Jill has not been sleeping well these past few weeks. She is extremely worried about her financial future and is wondering if she can stay financially afloat on her own. She has been working part-time since the birth of the children and she may now need to go back to work full-time. Jill was somewhat aware of the household finances but Jack was the financial planner and decision maker. Jill can barely function at work or at home and the thought of having to become financially knowledgeable overnight is overwhelming. She is angry at Jack for putting her and the children in this financial mess.
When facing divorce, people don’t always get what they think they deserve financially. Some make hasty decisions because they are anxious to get the divorce over with. Some hope to reconcile and for that reason don’t ask any questions to avoid alienating their spouse. Others are angry and let their emotions in the way of a fair and reasonable settlement, thus increasing legal fees unnecessarily. We have all heard horror stories about how divorce can be devastating financially to one or both parties. However, divorce does not have to lead to bankruptcy or a negative bank balance. Consulting professionals such as financial divorce specialists, mortgage specialists, accountants and appraisers (to name only a few) will help you assess the real value of your assets, understand any tax implications involved in any settlement and plan for your financial future. Educating yourself will be your guide to financial freedom. Here are a few ideas for you to reflect on:
1. Keep your expectations about money realistic. Expect that money will be tight – for a little while – and that you may not be able to maintain your present lifestyle even if you are fairly wealthy. It will be frustrating at times to think of what you had and what you have “lost”. Think of your separation as a temporary financial set-back. Like the fluctuations of the stock market, with a long-term financial plan, some patience and a bit of luck, lost money can always be re-earned.
2. Equitable does not mean equal. A long drawn out separation battle definitely drains emotions and finances. Be willing to negotiate as you have a limited supply of time, money and energy. It is not about getting all you can get. Understanding that equitable does not mean equal may help you strive to achieve a win-win situation and may save you time, money and energy in the long run.
3. Think long term. Keeping a handle on the financial implication of any decisions you make can avoid many long term pitfalls. Deciding whether to keep the convertible BMW you always dreamed of instead of a mutual fund may mean that you will be eating cat food in a few years. If you don’t know the answer or where to start, consult a financial expert who can help you see what today’s financial decisions will mean in ten years.
4. Get involved in planning your financial future. The rule of thumb is to keep it simple and get involved. Make a budget and a list of your debts and assets. You can have a short-term (before final settlement) plan and a long-term (after settlement) plan. Your separation will take some time before it gets resolved. Therefore, take it one step at a time.
Tuesday, October 11, 2011
Monday, October 3, 2011
Why is the date of separation important?
Jill has made it quite clear that she did not want to continue to live with Jack in their family home and as a result, Jack has been looking at his options. Jack knows that Jill has spoken to the bank and was pre-approved to purchase a new home, a move he clearly disagrees with. Jack is also getting extremely concerned about various withdrawals made by Jill against their joint line of credit without his knowledge or consent ($1,500 one week ago paid by cheque to “Albert & Albert Law”, $2,000 which was transferred to her personal bank account and another $500 the destination of which he does not know). Jack knows that these withdrawals will not bankrupt the family, but he sure disagrees with having to pay one half of Jill’s lawyer’s fees!
Are you having similar concerns? If so, then it is essential for you to understand the concept of the “date of separation” and its importance in your divorce or separation. In all Canadian provinces and territories, spouses have the right to ask that their family property be divided equally (or fairly, depending on the province or territory) between them. Most provinces and territories confine this right to married people ONLY. As a result, if you are living in a common law relationship in one of those provinces, the rules concerning the division of your property will be different. What is important to remember is that in most Canadian jurisdictions (including in the province of Ontario), when you are married it is not the property itself that gets divided (in species), but rather its value. What value do you use? In most provinces (including in the province of Ontario), the property subject to division is valued as of the date of the parties’ separation. This means that in principle, whatever happens after the date of separation is irrelevant to determine each party’s entitlement to a share of the parties’ family property.
Let us make it more simple. In the case of Jack and Jill, if Jack was to win one million dollars one day after the date of separation, he would not have to share it with Jill. Similarly, if one week after the separation Jill was to take a $50,000 personal loan to purchase a brand new Mercedes, Jack would not be entitled to share the value of the Mercedes, but nor would he be liable for the $50,000 debt. It is very important to keep in mind, however, that while Jack does not have to assume one half of Jill’s $50,000 debt, if Jill was to use the parties’ joint line of credit to purchase the car, Jack may become liable towards the bank for the entire amount. When negotiating their settlement, Jill will have to account to Jack and reimburse him for any liability (i.e. debts and bank withdrawls) contracted by her after the date of the parties’ separation.
How do we determine the date of separation? The date of a couple’s separation is not the day the parties signed a separation agreement, nor the day that their divorce is granted. The date of separation, in very simple terms, is the day that one of the spouses communicates to the other his or her intention to separate in a way that makes it clear that there is no possibility of reconciliation. For most couples, this date will be quite clear (in most cases one of the spouses moves out of the home that very day, or shortly thereafter), but for some other couples it will not be that clear and it will be a question of evidence if the spouses later cannot agree on a specific date. Also remember that it is possible (and in fact very common) to be considered separated even if you continue to live under the same roof.
Are you having similar concerns? If so, then it is essential for you to understand the concept of the “date of separation” and its importance in your divorce or separation. In all Canadian provinces and territories, spouses have the right to ask that their family property be divided equally (or fairly, depending on the province or territory) between them. Most provinces and territories confine this right to married people ONLY. As a result, if you are living in a common law relationship in one of those provinces, the rules concerning the division of your property will be different. What is important to remember is that in most Canadian jurisdictions (including in the province of Ontario), when you are married it is not the property itself that gets divided (in species), but rather its value. What value do you use? In most provinces (including in the province of Ontario), the property subject to division is valued as of the date of the parties’ separation. This means that in principle, whatever happens after the date of separation is irrelevant to determine each party’s entitlement to a share of the parties’ family property.
Let us make it more simple. In the case of Jack and Jill, if Jack was to win one million dollars one day after the date of separation, he would not have to share it with Jill. Similarly, if one week after the separation Jill was to take a $50,000 personal loan to purchase a brand new Mercedes, Jack would not be entitled to share the value of the Mercedes, but nor would he be liable for the $50,000 debt. It is very important to keep in mind, however, that while Jack does not have to assume one half of Jill’s $50,000 debt, if Jill was to use the parties’ joint line of credit to purchase the car, Jack may become liable towards the bank for the entire amount. When negotiating their settlement, Jill will have to account to Jack and reimburse him for any liability (i.e. debts and bank withdrawls) contracted by her after the date of the parties’ separation.
How do we determine the date of separation? The date of a couple’s separation is not the day the parties signed a separation agreement, nor the day that their divorce is granted. The date of separation, in very simple terms, is the day that one of the spouses communicates to the other his or her intention to separate in a way that makes it clear that there is no possibility of reconciliation. For most couples, this date will be quite clear (in most cases one of the spouses moves out of the home that very day, or shortly thereafter), but for some other couples it will not be that clear and it will be a question of evidence if the spouses later cannot agree on a specific date. Also remember that it is possible (and in fact very common) to be considered separated even if you continue to live under the same roof.
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