When super boomer relationships go bust

People over 50, known as super boomers, need to protect their wealth when they repartner

By Lorne Maclean Q.C. 

People over 50, known as super boomers, now control the majority of the wealth in Canada. That’s true in Vancouver too, where the middle-aged have made astronomical gains on their real estate, companies and stocks in recent years. A sad reality of that demographic, though, is that many who are married or in a marriage-like relationship will separate or divorce if they have not already done so. And at this time of life, asset protection and preservation is key.  Furthermore, wealthy ex-spouses are attractive targets, so super boomers have to be aware how to protect their assets if they enter into a subsequent relationship.

When two wealthy spouses from a long-term union separate, chances are most of the wealth was jointly acquired.  Whether both spouses were breadwinners, or one stayed at home, courts in British Columbia accept that both roles are equally valuable, and in most cases, the family property is equally divided.

Since March 2013, BC has a new Family Law Act and property division has changed.  This new law particularly impacts:

·  spouses who receive gifts or inheritances during their relationship

·  re-partnering super boomers who bring assets into a new relationship

·  spouses or couples who want to help their children financially in the future

·  property division

Now in BC, all married spouses, as well as unmarried couples who have lived in a marriage-like relationship for at least two years, equally share any jointly acquired property except for the starting value of:

·  property acquired before or after the relationship, unrelated to jointly acquired property

·  gifts or inheritances to one spouse

·  damage awards and insurance proceeds (with some exceptions)

·  some kinds of trust property a spouse has a potential interest in

Although this property is excluded from equal sharing, any increase in the value of the excluded property during the relationship is considered shared.

Excluding the starting value of a company, stocks or real estate is a great start for super boomers looking to protect their wealth. However, sometimes even sharing the increased value can feel like an injustice. Massive gains made on company ventures, stocks, and gains on real estate are often due to market forces and smart money management by the wealthier spouse, who brought them into the relationship long before they even met their new partner. Assume, for example, that due to Vancouver’s rising real estate market, a house doubles in value over the course of a year-long marriage. Many people might consider it excessive for the non-contributing spouse to get half of the gain after such a short period.

When a family business is involved in a marriage breakdown that one spouse brought into the relationship or received by way of a gift or inheritance then things get even more emotional and sensitive.

Business valuations will need to be done using valuation dates at the start and end of the relationship.  These valuations involve checking the accuracy of financial statements, valuing underlying assets, checking personal benefits and any non- arm’s length salaries, assessing tax liabilities, assessing the viability and profitability of the company, as well as dozens of other factors which could affect the value of the business.

There are also tax consequences, with a house worth $1 million always worth more in after-tax dollars than a $1-million business.  Yet unwary business owners often don't understand this.

The financial future of children can also be at risk in second marriages with offspring from the super boomer’s first marriage left out or facing a smaller share of the estate if a new relationship ends with the wealthier partner’s death.

As a result, a well-crafted marriage agreement, coupled with a solid estate plan that may include a company succession plan, estate freezes and the setting up of trusts is a must for any wealthy super boomer who considers re-partnering.

Lorne MacLean, Q.C.  is one of Canada’s most experienced lawyers dedicated to family law in B.C. in the field of high-net-worth and complex family law disputes.