Divorce and Financial Planning

Divorce is always an emotionally charged experience punctuated by uncertainty. What will it mean for you? For your family? For your financial situation? 

These things ring even truer for couples who have been married for a long time. More and more couples over 50 are deciding to separate their lives and finances if they are no longer happy together. "Grey divorces" have been on the rise for decades in Canada, and as the baby boomer generation ages, they are only becoming more common.

People tend to think that a house is a family's biggest asset, but in reality, a pension is the most critical asset. Additionally, while a divorce isn't easy for anyone, it can often present specific hurdles for women. 

As common as divorce may be, there are still many things that the average person may not know. Consider these key points as you make decisions about splitting your finances and moving on.

Stage 1: Pre-Settlement

One of the biggest mistakes people make is to rely on a lawyer/notary for every aspect of their divorce. Yes, seeing a lawyer is important, regardless of whether children are involved: they can guide you through the legal issues and draft what is needed to close a property settlement, but what they can’t do is provide financial advice. 

An incorrect calculation of the asset pool split, or retaining assets that are not aligned with your needs, can take a toll on your financial well-being and lifestyle. My advice here is to have a team of different specialists on your side who work together to help you get the best settlement. Start by making a list of everything each of you owns, including:

·      Savings, such as RRSPs and investment accounts

·      Assets such as property, cars, art collections

·      Debts such as a mortgage

·      Pensions and work pensions

·    Insurance plans

Before starting any negotiations, I recommend creating a monthly budget to determine how much income you need to live and cover all your expenses. This will help you make some important decisions, like whether you should keep or sell the house.

 Stage 2: Negotiation

Understand the pros and cons of various options before agreeing to any property settlement. When you understand all your options, you will be able to consider what works for you, both now and in the future. Understand that both parties must legally disclose all assets' actual value and that the old "you're not entitled" line is emotional gamesmanship, not law.

Stage 3: Post-Settlement

Have a financial plan that puts your assets to work with investments that suit you now, while taking your medium- and long-term needs into account. Once the money is gone, it’s gone, so it’s essential for you to live within your budget. A balanced life is the key to mental, physical, social, spiritual, and financial well-being.

My final piece of advice: divorce can be an emotionally and financially challenging time. However, you can come out the other side feeling stronger and less worried, with a renewed sense of hope, stability, and freedom. 

The best way to achieve this is by avoiding the impulse to buy a new car or a new house. Give yourself time to learn how to manage your new reality before making any significant financial commitments. 

Did this article resonate with you? Please feel free to share it with anyone who you think will benefit from it.

Have a wonderful weekend!

Hussain Ahmad

Investment Advisor — Mandeville Private Client Inc. 

Financial Security Advisor — Zagari+Simpson 

[email protected]