Divorce is a challenging and emotionally draining process, especially when it comes to dividing assets. In Prince Edward Island (PEI), family law governs how property is split during a divorce, and without proper planning, you could lose a significant portion of your wealth.
Whether you’re considering marriage, already married, or anticipating a separation, understanding how to protect your assets is crucial. This guide will walk you through legal strategies to safeguard your finances and property in PEI.
Understanding PEI’s Matrimonial Property Laws
Before diving into asset protection, it’s essential to understand how PEI’s family law treats property division.
1. Equal vs. Fair Division
PEI follows the Matrimonial Property Act, which generally promotes an equal division (50/50 split) of marital assets. However, courts may adjust this division if equal splitting would be “unfair” based on factors like:
- Length of the marriage
- Each spouse’s financial contributions
- Future financial needs (e.g., childcare, earning potential)
- Pre-marital assets
2. What Counts as Marital Property?
Marital property includes:
- Family home (even if only one spouse owns it)
- Joint bank accounts
- Investments acquired during marriage
- Vehicles, furniture, and other shared assets
3. Excluded (Non-Marital) Property
Some assets may remain with the original owner, such as:
- Property owned before marriage (if kept separate)
- Gifts or inheritances received individually
- Court-awarded damages (e.g., personal injury settlements)
However, if excluded assets are mixed with marital property (e.g., depositing an inheritance into a joint account), they may lose protection.
Proactive Strategies to Protect Your Assets
If you want to minimize financial loss in a divorce, planning ahead is key. Here are the best legal strategies for PEI residents.
1. Sign a Prenuptial Agreement (Prenup)
A prenup is the most effective way to protect assets before marriage. It allows couples to decide in advance:
- Which assets remain separate
- How property will be divided in a divorce
- Spousal support terms
Is a Prenup Enforceable in PEI?
Yes, but it must meet these conditions:
- Full financial disclosure (both spouses must disclose assets)
- Signed voluntarily (no coercion)
- Fair and reasonable terms (cannot leave one spouse destitute)
Tip: Each spouse should have independent legal advice when drafting a prenup to ensure fairness.
2. Consider a Postnuptial Agreement
If you’re already married without a prenup, a postnuptial agreement can still help. It works similarly but is signed after marriage. Courts scrutinize postnups more closely, so transparency is crucial.
3. Keep Assets Separate
To prevent assets from becoming marital property:
- Avoid joint accounts for pre-marital savings/inheritances.
- Title property in your name only (e.g., a second home or investment property).
- Document gifts/inheritances with a paper trail proving they’re separate.
4. Use Trusts for Asset Protection
Placing assets in a trust can shield them from divorce claims. Two common types:
- Family Trusts – Managed by a trustee for beneficiaries (e.g., children).
- Discretionary Trusts – Gives trustees control over distributions, making it harder for an ex-spouse to claim.
Note: If you transfer assets into a trust after marriage, courts may view this as an attempt to hide wealth, which could backfire.
5. Buy Insurance Policies
Certain insurance products can safeguard wealth:
- Life Insurance – Name a child or trust as beneficiary instead of your spouse.
- Disability/Personal Injury Protection – Ensures settlements remain separate property.
6. Business Protection Strategies
If you own a business, divorce can threaten its survival. Protect it by:
- Prenups specifying business ownership terms
- Shareholder agreements (preventing ex-spouses from gaining control)
- Paying yourself a fair salary (instead of relying solely on business equity)
What If Divorce Is Already Imminent?
If divorce proceedings have started, asset protection becomes more difficult—but not impossible.
1. Avoid Hiding Assets
Courts penalize spouses who conceal property. Instead:
- Negotiate a fair settlement (mediation can help).
- Focus on protecting exempt assets (e.g., inheritances).
2. Prove Certain Assets Are Separate
If you claim an asset is non-marital, provide:
- Purchase records (pre-marriage)
- Bank statements showing no commingling
- Witness testimony (if necessary)
3. Seek Legal Advice Immediately
A PEI family lawyer can help:
- Identify which assets are at risk
- Negotiate favorable settlements
- Challenge unfair division attempts
Common Mistakes That Jeopardize Asset Protection
Even with good intentions, people make errors that weaken their financial position:
❌ Mixing separate & marital funds (e.g., depositing an inheritance into a joint account).
❌ Transferring assets last-minute (courts may see this as fraudulent).
❌ Ignoring tax implications (e.g., capital gains when dividing property).
Final Thoughts: Plan Ahead to Protect Your Wealth
Divorce doesn’t have to mean financial ruin. By using prenups, trusts, and smart financial planning, you can safeguard your assets in Prince Edward Island.
Key Takeaways:
✔ PEI typically splits marital property 50/50, but exceptions exist.
✔ Prenups & postnups are the strongest legal protections.
✔ Keeping assets separate is crucial—avoid mixing finances.
✔ If divorce is near, consult a lawyer immediately.
Need Help? Consult a PEI Family Lawyer
Every case is unique. For personalized advice, contact a PEI divorce lawyer to discuss your situation confidentially.
