Can I stay financially afloat on my own?

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.

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.

The next step... our children

Jack is relieved that he finally told Jill the truth about his decision to separate, which had been weighting on him for quite some time.  He did not expect Jill’s reaction when he dropped the bombshell.  When Jack got married, he never planned to get divorced but now he realizes that they had problems in their relationship which were more obvious to others than to them.  He is hurting too and he is afraid of all the changes that lie ahead. His biggest fear is how the children will react to this, but he feels confident that the children will adapt with time.  Even if he and Jill are separated, Jack plans to continue to live with her in the home for a while until the children “adapt” to the idea of living into two separate homes.  Jack understood from his lawyer that there is no need to make rash decisions.  Jack believes that once Jill comes to terms with the separation, they will make this transition work for the sake of the children.  After all, they have always made a great team when it came to the children.

Ex-spouses living together after separation are much more common than you think. Some want to minimize the disruption in the children’s routine, others cannot afford to financially separate until some event takes place (like the sale of the home or the settlement of support issues).  When both parents continue to live in the same home, there is no physical separation and, in the eyes of the children, the separation is not truly happening. Whether you remain in the same home for a time, or whether the physical separation takes place right away, here are a few tips that you might want to consider before breaking the news to your children:

• When they are told about their parents’ separation, children often go “into shock” and in complete denial themselves. The children often maintain the dream that their parents will get back together.    Explaining the separation to your children is never easy. Sometimes you may not know what to say as you may be having a hard time yourself accepting the separation and all its realities. Tell the truth, as much as you can, and never promise your children something you cannot deliver such as “you will see daddy as much as you want”. 
• At the news of the separation, some children believe that the breakup is their fault.  Parents need to help their children understand that the separation is a problem that exists between Mom and Dad and that their actions or behaviour had nothing to do with the separation.  Your children know more than you think.  They have been feeling the tension and they have heard your conversations even if they were held behind closed doors!  Keep your children away from conflict and avoid speaking negatively about the other parent. 
• Children want to love both parents and the separation may create a sense of abandonment.  Children often feel like they have lost one parent and that they might lose the other one.  As a result, they tend to cling to their parents.  Reassure your children that you are not leaving them but only the relationship with their mother or father.  Show them lots of love, patience and understanding as they are filled with fears and anxieties about their own future.

Jill – I’m keeping the house!

After all of her attempts to convince Jack to give their 15-year marriage a chance, Jill realized that her marriage is really over.  Jill is hurt and angry.  She feels betrayed and Jack’s presence in the home is unbearable.  Jill is walking on eggshells and no one is talking.  To make it worst, Jack still pretends that everything is fine.  The atmosphere in the home is so tense that you could cut it with a knife.  Jill cannot take this anymore.  She barely sleeps at night and she feels sick.  Jack’s suggestion to just continue living together in the same home “for the sake of the kids” while they sort out the legal issues around their separation is complete nonsense.   Jill and the children cannot continue to live in limbo.  The children feel the tension in the home and they are starting to ask questions.  Jill is angry and wants Jack out of the home – the sooner the better.
 

Agreeing on housing arrangements is normally the first thing that ex-partners will need to sort out following the announcement of the separation.  What do we do with the home?  Who goes and who stays?  Do the children remain in the family home or do they move into the departing parents’ new home?   Many issues need to be considered when making new living arrangements.   Here are a few pointers to help you consider your options:

• Issues surrounding the care of the children need to be sorted out.  The best way to handle this is to make a temporary parenting plan for your children.  Abandoning the home with the kids and without notice to the other parent is NOT the way to proceed, unless you are faced with serious
  safety issues (such as domestic violence, in which case you should seek guidance before leaving with the children).  Agreeing to a temporary plan of care (even one that you may not feel is the best) will ensure that both parents’ rights towards their children are protected while they negotiate a final – and perhaps more appropriate – plan for their children. 
• It is not uncommon for a family to have a tough time meeting their monthly expenses on their combined income.   The prospect of dividing this family income into two different households (thus, doubling the parties’ combined housing expenses) may not be an option.   If finances are an issue, you may have to negotiate temporary financial arrangements with your former spouse to meet monthly expenses, even if only for a short period of time, for example while the home is being sold or refinanced with a view to be transferred to the other spouse.  You may consider obtaining a joint line of credit to pay the extra monthly expenses with the understanding that when the home is sold or transferred, the line of credit will be paid off.  
• If temporary financial arrangements cannot be made, you may have to consider whether your family members or a friend can provide you with temporary housing.   Perhaps the parents can rotate in and out of the home to care for the children (each of them having exclusive possession of the home while they care for the children) until things are settled.  Just remember that there are various alternatives that you may not think about, but that an experienced family lawyer, financial divorce specialist or financial advisor can help you craft. 
• If financial considerations are not an issue, and the parties cannot agree on temporary living arrangements, the court can make an order giving one of the parties (with or without children) the exclusive use / possession of the home for a certain period of time (normally until the sale of the home or until some event occurs).  However, seeking the assistance of the court should be your last option.  In fact, this costly option should be used only in case of an emergency or if all other attempts to negotiate an acceptable agreement (temporary or final) have failed.

Our marriage is over? This cannot be happening to me!

Jill is in complete shock. She never saw this coming.  Less than a month ago they went on a trip together and everything was great.    Jill had noticed that Jack was acting strangely for the past few months, that he was growing more distant, but never suspected that he wanted out.  Yes, they had their arguments, and yes, life was not always perfect, but they were still a happy family or so she thought.  When Jack told her he wanted to separate, Jill stormed out of the house and went to see her friend Sue.  She could not breathe anymore, she did not sleep that night and she could not stop crying.  In the morning, Jill came back to the house to get the children ready for school.  She put on a brave face for the children and pretended everything was fine while Jack kept on walking through the house as if nothing had happened.  Jill thought that maybe it was just a bad dream.  Maybe Jack was just upset and did not really mean it.  It would not be the first time.  She knew he was stressed out with work and had been spending lots of time at the office lately.  Jill had never felt such emotional pain and her mind was racing with fear.  Jack was really upset and seemed to mean it.  Could this be really happening?  What will happen to the children, the house, to their family relationships?  Their friends?  What will people say?   Jill felt like a complete failure and started doubting herself:  “What if I had not started the argument last night?  What if I had listened to him more?” In complete denial, Jill started to think that they could still work this out, it could not be the end of their marriage.  All she had to do was to convince Jack to attend marriage counselling.  Surely, he would realize that he was making the biggest mistake of his life! 

If, like Jill, your spouse just announced that he or she wants a separation, you are probably going through an emotional roller-coaster.  This is a very tough time for you.  Don’t do it blindly, and don’t do it alone. Here are a few tips to consider:

• Get support: You cannot go through this alone.  Call your best friend, a family member or someone that you trust.  Talk about it.  Let it out.  You have nothing to be ashamed of.
• Take time off work: You cannot function in this state of mind.  If you can, take a few days off.  Most employers will understand if you explain the situation to them.  
• Take care of yourself: Taking care of yourself is hard to do when your world is crumbling down.  But during the next few months, you will need to do just that because no one else will do it for you.  For some people, it can be as simple as taking a few minutes to take a hot bath each night, going for a massage, or asking your parents or friends to babysit the children one evening per week to give you some alone time.   Don’t hesitate to ask for help, now is the time.
• Get reliable information: Maybe you will not separate, but if it does happen, at least you will know what you are dealing with. You are possibly consumed with fears at this time.  Finding out about your rights and obligations can alleviate some of these fears.  Participate in one of our teleconferences, listen to one that is offered in replay on the subject that concerns you (children, support, family property), call our helpline, attend our Divorce Straight Talk seminars or spend an hour with a good family lawyer to get the basic information that you need.  

Do I leave or do I stay?

Jack had made his decision.  Unbeknownst to Jill, he had been through months of personal counselling to figure out whether or not his marriage was over.  It was now crystal clear to him that their long relationship (they started going out in University) was at an end.  After fifteen years of marriage, he was utterly unhappy and he felt that he and his wife had absolutely nothing in common anymore, except their two beautiful children Adam (age 10) and Eva (age 3), whom they both loved dearly.  After another endless evening of fighting over petty issues, Jack made an impulsive decision and announced to Jill that he wanted out.  He thought that she felt the same way as he did (she’s been so distant lately), but let’s just say that the announcement did not go as planned.  Jill stormed out of the home without saying where she was going.  She came back this morning before the children woke up, and has not spoken to him since.  Jack has tried to speak to her this morning after the children were gone to school and daycare.  He told her that he did not want to argue anymore, he just wanted a simple separation.  He was not leaving the home until both of them calmed down and figured out what would happen next.

Before Jack made his decision to leave, he consulted a family lawyer to find out what his rights and obligations were.  Jack wanted to make sure that his rights towards the children were protected, that he was not putting himself or the children at risk financially, and that he would not take any steps that might increase the conflict between him and Jill. His lawyer gave him the following advice:

•  Make sure that your marriage is over.  If in doubt, try marriage counselling.  It is readily available and relatively inexpensive, and you want to make sure you don’t regret your decision later;
• Don’t make hasty decisions.  Take the time to think this through with your partner.  Now is NOT the time to:
• Cancel your life insurance policies or change the beneficiaries on your health plan
• Sell the home or move out of the home (at least not before an agreement, even temporary, has been reached with respect to their care)
• Take out all of the money in the joint bank account, close all your bank accounts, or cancel your spouse’s credit cards.  This is the best way to insure years of litigation
• Create more debts (i.e. load your credit cards or buy yourself a new car with the joint line of credit)
• Remove all of the furniture from the home
• Protect yourself.  While you do not need to “rock the boat” the day after you announced your intention to separate, make sure that you are well informed and keep your eyes open.  Among other things:
• Pay attention to joint credit and debts.   If you see unusual or large withdrawals on the line credit, react!
• Put important belongings (family heirlooms, jewellery, insurance policies) in a safe place
• Make photocopies of important documents (income tax returns, home purchase documents, insurance policies, bank statements, passports)

Separation is usually a long and painful journey, take the time you need to think it through carefully.