Divorce Costs Followup

As a followup to my previous blog today take a look at this article from the  BBC and UK about the rising costs of divorce.    It quotes a report by the Legal Ombudsman for England and Wales showed complaints by clients in divorce and family law were higher than in any other category.

http://www.bbc.co.uk/news/uk-21611496

Have you gone through divorce recently? What do  you think of the costs involved?   At the end of it all, did you get value for what you paid for?

Even billionaires are concerned about the “costs” of divorce

Billionaire T. Boone Pickens was recently divorced from his 4th wife and chose collaborative practice to settle his divorce.

For the whole story, go to http://www.bizjournals.com/dallas/blog/2013/03/t-boone-pickens-on-how-to-save.html?ana=e_abd&u=rk2Eh9uif4Sgj7UM9KhZGpj2jD7&goback=%2Egde_2936590_member_219548098

“The collaborative approach saves both money and emotional wear and tear on families.” Pickens said.

Should non billionaire couples consider the costs of divorce before choosing how they divorce?  Couples should do their research about different processes and the costs of each process.

Creating a  separation agreement with the help of a mediator means you share the cost of one mediator.   If you are choosing the collaborative law approach, you are each working with your own lawyers however,  much of the work can be taken on with the help of  other collaborative team members.

If you have a family professional, rather than your own lawyers,  they help to create and draft a parenting plan.  This is  a shared cost (usually at a lower hourly rate than lawyers).  If you use the assistance of a divorce financial professional, like a Certified Divorce Financial Analyst (also usually at a lower hourly rate than lawyers) to help with gathering the financial information, you’re sharing that cost (and the work too as there is usually one spouse that has handled all the family finances and is better at accessing all the financial statements and documents).

Billionaires become billionaires not only because they make millions… they also recognize when they have the opportunity to save a million or two.

Retiring and Divorcing at the same time?

Thought your retirement would be like this?

But instead it turned out more like this?

The baby-boom generation is showing that it ‘s never too late to consider divorce.  As our life span extends,  people in their fifties and sixties with better health expectations figure they have a number of good years left. Why not live them to the fullest?  That may mean ending their long term marriage and going it alone.

The problem with getting divorced late in life, is that most people find it hard enough to save for retirement and don’t imagine living off of just half of their savings, whatever they may be.

If a couple had money in the marriage, there may be enough  money to go around after divorce.  The challenge is for normal middle-class couples who just scraped by.  Or those couples who lived beyond their means.  When they try to make their house and retirement assets cover two households instead of one, there’s simply not enough to go around.  And they’re not likely to go back to work.  They may be expecting to do the things they never allowed themselves to do while they were married like join a club, travel etc.

When people are relying on a pension or savings, there’s never going to be enough to duplicate the marital lifestyle.  If you’re divorcing at  55 or 60, it may be too late to go back to work or  too late to recover financially.

If you didn’t consider that divorce would be par t of your  retirement plan,  you may want to  work with a divorce team that consists of  both legal and financial professionals. They are there to help you navigate this difficult time, both in a legal and financial capacity.

Image courtesy of Ambro at FreeDigitalPhotos.net <http://www.freedigitalphotos.net

Dividing Property in Divorce

Deciding how to split assets is more than just dividing the values on paper.  People often make the mistake of believing that dividing everything in half is the simplest and fairest way of handling things.  This is not necessarily true.  People need to pay attention to the decisions they make about dividing property and consider the long term consequences.

Assets differ in a number of ways.  Some are liquid like cash.  Some assets like RRSP accounts are tax deferred.  Some assets need to be valued in a specific manner according to family law rules and regulations.  Investments may have a different value after taking into account possible capital gains taxes.

Sometimes assets have an emotional connection that may have more worth than the actual dollar value such as a house, business, or family heirloom.

Assets may have costs to consider.  A couple may have a $400,000 investment  account and a house worth $400,000 (mortgage free).  The assumption is that if one spouse takes the house and the other takes the cash, this results in an equal division.  Keeping the house has costs such as property taxes and upkeep and maintenance. The investment account will be growing over time earning interest. It may not seem quite the equal split over a period of time.

Debts are also part of the division of marital property.  Allocating debts in divorce may mean paying them off, refinancing, or applying for new debt.  Different types of debt carry different fees, charge, penalties and terms.   Just because you have $10,000 left on your car loan and $10,000 credit card debt doesn’t mean that the car loan should go to one spouse while the credit card debt goes to the other.

Divorce settlements are often agreed upon with limited insight into the long-term consequences.  As a result, settlements that seem to be fair and workable initially do not necessarily stand the test of time.  Therefore, it is highly recommended that a divorce financial planner be brought into the process so that you can see how decisions you make today will affect the rest of your life.

Image courtesy of renjith krishnan at FreeDigitalPhotos.net

Financial Literacy Month Quiz!

 

November is Financial Literacy month  in Canada,  http://www.financialliteracymonth.ca/ 

We experience dealing with money at an early age.  From getting money from the tooth fairy, saving coins in our piggy bank and opening our first bank account with allowance or birthday money.  We also learn how to spend money quickly.  Because we have experience with money throughout our daily lives, it doesn’t mean that we have  acquired the knowledge and skills to make responsible financial decisions.  After all, money doesn’t come with instructions.

When facing divorce, it’s crucial to acknowledge what level of financial literacy you have.  Take this simple quiz to assess your financial health:

http://www.womenindivorce.ca/womenfacingdivorce/tools/checkingmyfinancialhealth.html

 

Image courtesy of vichie81 at FreeDigitalPhotos.net

Divorce Settlement Options

When it comes to the financial aspects of divorce, it not just lack of understanding of the family’s finances, it’s the lack of information about a family’s financial picture that tends to make good financial decisions challenging  for couples when they decide to divorce.

One spouse may  know more because they managed the family investments or were in charge of paying the bills.  After all, the couple may have thought it would be a waste of time for both to balance the check book twice every month so one takes the responsibility and tends to keep doing it throughout the marriage.

Important decisions to be made when negotiating your settlement need high quality information from which to judge the options. The spouse with less knowledge may spend more time collecting documents,  working on past and go forward budgets. This is the most important part of divorce financial planning.   Decisions regarding finances are based on choosing one option relative to another. If you are confronted with a decision you must make based on limited information you risk  reaching a poor conclusion that may  affect you for a long time.   That’s why divorce financial planning before, during and after is critical to  your future when dealing with separation and divorce.

 

Image courtesy of Keerati at FreeDigitalPhotos.net

Toronto Star Article and Family Support Expo

Check out Ellen Roseman’s Article Separation’s high cost: Spending cut to the bone http://www.moneyville.ca/article/1270309 (from yesterday’s Toronto Star online) in which she interviews me about my role as a certified divorce financial planner and my advice for separating couples.

Also mentioned in the article is this weekends Family Support Expo where I will be on Saturday October 20th, from 1 to 4pm. You can find me at the Collaborative Practice Toronto Booth (booth # 608), please feel free to come by and say hello!