bankruptcy alternatives canada Archives - Ira SmithTrustee & Receiver Inc.

Joint accounts: Introduction

Sharing with your spouse is great, but not your PIN number or joint accounts. Some couples like to share everything in a marriage, but too much sharing, especially as it pertains to finances is not necessarily a good thing. We’re not saying that discussing finances is a bad idea; in fact it’s a great idea! But, sharing your PIN number is not recommended, and for good reason.

Joint accounts: Mixed feelings

Laurie Campbell, executive director of Credit Canada which deals with people with credit problems, says she has mixed feelings about people joining up their lives financially. “We see so much in here,” said Ms. Campbell. “You have to know what you are signing up for. We all go into these relationships with the best intentions thinking everything will be rosy. Unfortunately, it’s not the reality. What credit counsellors do is speak with couples who come to us, many of whom can’t even sit in the same room because of the damage they have done to each other’s credit. When involving joint accounts, the financially responsible spouse ends up paying for the financial sins of the other. If you have one person who is a saver and the other person is a spender, you’re in trouble,” said Ms. Campbell.

Joint accounts: Money can be the primary cause of divorce

The cause of about 1 in 5 of all Canadian divorces is primarily by money. Financial incompatibility was and still is a serious issue. According to a Harris Interactive poll recently released:

A third of American couples with joint finances say they have committed financial infidelity, with both sexes lying to their partners in equal numbers.

67% of those couples had arguments as a result.

42% said it caused less trust in the relationship.

16% of cases, the lying led to divorce; in 11% it caused a separation.

Joint accounts: Joint accounts does not equal a joint financial plan

In spite of advice to the contrary, a survey from the Chartered Professional Accountants found 69% of spouses or partners have shared their PIN. Yet a recent poll from TD Canada Trust found that only 36% of couples have a joint financial plan. For some couples a PIN number is symbolic of sharing in the relationship and for others it’s just convenient, but clearly it can be a recipe for financial disaster. Think twice before sharing your PIN number with anyone and that includes your spouse. The same is also true for co-signing a loan and using joint accounts not providing equal benefit to each spouse.

In last week’s blog we discussed the dilemma that arises when your parent(s) passes away in debt. This week we’ll be addressing your options, what your obligations are, and what you can do for the death of a debtor.

If your parent(s) pass away in debt and there are insufficient assets to pay off the debt, after paying the testamentary costs you really have only 2 options:

Pay the debts from your own resources
Let the estate go bankrupt

Emotionally you may want to pay the debts because you believe that it’s the right thing to do. But, before you make a decision you should know that there is no liability for a child to take on the debts of the parent(s). Although there is still a stigma attached to bankruptcy, the reality is that the debts are not yours, so why should you assume this burden and possibly place your own family in financial jeopardy?

Bankrupting the Estate makes financial sense. If your parent(s) pass away in debt you won’t receive a penny until the debts are paid. And, Estates can be complicated, especially if there are existing small business services still active or there are exes or common law spouses involved. It is the responsibility of Estate Executors to pay debts and expenses first. The Executor can side step the minefield of issues involved by bankrupting an insolvent testamentary Estate. If you or another family member is the Executor of your parent(s) Estate, there are some important facts that you should be aware of:

1. The Executors have a personal liability for all acts done, and for all acts not done that they should have.

2. By trying their best, they may be opening up the door for lawsuits from creditors or heirs for matters not properly handled. This is especially true where the family member, who is not skilled at financial, insolvency or testamentary matters, is Executor because he or she has been named, but really has no expertise in this area.

3. By putting the Estate into bankruptcy, which requires prior approval of the Bankruptcy Court, the Executor is relieving him or herself of personal liability because the Estate will now be handled under the Federal statute and all creditors will be handled properly and in priority under the law under the administration of the trustee in bankruptcy.

4. The Executor will relieve him or herself of dealing with creditor collection calls.

5. Section 136. (1)(a) of the Bankruptcy and Insolvency Act (Canada) states:

136. (1) Subject to the rights of secured creditors, the proceeds realized from the property of a bankrupt shall be applied in priority of payment as follows:

(a) in the case of a deceased bankrupt, the reasonable funeral and testamentary expenses incurred by the legal representative or, in the Province of Quebec, the successors or heirs of the deceased bankrupt;…

If your parent(s) pass away in debt, contact Ira Smith Trustee & Receiver Inc. as soon as possible. We will evaluate your situation and provide you with sound financial advice on how best to proceed Starting Over, Starting Now.

Joint accounts: Introduction

Joint accounts: Mixed feelings

Joint accounts: Money can be the primary cause of divorce

Joint accounts: Joint accounts does not equal a joint financial plan

Joint accounts: What to do if you are facing serious debt issues