Divorce has significant financial consequences that both parties need to consider when dividing assets such as pensions, savings plans, the home, and determining spousal and child support. It is important for both spouses to be aware of household finances and have a clear picture of their individual financial situations during the divorce process. Hiring trusted financial and legal advisors can help clarify finances and realign goals for after divorce.

1. the plan by investors group grow protect save enjoy share
No one wants to think about
divorce, but approximately one of
every three marriages now ends
that way, and there are always
financial consequences –
some obvious, some not. In the
absence of wise counsel during
development of the separation
and divorce agreements, financial
implications can be devastating for
one or both former partners.
Starting over
Refocusing your financial picture after divorce

2. Separating creates profound
anguish and uncertainty, yet
at the same time each partner
has to make important financial
decisions about spousal
and child support, joint bank
accounts, pensions, retirement
savings plans, the house,
the car, the kids... where do
you start?
A trusted financial advisor who
knows your circumstances, will
be able to clarify information
about your current financial
situation and can help realign
your retirement and savings
goals based on your new set
of circumstances.
Frequently, one member of
the couple is not as aware
of house-hold finances and
arrangements as the other.
He or she will need to have a
clear picture of their economic
situation and projected needs
while moving through the
process of splitting assets
and arranging for spousal
or child support.
The possibility of separation or divorce
should be anticipated when there are
severe problems in a relationship. Both
parties need to involve themselves in
the family finances well in advance
of separation by becoming aware of
the real costs of running the family
home, the overall financial situation,
outstanding debts, and current assets.
This information should be documented,
as it may become difficult to obtain
after separation occurs.
Men and women who anticipate
separation should also be aware of
the potential financial implications of
splitting assets and covering future
spousal and child support payments.
These responsibilities may continue
for a number of years. In addition,
there will be both initial and ongoing
costs for separate living arrangements.
Both parties should also be aware of
the potential financial cost of destructive
anger and resentment that almost
always follows a separation. If the
separating partners can manage to
stay level-headed, the process of
dividing assets will be easier and less
likely to result in lengthy court battles.
Approaching issues with revenge in
mind will inevitably inflict needless
anger, pain and guilt not only on
the separating spouses, but on any
children involved.
Counselling for anger management
and to help heal painful emotional
damage from the separation may well
benefit both parties and may also help
children through the trauma of this
life-changing event with less damage.
Minimizing the damage you do to each
other now will make it more likely
you’ll be able to deal civilly with each
other in the future.
Working out the finances
Two sets of legal rights related to
finances arise on the breakdown of a
relationship: rights to division of property
acquired during marriage, and rights
regarding support. You may be
required by your provincial laws to
make what’s called an “equalization
payment” upon dissolution of a
relationship (or you may be entitled
to receive one).
In some cases, partners in common-law
relationships may be able to make
claims against assets in the name of,
or owned by, the other person. The
rights afforded to common-law couples
are expanding. Your lawyer will be
able to explain your position to you.
Upon separation, we can help you
review and revise beneficiaries for
registered investments, insurance,
pension, and your will. Do not wait
until the formal separation agreement
or divorce decree. In many provinces,
any gift given in a will to a former
spouse is considered null and void
on divorce. But if your death should
occur prior to a finalized divorce, the
provisions in an unrevised will remain
applicable: if you had willed everything
to your spouse, that’s how the estate
will be dispersed.
Spousal and child support
You will likely need a separation
agreement to cover the period prior
to the formal divorce, than a divorce
agreement. You can incorporate both
spousal and child support in the sepa-ration
agreement, and carry it forward
into the divorce settlement. Support
payments may have tax implications.
Ask your lawyer for clarification.
Each spouse should have a lawyer.
On divorce, a judge may review the
support terms, and may revise them.
Tax implications
In a separation agreement, tax issues
should be taken into consideration
with regard to the splitting of assets.
For example, a husband may wish
to transfer a $10,000 mutual fund,
at cost, to the spouse. Interest and
dividends are taxable in the recipient’s
2

3. hands. But if the wife sells the fund
before the divorce is finalized and
triggers the capital gain, the husband
must report and pay tax on that gain
unless both jointly agreed, in writing,
that she would have the liability.
After divorce, the husband would no
longer be responsible for the capital
gains tax — but tax implications still
need to be considered. An asset with
an inherent tax liability is worth less
in reality than an asset of similar
value with no tax liability. Cottages,
RRSPs and other investments may
be split up, but will a spouse receive
the asset with or without tax liability?
If a registered asset is split, there will
be an underlying tax obligation down
the road; a $30,000 car is not a direct
trade for a $30,000 RRSP, because
the car represents simple cash value
and the RRSP will be taxed.
Separating couples, even those with
seemingly modest assets, would be
wise to employ tax accountants who
can review separation and divorce
agreements to see if any issues have
been missed.
It is seldom advisable to attempt
reaching settlements without expert
advice. Even if both parties are dealing
amicably, the lawyer, accountant,
and financial advisor all offer unique
knowledge that can help ensure the
divorce agreement works out to
maximum benefit and minimum
inconvenience for both parties. The
cost in fees could be far less than
potential costs in taxes or legal stitches
dropped that have future implications.
Cases where divorces do incur high
legal fees are almost always directly
correlated to the level of rancour
between the parties. Anger, resentment,
and desires for revenge are extremely
expensive and highly destructive. Would
you rather incur high legal costs or pay
for your son’s university education?
Working through the emotions
Anger, hurt, grief, denial – they’ll all
come flooding in just when you’re
trying to re-build your life and ensure
your children survive with as little
pain as possible. For some couples
splitting up, focussing on children’s
needs helps the adults work through
the process; if both parents genuinely
concern themselves with the best
interests of the children they both love,
a degree of civility may be achieved.
But for most, emotional pain can all
too easily manifest itself as destructive
responses to the former spouse, or
may surface in the form of emotional
disturbances like depression. Some-times,
all you need is a trusted friend
you can vent to while you get over it.
But you may need more support,
and self-help groups, counsellors,
or therapists can be a great help.
Your family doctor can refer you to
agencies, organizations, or groups
3
Independent advice is critical in dealing with the immensity
of issues arising from separation and divorce. If you had
good working relationships as a couple with various
advisors, you may have little choice but to begin working
with other professionals.

4. SHANNON BOSCHY
BFA, CFP
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that can help you get through this
troubled time. Start there to seek help
if you find you’re having too much
difficulty coping following the separation.
Your lawyer or local social or family
services departments may also refer
you to groups or therapists who can help.
A final word on the value of
family, friends and professionals
While this could very well be one of the
most trying periods in your life, most
people are able to look back once the
dust has settled and realize they’ve
emerged stronger. Many people who’ve
gone through a separation find the
whole experience has helped them
rediscover themselves and develop a
new-found sense of confidence. They
find they’re able to focus on growth and
self-actualization. In this sense, positive
change occurs if we allow ourselves the
time to heal and look forward. Being
patient and drawing upon resources
around you – family, friends and
professionals – will help you see the
light at the end of the tunnel.
SHANNON BOSCHY BFA, CFP
Mutual Funds Representative, Financial Security Advisor
Investors Group Financial Services Inc.
Financial Services Firm
Tel: (613) 282-5370
Shannon.Boschy@investorsgroup.com
1501 GRACE STREET
OTTAWA ON K1M 7C1
When it comes to the business of dividing assets, you need
to recognize assets cannot be swapped on a dollar-for-dollar
basis. A $30,000 RRSP with its deferred tax liability, for example,
is worth less than a $30,000 vehicle. Recreational properties
and other assets with deferred capital gains should also not be
viewed at face value.
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