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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
