The Role of the Financial Divorce Specialist In the Separation/Divorce Process

Stats: It all depends! Headlines do not tell all the story – but where there is smoke there is likely some substance.

Common Questions: Do half of all marriages end in divorce? Do half of all marriages end in divorce? What is the impact of no-fault divorce? What is the impact of no-fault divorce? Same sex couples now able to marry/divorce? Same sex couples now able to marry/divorce? Common law couples? Common law couples?

The Divorce Triangle Legal Emotional Financial

What does an FDS deal with? Sources of Money Sources of Money Family Property Family Property Exempt Assets Exempt Assets Support calculations – child/spousal Support calculations – child/spousal

Ramifications of Property Division 1. Liquid Assets vs fixed assets 2. Real Estate – principal residence 3. Income/leisure property 4. Pensions 5. RRSP vs Non-registered assets 6. Businesses

Special Areas Finding hidden assets or mistakes in financial statements Finding hidden assets or mistakes in financial statements Establishing tax liability Establishing tax liability taxable real estate & investment taxable real estate & investment Identifying future budget or cash flow issues Identifying future budget or cash flow issues Establishing insurance needs Establishing insurance needs Support protection Support protection

Risk Management Needs Life insurance Critical illness Disability Insurance Long term care insurance

Spousal Support Criteria – long term marriage, age, health, and skill set Criteria – long term marriage, age, health, and skill set Periodic vs. lump sum payments Periodic vs. lump sum payments Third party payments Complex calculations based on new rules Complex calculations based on new rules

Registered Money/Pensions RRSPs – tax implications RRSPs – tax implications (CPP)/(OAS) income (CPP)/(OAS) income Company Pensions Company Pensions Defined Contribution Defined Contribution Defined Benefit Defined Benefit

Company Pension Plans Defined Benefit – present value of a future income stream Defined Benefit – present value of a future income stream “If and when” approach “If and when” approach Lump sum payment Lump sum payment

Lump Sum Method Current Value Current Value Use value to divide assets Use value to divide assets Inflation factor Inflation factor Future use has tax implications Future use has tax implications

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

Ken & Kate’s Property Home equity$180,000 Home equity$180,000 Mutual Funds 92,000 Mutual Funds 92,000 RRSPs 212,000 RRSPs 212,000 Business 180,000 Business 180,000 Total$664,000 Total$664,000

Ken’s Offer to Kate 50% of the assets 50% of the assets $1,000/month child support until 1 st child is of age, $500 until 2 nd of age $1,000/month child support until 1 st child is of age, $500 until 2 nd of age $1,500/month spousal support $1,500/month spousal support for 5 years for 5 years

Kate’s Half Home equity $180,000 Home equity $180,000 1/2 Mutual Funds 46,000 1/2 Mutual Funds 46,000 1/2 RRSPs 106,000 1/2 RRSPs 106,000 Total $332,000 Total $332,000

Ken’s Half 1/2 Mutual Funds $46,000 1/2 Mutual Funds $46,000 1/2 RRSPs 106,000 1/2 RRSPs 106,000 Business 180,000 Business 180,000 Total $332,000 Total $332,000

Projections for Their Future

Spreadsheet for Kate

Spreadsheet for Ken

Consider Scenario #2 $5,000/mth spousal support for 5 years $5,000/mth spousal support for 5 years Then $4,000/mth for 5 years Then $4,000/mth for 5 years Then $3,000/mth for 5 years Then $3,000/mth for 5 years

Projection of Their Future Scenario #2

Future Projections Improve decision making Improve decision making Assist in reducing fears Assist in reducing fears Empower through knowledge Empower through knowledge Offer a realistic overview Offer a realistic overview

Ideal Divorce Triangle Mental Health Practitioner Financial Divorce Specialist Lawyer CLIENT

Financial Divorce Specialist Role Educator/information source Educator/information source Reality check Reality check Communicator Communicator Objectivity - the true neutral Objectivity - the true neutral

Questions ?