Not Cleared for Take Off: Mistakes To Avoid In Your Separation

All too often in separation situations, one or both of the parties head for the barricades and do things far more than necessary to protect themselves. I sometimes call these actions “take offs”. For example:

  1. He takes her off of his health insurance coverage available at work.
  2. She takes him off her credit card.
  3. He takes her off as beneficiary of his life insurance policy.
  4. She takes him off the list of school contacts.

Small Changes Can Lead To Big Claims

This can be very unhelpful and make resolution of the issues more difficult and expensive. We recently encountered a situation in which a husband had free health insurance provided by his employer for both his wife and children. This is quite common. At separation he deleted his wife from this coverage even though she still qualified as a separated but still married spouse. He thought that he needed to do this now that they were separated.

Unfortunately, the wife was without her own health insurance. Her income was considerably less than the husband’s and even apart from child support, the husband was facing a spousal support claim. The wife’s expenses were even more significant now that she would have to pay for her own health care. That health care could have been provided free of charge until at least the parties were divorced. We tried to see whether the wife could be reinstated given that she was still a spouse however, his insurer would not do so. The wife now had a larger spousal support claim due to her significant health expenses and the loss of coverage.

Credit Considerations

We had another situation in which the wife was the primary cardholder of a major credit card and the husband was the secondary cardholder. She was by far the main breadwinner in the family and earned a healthy income in relation to that of the husband. She “took off” the husband from the credit card. He had a spousal support claim and that claim was enhanced further because he had no other access to credit and did not have available money to rent his own accommodation.

I am not suggesting that all credit cards and lines of credit should be kept open for both parties to use following a separation. Sometimes it is necessary to freeze the credit facilities so that neither can debit them further. Sometimes it is necessary to put a certain limit on further debits and provide for both payment against the rising balances or other compensatory arrangements. Health benefits are different. If they are provided at no charge, there is seldom any reason to discontinue them even if the other spouse has benefits at his or her own place of work. They can be co-ordinated and maximized between the two plans.

We also sometimes encounter a situation in which one of the spouses to a separation “tears up” or throws away a credit card. They may think that this somehow prevents the other party from incurring further debt on a joint credit card. Unfortunately, it may not and certainly doesn’t bind the bank or other issuer of the credit card. Whether or not you have separated, banks and other credit granting institutions continue to have both of you “on the hook” if there is jointly held debt. In some cases, they may be willing to release one of the parties from a joint debt if the other spouse would qualify to carry he entire debt on their own. This has to be negotiated however.

Insurance Too

As family law lawyers, we also encounter situations in which, due to separation, one deletes the other spouse as beneficiary of their life insurance. This too can be problematic especially if there will be a likely claim for spousal support by the beneficiary. Life insurance is often used in settlements to secure a spousal (or indeed a child) support obligation. If done correctly it may protect your estate from a support claim.

Generally we find that when one or both parties, upon separation, make unilateral changes to the status quo, it can precipitate a crisis and make it more difficult to peacefully resolve their legal issues. Sometimes unilateral actions can create such a crisis that the matter moves quickly into court on an urgent basis.

Some Things Should Change…

It is sometimes necessary to make certain changes before having had a proper opportunity to negotiate a settlement. Changes to one’s Will or Power of Attorney may be necessary. Sometimes if a matrimonial home is held by the husband and wife “as joint tenants” (meaning that if one dies, the survivor receives their half share), we recommend removing the survivorship features before there is any settlement. Likewise, in some cases a freeze on joint credit facilities such as a line of credit may be appropriate.

We recommend that before you “take off”, you spend an hour or so with a qualified family lawyer to get individual advice as to what changes may be immediately appropriate and the best way of resolving matters between you and your spouse.

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About Charles Morrison

Charles Morrison is a family law expert with over 35 years of experience. In addition to negotiating separation agreements and marriage contracts he is an enthusiastic supporter of Collaborative Practice. Charles regularly appears at the Ontario Court of Justice as well as the Superior Court of Justice locally and beyond.

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