Are you Financially Prepared for Divorce?

“Why didn’t I pay more attention to our family finances?”

I frequently hear this from women who find themselves facing divorce.  This is the time for women to start to make constructive and knowledgeable decisions about their money and their future. It’s never too late to get started.

Here are some steps you can take to get financial prepared for your divorce. (Frankly it’s good advice even if you aren’t facing divorce)

Pay Attention to the Household Finances
You should attend meetings with insurance agents, accountants, financial planners and lawyers. You should also look over monthly bank statements and credit-card bills. Ask about your husband’s company benefits including bonuses, other “perks”,  company pensions, and other savings  plans, etc. Keep a list of all bank and brokerage accounts and insurance policies.

Don’t lose your Financial Identity
You always want to maintain your own credit identity. Check if your credit cards are in your own name or if you are simply an authorized user as a lack of credit history can work against you.  You should have three bank accounts (his, hers and ours) and maintain separate credit cards.

Keep Your Skills Fresh
While you might welcome the chance to stay home with your kids, the longer you’re out of the work force, the harder it can be to jump back in. Women often face lowball wages or lower job titles when they try to return to work after a long hiatus.

Save for Retirement
Many married women don’t make retirement-saving a priority. If the husband is the primary wage earner, the wife often trusts her spouse to save enough for their collective golden years. A woman spending her retirement savings, (sometime all on legal fees),   is particularly distressing considering that women, on average, live six years longer than men.

Get Financial Guidance
When women are going through a divorce, they need to determine which assets will help them pay their bills and reach their long-term goals. Too many women fight for the home to avoid uprooting their children, only to find that they don’t have the cash flow to pay for it.

Divorce is not only the end of a marriage but it is the breakup of an economic unit. Financial awareness will go a long way to help you feel more in control and better equipped to make reasoned decisions.

GETTING OLDER- GETTING DIVORCED

Here are some interesting statistics about the increase in divorces among long term partners.  According to Statistics Canada, as the Canadian divorce rate fell by more than 11 per cent between 1993 and 2003, it rose among couples over the age of 40.  In  the 50-to-54 age group, divorce rates increased to 34 per cent. The rate of divorce for Baby boomers between the ages of 55 and 59, increased by 47.8 per cent. The numbers fell slightly for those in their 60s, but still stood at 31.7 per cent. Among seniors, it dropped remarkably to 9.2 per cent.

Whatever the underlying reasons for this trend, there is no question that the event itself can be confusing to grown children and extended family.  At a time when couples would be preparing for retirement, the unexpected costs of divorcing can also have a major financial impact.

Managing the costs of divorce at this age is an important aspect of planning for the future.  The reality of covering the additional expenses of having 2 homes is reason enough to make sure that cost of the separation is handled responsibly. 

Both mediation and Collaborative Practice offer older couples an approach that allows them to make decisions about costs and provides the opportunity to plan for their separate financial futures together.  Financial projections that give information about the impact of the today’s decisions on tomorrow’s finances are a value added service.

Divorcing or Not – Establish Your Own Credit

If you don’t have any credit in your name alone you should establish some now. You can do this by obtaining a credit card but remember you want a card that is in your name only. Many women find that, after divorce they have a hard time purchasing a home or car because they have spent years sharing credit with their spouse. All that credit you’ve had over the years with your spouse is helpful to him but once you are a single woman, you will get very little ‘credit’ for keep those payments up.

Once you have a credit card in your name use is sparingly and make sure you are able to pay it off each month. The goal is to establish a good credit score not to run up a bunch of debt.

Divorce in Recession

Divorce is a financial strain on your family because it divides you and your spouse’s cumulative assets. In this economy, where assets are quickly turning into debts, it is critical to understand the financial consequences of a divorce and how to make the most out of its aftermath. A divorce divides one family unit into two separate units. When one spouse moves out, there will be one more mortgage or rental payment to make. Having 2 separate families also means twice the living expenses, including, but not limited to: health insurance, car payments, and all the children’s needs in the separate households.

Debt loads start to grow when: 

• you have been living beyond your means even before considering divorce 
• one of you have lost your job due to downsizing and have been depleting savings to cover living expenses 
• you may be already living apart and dealing with additional expenses of second home

If you have accumulated substantial debt and are facing divorce, you will be dealing with how to divide the debt, rather than the equity. In the unstable economy, where your stocks, RRSPs, savings, and assets are quickly eroding, use the combined services of a certified divorce financial analyst and mediator to focus on a solution that works for both spouses.

Interview with the Toronto Sun

My interview with Marion Korn for the Toronto Sun:

http://www.torontosun.com/2012/01/09/divorce-rate-peaks-in-the-new-year

What the Supreme Court of Canada has to say about making changes to spousal support

This article explains what the Supreme Court of Canada has said about making changes to spousal support in the years after an agreement has been signed.  If you want to be able to make changes in the future, then your agreement today should say so- and it should also say what future events would be considered if one person or both want to make changes. 

http://www.theglobeandmail.com/news/national/supreme-court-takes-firm-stand-on-spousal-support-payments/article2279213/

The more open the negotiations in the first place, the more likely you are to have the conversation about the future “what-if’s”.  Both mediation and Collaborative Practice encourage these conversations.  For more information, go to www.mutualsolutions45.com .

Getting the Paperwork Organized for Mediation:

Starting the divorce process can seem like a daunting task.  No matter which way you go about your divorce, from litigation to mediation, you will be asked for a lot of paperwork in order to get started. This is a great time of year to get that information together; the end of the year is a great time to get a full picture of earnings, expenses, budgets, taxes and other important information.  For those deciding to start the process of Mediation in the New Year, here is a list of the paperwork you will want to have prepared:

1.  Budgets: You may each have a budget for yourselves, you as a couple and for the children.  It is important to come up with an estimated budget for what your life will look like after separation. Be sure to include:

• Health Insurance:  Include the cost for both parties after separation.  (Once divorce is final, if one spouse was covered by the other’s Health insurance, they will need a new policy.) 
• Life Insurance: Make sure that whoever provides the primary support for the family is covered so that there will be funds available in case of emergency.
• Housing Costs: If one party will be renting a new apartment or buying a new house.
• Remember, take your regular household expenses (gas, water, hydro, food, travel etc.) and create estimates for what that will look like for two households

2.  Recent pay stubs.

3. Most Recent Statements from All Accounts (last four digits of the account number ONLY)

• Checkings
• Savings
• Mutual Funds
• Stocks/Bonds
• Any other accounts in which you have individual or joint investments. 

4.  List of Social Security Numbers for each party and their children.

5.  Income Tax Forms for the last three to five years.

6.  Real Estate Holdings & All Mortgage Information

• List the last four numbers of the Account
• Name of Bank holding the Mortgage
• Terms of payments.

 7.  Retirement Accounts

• Name of Institution holding account  (last four digits of the account number)
• Terms of Payment – death benefit, annuity
• Amount in each account
• Include any stock options.

8.  List of All Assets acquired during the marriage: While this may not be a list that you agree on, the mediation process is intended to help you work through dividing your assets in an equitable manner.  If you disagree, each of you should make your own lists that can be discussed as part of the negotiation.  If you have already divided your assets, you may choose to make the list anyway so that it can be included in your agreement. Think about:

• Collections
• Cars
• Jewelry
• Antiques, etc.

9.  Wills

You will need a minimum of three copies of this information, one for each of you and one for the Mediator.  Having this paperwork ready before starting the Mediation process (or any other divorce process) will be helpful to both parties.  It will allow both parties the chance to get a better picture of where you are financially, which will help when you begin the negotiation process.

Wellbeing of the Children

Say what you want about Charlie Sheen but he has at least one good thing going for him: a good parenting relationship with his ex-wife Denise Richards.  Despite what Denise calls “one of the worst divorces” it seems she and Sheen have put their difference aside for the sake of their two daughters Sam and Lola.  Richards has been there to support Sheen throughout this year’s many public falls, support she offers because “We’ll always have a bond with our daughters, and I wish nothing but the best for him.” Richards’s support of her daughters’ troubled father shows the importance of putting aside ones ego and focusing on what is important: the wellbeing of their children.

Planning to Separate after the Holidays?

Many families postpone their separation until after the holidays.  There are things that can be done in preparation for that change while you have the time to research online or make enquiries during your time off from work.

Here are some tips:

1.    Start collecting financial documents like credit card and bank statements, investment and RRSP statements, mortgage and property tax statements, etc.  Prepare a file so that you both have what you will need.

2.    You can check your credit rating.  In that way, you will have the same information as the bank when you start to negotiate lines of credit or changes to your accounts or even your mortgage.

3.    Work from a budget for the holidays.  In the event that you are using joint credit cards, it is easier to agree on who will be responsible for costs when you are planning a purchase than when you are paying for it.

4.    Find time to research your options.  Such things as:

• a survey of the cost of alternate accommodation in your area
• the dates of the school holidays for the upcoming year
• local divorce professionals and their approaches to separation and divorce
• local mortgage brokers
• local real estate agents

Remember that your involvement in your separation and divorce is the most important factor in reaching an outcome that works for everyone.

 

 

THINKING SEPARATION OVER THE HOLIDAYS

It is not uncommon for families to delay taking steps toward separation until after the holidays are over.  For many, this can mean sadness, tension and worry that their children may be affected by the breakdown of the relationship.

It is normal to put off difficult first steps.  It is also normal to be hopeful that time together with the family may provide a chance to rethink such a big decisions.

Adding to the mix is the seasonal overspending that most of us succumb to every year.  Sober financial realities get pushed aside.  Credit card statements that will resurface in January are part of the tensions and worry for those already confused about how they will restructure finances if they separate.

Here are a few tips that may help:

*   Find activities for the family that are cost free such as skating, a winter walk around Toronto Islands,  a stroll on the boardwalk in the Beaches, etc.

*   Take the first step and look into mediation or Collaborative Practice before the holidays so that you have some idea what it is all about.

*   Set an example of good communications in front of your children. When you finally tell them about the separation, you will be able to point to the holidays as a time when you were already thinking about separation and help them see that you will still be able to talk to one another.

*   Try having a good conversation about budgeting for the holidays.

*   Set some new traditions that will mark the season.

Remember that there are many services for helping families have a good separation.  The more you are involved in making decisions about how you will separate the better the outcome will be for the whole family.