal support when you retire.

Your will, beneficiaries and power of attorney

Estate plans made as a couple usually leave everything to each other. Separation changes some of that automatically, but not all of it:

• Gifts to a spouse in a will. Under section 56 of the Wills, Estates and Succession Act, if spouses cease to be spouses under section 2(2), a gift to the former spouse and their appointment as executor are revoked unless the will shows a contrary intention. For married spouses, that happens when an event occurs that gives rise to an interest in family property under the Family Law Act. A later reconciliation does not undo the revocation.
• Beneficiary designations. Section 56 deals with wills. Designations on RRSPs, RRIFs, TFSAs, life insurance and pension survivor benefits need to be reviewed separately.
• Enduring power of attorney. Under section 29 of the Power of Attorney Act, a spouse's authority as attorney ends when the marriage or marriage-like relationship ends (on separation), unless the document says it continues regardless.

Our checklist on updating your will, beneficiaries and power of attorney after separation goes through each document. A new will is usually one of the first things to sign once you separate, since your estate plan may otherwise follow rules you did not choose.

Watch the two-year limit

Under section 198 of the Family Law Act, a married spouse must start a claim to divide property or a pension, or for spousal support, no later than two years after the divorce judgment. For unmarried spouses, the two years run from the date of separation. Time spent in family dispute resolution with a professional suspends the clock. Our guide to family law deadlines explains the details.

Separating after a long relationship? Plan the pieces together

Our family lawyers can help you value and divide pensions and property, work through housing and support options, and coordinate with our wills and real estate colleagues so your estate plan and any sale or downsizing line up with the settlement.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.