A good plan for a challenging time

Divorce can be difficult, but a good financial plan helps you take command of your new life.

 

Key takeaways

  • Build a strong team and establish your priorities.

  • Gather all relevant paperwork.

  • Let your financial advisor help you create an action plan.

 

Splitting up from a partner with whom you planned on spending a lifetime is a stressful situation that brings with it a host of challenges, especially if it happens later in life, as is becoming increasingly common.

However, experts agree that good planning is critical to determining your future financial and emotional well-being. A well-thought-out plan will also give you a chance to find concrete ways to support your goals for your new life.

 

Build a strong support network and set priorities.

First, focus on pulling together a team to assist you. It is recommended that professionals such as financial advisors, lawyers, accountants and counsellors be engaged before finalizing any major decisions.

There are many important questions to consider as the next stage of your life begins, including where you will live and work post-divorce. If a new home is being purchased requiring a mortgage, it’s vital to have a well-established credit history. That’s why it’s important, even in single-income households, for both parties to build a solid credit history over time.

 

Take stock of the potential changes to come.

Other considerations might involve a move to another city, and what kind of custody arrangements need to be made if children are involved. You will need to establish a budget to clearly understand expenses that were once shared with your spouse but now will be managed separately, such as housing, food and transportation, as well as vacations, health care and retirement funding.

As often happens with many of life’s milestones, divorce can be a time to pause and reassess priorities. Retirement goals a couple might have had together might dramatically shift when they go their separate ways. Spending habits and saving needs might need to be reassessed. Insurance requirements might also need to be re-evaluated. A financial advisor can help identify these signposts and come up with a road map that works for your new circumstances.

 

Gather all the paperwork.

One of the first steps in the divorce journey is to gather all records. Copies are needed of CRA tax returns, loan applications, wills, trusts, banking information, credit card statements, titles to real estate, car registrations, investment statements for securities, and bonds and GICs in RRSPs and TSFAs, as well as of non-registered accounts, employer retirement savings plan, pension plans, among other assets, all of which will form part of the financial statement each spouse submits to the court for division of assets. The court then considers the value of the asset rather than the actual asset itself for division between the parties.

Assemble lists of any debts or liabilities incurred by the family, including mortgages, loans and credit card bills, even debts incurred in the name of one spouse alone. These are subtracted from the total value of family assets when they are divided. You should also obtain a full credit report to ensure there are no surprises on it.

 

What’s yours isn’t always yours.

Consider possessions you acquired prior to the marriage and assets received separately, such as gifts or inheritances, or assets that both spouses agreed were separate from family assets in a pre-nuptial agreement or contract.

Depending on child custody and access issues, you will want to plan for such considerations as health insurance, RESPs or tuition fees for older children. Familiarizing yourself with the laws that apply in your province will help facilitate the process and reduce your legal and accounting costs.

Approximately 38% of all Canadian marriages end in divorce, but everyone’s circumstances are unique. Enlist the help of professionals to help you navigate the process of dissolving the union that was and begin charting a new personal and financial life.


Sources:
Michael G. Cochrane, LLB, Surviving Your Divorce: A Guide to Canadian Family Law, Sixth Edition (John Wiley & Sons, 2011). (Kindle Edition)
Gail Vaz-Oxlade, Money Rules: Rule Your Money or Your Money Will Rule You (Toronto: Harper Collins, 2012).

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