Separated but living together, an oxymoron?

Many couples on the journey of separation/divorce find themselves in the unenviable position of having to continue to live together because they cannot afford two separate residences.  You might be thinking that this sounds absurd but it is reality for many couples. In today’s depressed real estate market couples often find that they simply cannot sell their home. Having your ex-spouse become your roommate should not be excluded as a temporary solution to the cash crunch. Sometimes it is just not affordable for a couple to finance another residence while they wait for their matrimonial home to sell.

So, you and your ex have decided to live under the same roof; how can you make it work? You must have rules!

• Decide with your real estate professional, when and by how much you will continue to decrease the sale price of your home.
• Decide how the net sale proceeds of the home will be shared, even if it takes a very long time to sell your home.
• Decide how all household expenses will be shared (create a budget so it is clear from the start).
• Decide on a parenting plan so that both parties understand when each is responsible for the children.
• Come up with a system to inform each other of day-to-day schedules.
• MOST IMPORTANTLY, ensure you are both committed to keeping the atmosphere civil, respectful and co-operative.

Even if you and your ex-partner decide to stay in the house for a period of time, you can still go ahead and formalize a legal agreement with respect to your separation which includes all of your financial and parenting decisions.

Remember, the right decision is the one that works for the two of you and your children!

Can you control the ‘What-ifs’ in Divorce?

Suzie Orman once wrote that “A big part of financial freedom is having your heart and mind free from worry about the “what-ifs of life”. There is a myth that in divorce, having little control and being in a constant state of panic and fear is the way it has to be.

Regardless of family income level, men and women going through divorce are most often dealing with the biggest ‘what-ifs’ with respect to their financial future. We worry that there is no way that our family income pre-divorce can possibly support two households going forward. Become an empowered financial decision maker so that your heart and mind can begin to heal from the emotional toll of separation and divorce.

Three steps to help you feel more in control.

1. Educate, educate, educate! – Read books, attend seminars but most importantly seek out professional support to help you understand every aspect of the decisions that lie ahead. A Certified Divorce Financial Analyst (CDFA™), lawyer and/or mediator, therapist and financial planner are all important members of ‘the Divorce Team’.
2. Prepare a Budget! – It is almost impossible to make financial decisions in divorce without at least taking a first stab at preparing your budget. Even if you have never done so, it is imperative to look at what the expense side of life will look like post-divorce. You cannot make financial decisions in divorce with any degree of certainty unless you know what your cash-in/cash-out situation will look like.
3. Surround yourself with POSITIVE energy! – We all know how easy it is to be negative and how negative relationships can influence our well-being. In divorce, it is crucial to surround yourself with only positive friends, family and professionals.

Following these three easy steps will help you to feel in control of the decisions that lie ahead.

Beware of your spouse’s debts

At a recent CDFA™ conference, I learned that until a legal separation agreement is actually signed, the debts and/or decisions of your spouse post-separation may significantly and adversely affect you financially and there may actually be nothing you can do, especially in a high conflict separation. If your spouse decides to file for bankruptcy (a process to be considered thoroughly with a qualified professional) and you do not have a legal agreement, your joint assets may be accessible by the bankruptcy trustee, on behalf of the unsecured creditors.

The speaker at the conference, a well-known Canadian C.A. and Trustee, explained that “one out of every eight persons who experience a relationship breakdown will end up filing some sort of insolvency protection.” The emotional toll of a marital breakdown is difficult enough without having to consider the options to relieve financial distress. I want to stress though that if you and your spouse can co-operate, there are options to restructure your finances that when manageable are much better choices than filing for bankruptcy. In separation when some debts have become unmanageable, and at least one of you feels there is no other choice, education, more than ever is KEY!

Financial knowledge key to good divorce decisions

Read this article in the Calgary Herald and learn how important it is to educate yourself on your finance during your divorce. Your decisions depend on your knowledge.

Include investments and insurance in your settlement negotiations

Benjamin Franklin once said that “an investment in knowledge pays the best interest”. As you know, our passion at Alberta Divorce Finances is the education and empowerment of men and women on the journey of separation and divorce.  This month’s Lunch and Learn topic is all about education in the area of investments and insurance during separation/divorce negotiations.

Decisions must be made with respect to investments, yet it is a subject that most people know very little about. Most investments have future financial and tax implications that you need to know about before you decide what to retain and what to give up. Also, the associated risk of your investment’s portfolio is something that you should research with a professional. Finally, what effect does this have on your ability to invest post-divorce?

Most people don’t consider the topic of insurance at all relevant to divorce. There is a great deal to learn about not only the value of your policies but the need for insurance to secure future support.

 Although investments and insurance have never earned the notoriety of topics such as the matrimonial home or spousal support, they are important critical decision points in negotiating a settlement.

Did you know that almost every divorce decision has a tax implication?

Most people do not realize that almost every decision they make in their divorce will have a resulting tax implication, even decisions with respect to parenting arrangements. These are just a few of the examples.

Financial Decisions – Property

When you are negotiating the division of your matrimonial property, you must know what the associated tax liability is. Stocks and mutual funds have very different tax results than RRSPs. Retaining your family cabin has very different implications than retaining the matrimonial home.

Financial Decisions – Income

You should be aware that different types of support you may receive and/or pay as a result of your divorce are taxed differently. The resulting tax will also depend on the income tax bracket of your total income from all sources.

Children Decisions

Other than the intrinsic benefits to spending time with our children, these arrangements after divorce may also have certain tax advantages or disadvantages.

Divorced parents who do not reside with a new partner may be able to qualify to claim a tax deduction for a child, which may also become a point of negotiation. Parenting decisions should always be in the best interest of the children but be keenly aware of the resulting tax consequences.

 Before you sign your final divorce agreement you must ensure that you understand the tax implications of all of your permanent decisions so that you make the best decisions for your financial future!

Visit Alberta Divorce Finances to learn more about what you should know before you sign your settlement agreement.