Divorce upends lifestyle, housing and financial goals, making process of separating finances onerous
Published Mar 21, 2023 • 4 minute read
Separating emotions from critical financial decisions can be difficult at the best of times, but is especially complicated when working through a divorce. Photo by Getty Images/iStockphoto More than 40 per cent of marriages in Canada end in divorce, which can be an emotionally charged life transition since your lifestyle, housing and financial goals can all be upended, making the process of separating finances onerous and exacerbating.
Advertisement 2 This advertisement has not loaded yet, but your article continues below.
THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada.
Unlimited online access to articles from across Canada with one account Get exclusive access to the National Post ePaper, an electronic replica of the print edition that you can share, download and comment on Enjoy insights and behind-the-scenes analysis from our award-winning journalists Support local journalists and the next generation of journalists Daily puzzles including the New York Times Crossword SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada.
Unlimited online access to articles from across Canada with one account Get exclusive access to the National Post ePaper, an electronic replica of the print edition that you can share, download and comment on Enjoy insights and behind-the-scenes analysis from our award-winning journalists Support local journalists and the next generation of journalists Daily puzzles including the New York Times Crossword REGISTER TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience.
Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors Separating emotions from critical financial decisions can be difficult at the best of times, but is especially complicated when working through a divorce. Working with a wealth adviser can add an objective lens when navigating your uncoupling and can help you better plan for financial security in the future.
Financial Post Top Stories Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.
By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails or any newsletter. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300
Gathering resources Before you begin the divorce process, consider the shared assets and debt accumulated during the marriage that will need to be divided during the separation. For example, if a couple took on a mortgage to purchase a matrimonial home, the home’s value and the debt taken on to purchase the property will need to be split between the couple regardless of who paid for it.
Other financial considerations may include the appreciation in investment portfolios, other real estate properties, pension assets and the value of a business. Depending on how they were treated during marriage, gifts and inheritances may also need to be divided.
This advertisement has not loaded yet, but your article continues below.
Article content The division of art and antiquities, precious metals, the cash value of insurance policies and even loyalty reward programs such as Air Miles are sometimes overlooked and will form part of your net family property.
While not on the balance sheet, other considerations should include the potential impact to your health insurance coverage if you are transitioning out of a marriage and were dependent on your spouse for this coverage.
Protecting your assets in case of divorce Although only eight per cent of Canadians claimed to have signed prenuptial agreements in 2017, according to an Ipsos survey, the trend is shifting, with an increasing number of young adults, especially women, requesting prenups to cover property protection, spousal support and the division of assets in case of divorce.
Advertisement 4 This advertisement has not loaded yet, but your article continues below.
Like any other contract, a prenuptial agreement can benefit couples by encouraging early communication, potentially avoiding costly legal disputes, reducing stress and uncertainty and increasing the chances of a clean separation of assets later on.
Although prenups cannot cover everything, they can help simplify the divorce process and alleviate some of the financial and emotional burdens.
If you do not have a prenup, keeping thorough records of the assets you owned before marriage and keeping gifts and inheritances separate from marital property are simple ways to protect your finances. For more sophisticated methods of protecting assets, life insurance, corporations and trusts may also be used.
Advertisement 5 This advertisement has not loaded yet, but your article continues below.
Some couples may forgo marriage entirely and choose a common-law arrangement to reduce financial risks since the law treats common law differently than marriage.
For example, depending on the specific laws of the jurisdiction in which the couple resides, the partner who purchased the home could be considered the sole owner of the property. However, if the other partner made contributions towards the purchase or maintenance of the home, such as paying bills or making improvements, they may be entitled to a portion of the property’s value upon separation.
Aligning child-care responsibilities One of the most common concerns for couples during a divorce is their children, and it is critical to consider their emotional and financial well-being.
This advertisement has not loaded yet, but your article continues below.
Article content Determining child support costs in Canada is mostly formulaic and is calculated by considering each partner’s annual gross income, the number of children in the family and custodial arrangements. Other considerations include the cost of child care and extraordinary expenses such as private school and extracurricular activities.
It’s critical to ensure the well-being of your children during a divorce. Photo by Getty Images/iStockphoto Calculating spousal support costs is more complex and considers a number of factors such as the length of the marriage, ages of the spouses, gross income, financial needs of each spouse, whether there are children and child support, and more.
A couple should find solutions that best suit their family’s circumstances when constructing separation and parenting agreements, keeping in mind factors such as safeguarding the familial home for their kids, considering the location of their new homes and workplaces, insurance policies for support payments, and their custodial and visitation rights.
This advertisement has not loaded yet, but your article continues below.
Article content Transitioning from family income to a single income The financial and lifestyle changes that result from moving to a single-income household can be overwhelming, but working with a wealth adviser can prepare you to manage the expenses attached to the process, make informed decisions about dividing assets and devise a new financial plan based on your revised priorities and life goals.
Whether it is providing recommendations for lawyers or mediators, checklists and budgeting worksheets, or even sample parenting and separation agreements, wealth advisers can provide valuable tools and information needed to consider your next steps. They can also work with your other advisers such as accountants to review the impacts of a divorce from a tax perspective.
This advertisement has not loaded yet, but your article continues below.
Article content Beyond helping you work through any financial concerns, a trusted adviser can provide much-needed emotional support during these tumultuous times and guide clients thoughtfully in the right direction.
This may mean encouraging a couple to attend mediation rather than going through a costly legal battle and providing support and resources for children, including budgeting for counselling to help support the family’s mental health during this difficult transition.
Retired Ontario man living on cash savings is making a mistake Women are taking more control of family’s finances Couple wants to retire early, but are government pensions enough? Ultimately, it is important to remember that you are not alone in this process and the more you lean on the support systems around you, the lighter the burden will feel.
Ida Khajadourian is a portfolio manager and investment advisor at Richardson Wealth. This article is not intended to provide legal advice.
_____________________________________________________________
If you like this story, sign up for the FP Investor Newsletter.
_____________________________________________________________