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The Role of the Financial Divorce Specialist In the Separation/Divorce Process

The Role of the Financial Divorce Specialist In the Separation/Divorce Process. Stats: It all depends!. Headlines do not tell all the story – but where there is smoke there is likely some substance. Common Questions:. Do half of all marriages end in divorce?

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The Role of the Financial Divorce Specialist In the Separation/Divorce Process

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  1. The Role of the Financial Divorce Specialist In theSeparation/Divorce Process

  2. Stats: It all depends! Headlines do not tell all the story – but where there is smoke there is likely some substance.

  3. Common Questions: • Do half of all marriages end in divorce? • What is the impact of no-fault divorce? • Same sex couples now able to marry/divorce? • Common law couples?

  4. The Divorce Triangle Financial Emotional Legal

  5. Sources of Money • Family Property • Exempt Assets • Spousal Support • Child Support

  6. Property to Divide • Liquid Assets • Furniture • Art, Collections, etc. • Real Estate • Businesses • Pensions

  7. Property Division • Principal Residence – matrimonial home • Other Property • Exempt Assets • Protecting Yourself Before Separation • Contracts

  8. Other Considerations • Finding hidden assets or mistakes in financial statements • Establishing tax liability for taxable real estate and business • Establishing insurance needs/if policy is an asset • Identifying future budget or cash flow issues

  9. Support • Spousal Support • Child Support

  10. Spousal Support • Criteria – long term marriage, age, health, and skill set • Periodic vs. lump sum payments • Third party payments • Complex calculations based on new rules

  11. Registered Money/Pensions • RRSPs • Canadian Pension Plan (CPP) • Old Age Security (OAS) • Company Pensions – Defined Contribution or Defined Benefit

  12. Canadian Pension Plan (CPP) • Based on years married and/or living together • Credit splitting • Automatic but needs to be acknowledged

  13. Company Pension Plans • Defined Benefit – present value of a future income stream • “If and when” approach • Lump sum payment

  14. Lump Sum Method • Current Value • Use value to divide assets • Inflation factor • Future use has tax implications

  15. Separating Couple • Kate is 46 years old • Ken is 52 years old • Married 18 years • 2 sons – ages 11 and 7 • Kate’s take-home pay is $21,600 • Ken’s take-home pay is $132,000

  16. Ken & Kate’s Property • Home equity $180,000 • Mutual Funds 92,000 • RRSPs 212,000 • Business 180,000 • Total $664,000

  17. Ken’s Offer to Kate • 50% of the assets • $1,000/month child support until 1st child is of age, $500 until 2nd of age • $1,500/month spousal support for 5 years

  18. Kate’s Half • Home equity $180,000 • 1/2 Mutual Funds 46,000 • 1/2 RRSPs 106,000 • Total $332,000

  19. Ken’s Half • 1/2 Mutual Funds $46,000 • 1/2 RRSPs 106,000 • Business 180,000 • Total $332,000

  20. Projections for Their Future

  21.  Spreadsheet for Kate

  22. Spreadsheet for Ken

  23. Consider Scenario #2 • $5,000/mth spousal support for 5 years • Then $4,000/mth for 5 years • Then $3,000/mth for 5 years

  24. Projection of Their Future Scenario #2

  25. Future Projections • Improve decision making • Assist in reducing fears • Empower through knowledge • Offer a realistic overview

  26. Risk Management Needs • Life insurance • Critical illness • Disability Insurance • Long term care insurance

  27. Ideal Divorce Triangle Financial Divorce Specialist Mental Health Practitioner CLIENT Lawyer

  28. Financial Divorce Specialist Role • Educator/information source • Reality check • Communicator • Objectivity - the true neutral

  29. Questions ? www.afds.ca

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