Few events in life can be as profound and challenging as a divorce. It is one of the most painful and emotional experiences. You get angry, lonely, anxious, bitter and desperate. Your identity is at stake and it can shake the very foundation of your life.
You have to deal with a number of issues: financial, emotional, professional, parenting, health and spiritual. This article will deal with only the financial aspect of a divorce.
Legally this is a life-changing event. It is in your best interest to separate the emotional attachment from strategic decisions.
Mediation, arbitration, litigation and the collaborative process are some of the legal choices available. You need to educate yourself and see which is the most beneficial to you.
Mediation is a safe process provided by a neutral third party to help resolve issues that arrive during divorce. It saves you money compared going to court. You participate in the resolution.
Arbitration is a procedure in which a dispute is resolved by agreement of parties to a binding decision by one or more arbitrators.
Collaborative Divorce is a family law process. It helps couples work with their lawyers in order to avoid the uncertain outcome of Court. It best meets the specific needs of both parties and their children without the underlying threat of contested litigation.
Litigation is a process where your lawyer represents you in the court. A judge makes the final decision. This can become a long, expensive and cumbersome process. You should choose a lawyer that specializes in family law, and make sure you have a written fee agreement.
Have realistic expectations. A divorce will affect your lifestyle. Prepare a budget for yourself. Write down all your income and minus your expenses. Differentiate between wants and needs. Try to stay away from debt.
Check your credit report. If all your credit cards were in both names, cancel the cards and order new ones in your sole name. Inform the credit agencies about your divorce.
Inform your bank and close the joint accounts. Open an individual account.
A house will be a major asset that belongs to the both of you. Calculate the total carrying and operating costs to see if you can afford it on one salary. If not then you need to consider selling the house.
Check for beneficiaries on TFSA, RRSP, RRIF, LIF and Life Insurance policies. Life insurance policies have an option of revocable or irrevocable beneficiaries. Remember to have your will updated.
Have the pension appraised. Some plans are easier to value and contribute. Others have vesting schedule, defined benefit and defined contribution.
Would you rather have a forty thousand dollar BMW or a forty thousand dollar GIC when dividing assets? If you look at it from a depreciation point of view then the GIC is a better asset.
In the eyes of the Canada Revenue Agency, not all assets are equal. So consider all the tax issues. A spousal RRSP cashed within the first three years will become income for the contributor rather than the recipient.
Make sure you have adequate health coverage. A visit to the dentist without coverage is expensive.
A divorce can put your best-laid plans to ruin. Focus on the future and make some good financial decisions.