Fair enrichment

07 October, 2021

By Dominique Lépine, Financial Advisor

What is fair enrichment?
In 1989, to ensure that one of the spouses does not grow rich at the expense of the other, Quebec created the family patrimony. The objective is to promote the economic equality of the spouses. However, this law only applies to married spouses. Is it to avoid it that the number of marriages is in decline? It certainly doesn't explain all of the decrease, but it is probably part of the explanation. For my part, I believe that it is not up to the State to dictate the economic model of the couple and that it should not interfere with it because there is not, in my opinion, a single and only one correct answer.
Let's start by defining what enrichment is. According to Le Robert, it is about "increasing one's property, making a fortune". I would sum it all up by saying it's your monetary net worth: your assets minus your debts. The definition of enrichment is the same for everyone. It gets more complicated when you want to define equitable enrichment. Does that mean equivalent? Does that mean prorated to your income? Is it the same if you are a blended family? Is it the responsibility of each spouse regardless of the other?
Determining everyone's contribution to the family budget is not easy. It is even more complex to determine what constitutes equitable enrichment within your couple. Again, the correct answer is not your brother, co-worker, friend, etc. The right answer is the one that suits you according to your reality and your family values. To evaluate the enrichment, one must define the difference between two values ​​over a given period. For example, my wealth over the past year is the difference between my net worth on January 1 and that on December 31.
When we calculate the enrichment in the couple, what is our starting value? Our net worth at the start of our life together? Or when our first child arrives? Once the structure has been established and the departure date agreed, the net worth of each of the spouses must be evaluated annually in order to measure the respective enrichment of each. It is by making this calculation that we will see if our objectives have been achieved.
So, annually , as we have already discussed, we must become aware of our family net worth, which will then have increased or decreased. Once this variation has been obtained, we must ensure that it is well distributed between the spouses. Let's take a simple example, a couple who determines that their goal is that each can obtain an annual dollar equivalent enrichment. He therefore decides that all property of significant value, including the house, be in the name of both spouses. Every year, identical contributions are made to their RRSP... Everything is split 50/50. The goal is achieved and everyone has the same net worth, unless one spouse's employer offers a retirement savings plan. Despite the good intention of the couple to have an equivalent enrichment, one of them therefore gets richer more quickly than the other. Assessing their net worth regularly will ensure that they can make adjustments . From now on, RRSPs can be taken out exclusively in the name of the spouse who does not have a pension fund.
When calculating net worth, make sure you don't forget anything: retirement funds, surrender value of insurance policies , RESPs, etc.
In my view, enrichment does not have to be equivalent to be fair. The enrichment is equitable if both spouses understand and endorse the chosen distribution. Attention, the stake being too great, one cannot avoid this discussion. It's the financial strength of the partners that is at stake. Don't let one spouse manage all the aspects. Above all, do not trust the legislator to settle this file. You can't do it, is it really too complicated? Take the time to consult with a financial planner. It will help and guide you in defining what your definition of fair enrichment is.