The Role of the The Role of the Financial Divorce Specialist Financial Divorce Specialist

In the In theSeparation/Divorce Process Separation/Divorce Process

Stats: It all depends!Stats: It all depends!

Headlines do not tell all the story – but Headlines do not tell all the story – but where there is smoke there is likely where there is smoke there is likely

some substance.some substance.

Common Questions:Common Questions:

Do half of all marriages end in Do half of all marriages end in divorce?divorce?

What is the impact of no-fault divorce?What is the impact of no-fault divorce?

Same sex couples now able to Same sex couples now able to marry/divorce?marry/divorce?

Common law couples?Common law couples?

The Divorce TriangleThe Divorce Triangle

Legal

Em

otio

nal

Financial

Sources of MoneySources of Money Family PropertyFamily Property

Exempt AssetsExempt Assets

Spousal SupportSpousal Support

Child SupportChild Support

Property to DivideProperty to Divide

1.1. Liquid AssetsLiquid Assets

2.2. FurnitureFurniture

3.3. Art, Collections, etc.Art, Collections, etc.

4.4. Real EstateReal Estate

5.5. BusinessesBusinesses

6.6. PensionsPensions

Property DivisionProperty Division Principal Residence – matrimonial Principal Residence – matrimonial

homehome

Other PropertyOther Property

Exempt AssetsExempt Assets

Protecting Yourself Before SeparationProtecting Yourself Before Separation ContractsContracts

Other ConsiderationsOther Considerations Finding hidden assets or mistakes in Finding hidden assets or mistakes in

financial statementsfinancial statements

Establishing tax liability for taxable real Establishing tax liability for taxable real estate and businessestate and business

Establishing insurance needs/if policy is Establishing insurance needs/if policy is an assetan asset

Identifying future budget or cash flow Identifying future budget or cash flow issuesissues

SupportSupport

Spousal SupportSpousal Support

Child SupportChild Support

Spousal SupportSpousal Support Criteria – long term marriage, Criteria – long term marriage,

age, health, and skill setage, health, and skill set

Periodic vs. lump sum paymentsPeriodic vs. lump sum payments

Third party paymentsThird party payments

Complex calculations based on Complex calculations based on new rulesnew rules

Registered Money/PensionsRegistered Money/Pensions RRSPsRRSPs

Canadian Pension Plan (CPP)Canadian Pension Plan (CPP)

Old Age Security (OAS)Old Age Security (OAS)

Company Pensions – Defined Company Pensions – Defined Contribution or Defined BenefitContribution or Defined Benefit

Canadian Pension Plan Canadian Pension Plan (CPP)(CPP)

Based on years married and/or Based on years married and/or living togetherliving together

Credit splittingCredit splitting

Automatic but needs to be Automatic but needs to be acknowledgedacknowledged

Company Pension PlansCompany Pension Plans

Defined Benefit – present value Defined Benefit – present value of a future income streamof a future income stream

““If and when” approachIf and when” approach

Lump sum paymentLump sum payment

Lump Sum MethodLump Sum Method Current ValueCurrent Value

Use value to divide assetsUse value to divide assets

Inflation factorInflation factor

Future use has tax implicationsFuture use has tax implications

Separating CoupleSeparating Couple

Kate is 46 years oldKate is 46 years old Ken is 52 years oldKen is 52 years old Married 18 yearsMarried 18 years 2 sons – ages 11 and 72 sons – ages 11 and 7 Kate’s take-home pay is $21,600Kate’s take-home pay is $21,600 Ken’s take-home pay is $132,000Ken’s take-home pay is $132,000

Ken & Kate’s PropertyKen & Kate’s Property

Home equityHome equity $180,000$180,000 Mutual FundsMutual Funds 92,000 92,000 RRSPsRRSPs 212,000 212,000 BusinessBusiness 180,000180,000

TotalTotal $664,000$664,000

Ken’s Offer to KateKen’s Offer to Kate50% of the assets50% of the assets

$1,000/month child support $1,000/month child support until 1until 1stst child is of age, $500 child is of age, $500 until 2until 2ndnd of age of age

$1,500/month spousal support $1,500/month spousal support

for 5 yearsfor 5 years

Kate’s HalfKate’s Half

Home equityHome equity $180,000 $180,000 1/2 Mutual Funds1/2 Mutual Funds

46,00046,000 1/2 RRSPs1/2 RRSPs 106,000106,000

TotalTotal $332,000 $332,000

Ken’s HalfKen’s Half

1/2 Mutual Funds 1/2 Mutual Funds $46,000$46,000 1/2 RRSPs1/2 RRSPs 106,000 106,000 BusinessBusiness 180,000180,000

TotalTotal $332,000 $332,000

Kate & Kenneth's Net Worth ChartVersion 1

($200,000)

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

$2,200,000

$2,400,000

$2,600,000

$2,800,000

$3,000,000

46 48 50 52 54 56 58 60 62 64 66

Kate's Age (years)

Net

Wo

rth

($)

Kate

Kenneth

Projections for Their Future

��

K A T E

A g e N e t S a l a r y S p o u s a l C h i l d E x p e n s e s A d j u s t T a x L i a b i l i t y C a s h F l o w L i q u i d A s s e t s R R S P H o m e N e t W o r t h4 6 4 . 0 0 % 5 y e a r s 1 1 y e a r s 4 . 0 0 % 2 8 % 5 . 5 0 % 7 . 5 0 % 4 . 0 0 %4 6 $ 2 1 , 6 0 0 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 5 8 , 0 0 0 $ 5 , 0 4 0 ( $ 1 1 , 4 4 0 ) $ 4 6 , 0 0 0 $ 1 0 6 , 0 0 0 $ 1 8 0 , 0 0 0 $ 3 3 2 , 0 0 04 7 $ 2 2 , 4 6 4 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 6 0 , 3 2 0 $ 5 , 0 4 0 ( $ 1 2 , 8 9 6 ) $ 3 7 , 0 9 0 $ 1 1 3 , 9 5 0 $ 1 8 7 , 2 0 0 $ 3 3 8 , 2 4 04 8 $ 2 3 , 3 6 3 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 6 2 , 7 3 3 $ 5 , 0 4 0 ( $ 1 4 , 4 1 0 ) $ 2 6 , 2 3 4 $ 1 2 2 , 4 9 6 $ 1 9 4 , 6 8 8 $ 3 4 3 , 4 1 84 9 $ 2 4 , 2 9 7 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 6 5 , 2 4 2 $ 5 , 0 4 0 ( $ 1 5 , 9 8 5 ) $ 1 3 , 2 6 7 $ 1 3 1 , 6 8 3 $ 2 0 2 , 4 7 6 $ 3 4 7 , 4 2 65 0 $ 2 5 , 2 6 9 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 6 7 , 8 5 2 $ 5 , 0 4 0 ( $ 1 7 , 6 2 3 ) $ 1 3 8 , 0 8 0 $ 2 1 0 , 5 7 5 $ 3 4 8 , 6 5 55 1 $ 2 6 , 2 8 0 $ 1 2 , 0 0 0 $ 7 0 , 5 6 6 ( $ 3 2 , 2 8 6 ) $ 1 2 5 , 8 7 9 $ 2 1 8 , 9 9 8 $ 3 4 4 , 8 7 65 2 $ 2 7 , 3 3 1 $ 1 2 , 0 0 0 $ 7 3 , 3 8 9 ( $ 3 4 , 0 5 8 ) $ 9 3 , 9 9 3 $ 2 2 7 , 7 5 7 $ 3 2 1 , 7 5 15 3 $ 2 8 , 4 2 4 $ 9 , 0 0 0 $ 7 3 , 3 2 4 ( $ 3 , 0 0 0 ) ( $ 3 5 , 9 0 0 ) $ 5 7 , 4 4 9 $ 2 3 6 , 8 6 8 $ 2 9 4 , 3 1 75 4 $ 2 9 , 5 6 1 $ 9 , 0 0 0 $ 7 6 , 2 5 7 ( $ 3 7 , 6 9 6 ) $ 1 5 , 8 0 6 $ 2 4 6 , 3 4 2 $ 2 6 2 , 1 4 85 5 $ 3 0 , 7 4 4 $ 9 , 0 0 0 $ 7 9 , 3 0 7 ( $ 3 9 , 5 6 4 ) ( $ 3 1 , 2 5 9 ) $ 2 5 6 , 1 9 6 $ 2 2 4 , 9 3 75 6 $ 3 1 , 9 7 3 $ 9 , 0 0 0 $ 8 2 , 4 8 0 ( $ 4 1 , 5 0 6 ) ( $ 8 1 , 9 0 1 ) $ 2 6 6 , 4 4 4 $ 1 8 4 , 5 4 35 7 $ 3 3 , 2 5 2 $ 7 6 , 7 7 9 ( $ 9 , 0 0 0 ) ( $ 4 3 , 5 2 7 ) ( $ 1 3 5 , 0 2 9 ) $ 2 7 7 , 1 0 2 $ 1 4 2 , 0 7 35 8 $ 3 4 , 5 8 2 $ 7 9 , 8 5 0 ( $ 4 5 , 2 6 8 ) ( $ 1 9 0 , 7 4 3 ) $ 2 8 8 , 1 8 6 $ 9 7 , 4 4 35 9 $ 3 5 , 9 6 6 $ 8 3 , 0 4 4 ( $ 4 7 , 0 7 8 ) ( $ 2 4 8 , 6 8 5 ) $ 2 9 9 , 7 1 3 $ 5 1 , 0 2 86 0 $ 3 7 , 4 0 4 $ 8 6 , 3 6 6 ( $ 4 8 , 9 6 1 ) ( $ 3 0 8 , 9 4 6 ) $ 3 1 1 , 7 0 2 $ 2 , 7 5 66 1 $ 3 8 , 9 0 0 $ 8 9 , 8 2 0 ( $ 5 0 , 9 2 0 ) ( $ 3 7 1 , 6 1 6 ) $ 3 2 4 , 1 7 0 ( $ 4 7 , 4 4 7 )6 2 $ 4 0 , 4 5 6 $ 9 3 , 4 1 3 ( $ 5 2 , 9 5 7 ) ( $ 4 3 6 , 7 9 4 ) $ 3 3 7 , 1 3 7 ( $ 9 9 , 6 5 7 )6 3 $ 4 2 , 0 7 5 $ 9 7 , 1 5 0 ( $ 5 5 , 0 7 5 ) ( $ 5 0 4 , 5 7 8 ) $ 3 5 0 , 6 2 2 ( $ 1 5 3 , 9 5 6 )6 4 $ 4 3 , 7 5 8 $ 1 0 1 , 0 3 6 ( $ 5 7 , 2 7 8 ) ( $ 5 7 5 , 0 7 4 ) $ 3 6 4 , 6 4 7 ( $ 2 1 0 , 4 2 7 )6 5 $ 4 5 , 5 0 8 $ 1 0 5 , 0 7 7 ( $ 5 9 , 5 6 9 ) ( $ 6 4 8 , 3 9 0 ) $ 3 7 9 , 2 3 3 ( $ 2 6 9 , 1 5 7 )

P r i n t

Spreadsheet for Kate

K E N N E T H

A g e N e t S a l a r y C P P S p o u s a l C h i l d E x p e n s e s T a x L i a b i l i t y C a s h F l o w L i q u i d A s s e t s R R S P B u s i n e s s N e t W o r t h5 2 4 . 0 0 % 2 . 0 0 % 5 y e a r s 1 1 y e a r s 4 . 0 0 % 4 0 % 5 . 5 0 % 7 . 5 0 % 4 . 0 0 %5 2 $ 1 3 2 , 0 0 0 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 4 2 , 0 0 0 ( $ 7 , 2 0 0 ) $ 6 7 , 2 0 0 $ 4 6 , 0 0 0 $ 1 0 6 , 0 0 0 $ 1 8 0 , 0 0 0 $ 3 3 2 , 0 0 05 3 $ 1 3 7 , 2 8 0 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 4 3 , 6 8 0 ( $ 7 , 2 0 0 ) $ 7 0 , 8 0 0 $ 1 1 5 , 7 3 0 $ 1 2 5 , 9 5 0 $ 1 8 7 , 2 0 0 $ 4 2 8 , 8 8 05 4 $ 1 4 2 , 7 7 1 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 4 5 , 4 2 7 ( $ 7 , 2 0 0 ) $ 7 4 , 5 4 4 $ 1 9 2 , 8 9 5 $ 1 4 7 , 3 9 6 $ 1 9 4 , 6 8 8 $ 5 3 4 , 9 7 95 5 $ 1 4 8 , 4 8 2 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 4 7 , 2 4 4 ( $ 7 , 2 0 0 ) $ 7 8 , 4 3 8 $ 2 7 8 , 0 4 8 $ 1 7 0 , 4 5 1 $ 2 0 2 , 4 7 6 $ 6 5 0 , 9 7 55 6 $ 1 5 4 , 4 2 1 $ 1 8 , 0 0 0 $ 1 2 , 0 0 0 $ 4 9 , 1 3 4 ( $ 7 , 2 0 0 ) $ 8 2 , 4 8 7 $ 3 7 1 , 7 7 9 $ 1 9 5 , 2 3 5 $ 2 1 0 , 5 7 5 $ 7 7 7 , 5 8 85 7 $ 1 6 0 , 5 9 8 $ 1 2 , 0 0 0 $ 5 1 , 0 9 9 $ 9 7 , 4 9 9 $ 4 7 4 , 7 1 4 $ 2 2 1 , 8 7 7 $ 2 1 8 , 9 9 8 $ 9 1 5 , 5 8 95 8 $ 1 6 7 , 0 2 2 $ 1 2 , 0 0 0 $ 5 3 , 1 4 3 $ 1 0 1 , 8 7 9 $ 5 9 8 , 3 2 2 $ 2 5 0 , 5 1 8 $ 2 2 7 , 7 5 7 $ 1 , 0 7 6 , 5 9 85 9 $ 1 7 3 , 7 0 3 $ 9 , 0 0 0 $ 5 5 , 2 6 9 $ 1 0 9 , 4 3 4 $ 7 3 3 , 1 0 8 $ 2 8 1 , 3 0 7 $ 2 3 6 , 8 6 8 $ 1 , 2 5 1 , 2 8 36 0 $ 1 8 0 , 6 5 1 $ 9 , 0 0 0 $ 5 7 , 4 8 0 $ 1 1 4 , 1 7 1 $ 8 8 2 , 8 6 3 $ 3 1 4 , 4 0 5 $ 2 4 6 , 3 4 2 $ 1 , 4 4 3 , 6 1 16 1 $ 1 8 7 , 8 7 7 $ 9 , 0 0 0 $ 5 9 , 7 7 9 $ 1 1 9 , 0 9 8 $ 1 , 0 4 5 , 5 9 2 $ 3 4 9 , 9 8 5 $ 2 5 6 , 1 9 6 $ 1 , 6 5 1 , 7 7 36 2 $ 1 9 5 , 3 9 2 $ 9 , 0 0 0 $ 6 2 , 1 7 0 $ 1 2 4 , 2 2 2 $ 1 , 2 2 2 , 1 9 7 $ 3 8 8 , 2 3 4 $ 2 6 6 , 4 4 4 $ 1 , 8 7 6 , 8 7 66 3 $ 2 0 3 , 2 0 8 $ 6 4 , 6 5 7 $ 1 3 8 , 5 5 1 $ 1 , 4 1 3 , 6 4 0 $ 4 2 9 , 3 5 2 $ 2 7 7 , 1 0 2 $ 2 , 1 2 0 , 0 9 46 4 $ 2 1 1 , 3 3 6 $ 6 7 , 2 4 3 $ 1 4 4 , 0 9 3 $ 1 , 6 2 9 , 9 4 1 $ 4 7 3 , 5 5 3 $ 2 8 8 , 1 8 6 $ 2 , 3 9 1 , 6 8 16 5 $ 2 1 9 , 7 9 0 $ 6 9 , 9 3 3 $ 1 4 9 , 8 5 7 $ 1 , 8 6 3 , 6 8 1 $ 5 2 1 , 0 7 0 $ 2 9 9 , 7 1 3 $ 2 , 6 8 4 , 4 6 46 6 $ 1 3 , 6 0 0 $ 7 2 , 7 3 0 ( $ 5 9 , 1 3 0 ) $ 2 , 1 1 6 , 0 4 0 $ 5 6 0 , 1 5 0 $ 3 1 1 , 7 0 2 $ 2 , 9 8 7 , 8 9 26 7 $ 1 3 , 8 7 2 $ 7 5 , 6 4 0 ( $ 6 1 , 7 6 8 ) $ 2 , 1 7 3 , 2 9 2 $ 6 0 2 , 1 6 1 $ 3 2 4 , 1 7 0 $ 3 , 0 9 9 , 6 2 36 8 $ 1 4 , 1 4 9 $ 7 8 , 6 6 5 ( $ 6 4 , 5 1 6 ) $ 2 , 2 3 1 , 0 5 5 $ 6 4 7 , 3 2 3 $ 3 3 7 , 1 3 7 $ 3 , 2 1 5 , 5 1 56 9 $ 1 4 , 4 3 2 $ 8 1 , 8 1 2 ( $ 6 7 , 3 7 9 ) $ 2 , 2 8 9 , 2 4 8 $ 6 9 5 , 8 7 3 $ 3 5 0 , 6 2 2 $ 3 , 3 3 5 , 7 4 27 0 $ 1 4 , 7 2 1 $ 8 5 , 0 8 4 ( $ 7 0 , 3 6 3 ) $ 2 , 3 4 7 , 7 7 7 $ 7 4 8 , 0 6 3 $ 3 6 4 , 6 4 7 $ 3 , 4 6 0 , 4 8 77 1 $ 1 5 , 0 1 5 $ 8 8 , 4 8 8 ( $ 7 3 , 4 7 2 ) $ 2 , 4 0 6 , 5 4 1 $ 8 0 4 , 1 6 8 $ 3 7 9 , 2 3 3 $ 3 , 5 8 9 , 9 4 2

P r i n t

Spreadsheet for Ken

Consider Scenario #2Consider Scenario #2

$5,000/mth spousal support for $5,000/mth spousal support for 5 years5 years

Then $4,000/mth for 5 yearsThen $4,000/mth for 5 years

Then $3,000/mth for 5 yearsThen $3,000/mth for 5 years

Kate & Kenneth's Net Worth ChartVersion 3

($200,000)

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

$2,200,000

$2,400,000

$2,600,000

$2,800,000

$3,000,000

46 48 50 52 54 56 58 60 62 64 66

Kate's Age (years)

Net

Wo

rth

($) Kate

Kenneth

Projection of Their Future Scenario #2

Future ProjectionsFuture Projections

Improve decision makingImprove decision making

Assist in reducing fearsAssist in reducing fears

Empower through knowledge Empower through knowledge

Offer a realistic overview Offer a realistic overview

Risk Management Needs Life insurance

Critical illness

Disability Insurance

Long term care insurance

Ideal Divorce TriangleIdeal Divorce Triangle

Men

tal H

ealth

Pra

ctiti

oner

Financial D

ivorce

Specialist

Lawyer

CLIENT

Financial Divorce Financial Divorce Specialist RoleSpecialist Role

Educator/information sourceEducator/information source

Reality checkReality check

CommunicatorCommunicator

Objectivity - the true neutralObjectivity - the true neutral

Questions Questions

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