Today, we’re elaborating on divorces and the financial ramifications of going through one. If you happen to be going through one or you think you might be going through a divorce, you might find some valuable information here.
I know it’s not pleasant, but at least you can start to consider all the financial moving parts that need to happen when you are going through this. A lot of things are happening and obviously the change in your financial plans is a big one. You need to make sure you have a team in place that you trust and that you can focus on:
-Your accountant and your lawyer.
Hopefully, you have one of those professionals in your network that can help and guide you through the painful process of a divorce. There’s a ton of marital assets that are there. First and foremost, you will want to divide the marital assets. This is going to be one of the steps that’s going to be very complicated.
One other key point you need to consider is factoring in the tax implications of dividing those marital assets. Sometimes you’re much better to have a real asset like a property or a home (the marital home) than it would be to potentially own a registered asset, like an RRSP or something similar. These are factors that you definitely have to consider.
When you’re going through the split, there will often be pensions involved and you’re going to have to consider all of these pensions that come into play in the divorce. How much of each do you have access to? Do you have access to the future cashflow? Are you doing a NPV (Net Present Value) on those pensions in order to figure out what they’re worth today? At the end of the day, there will be a ledger indicating the assets for husband, the assets for wife and then there will be an equalization payment.
It’s complicated, trust me. Have the RESPs been factored in? Is that being taken care of? Who’s going to be the trustee for the RESPs and how are you going to function that on a go forward basis, especially if the kids are still a young age. You also must consider and ask yourself this; what does my retirement look like? The retirement for a couple is significantly different than retirement for a divorcée. So the divorcée now needs to factor in less cash flow. Expenses will most likely be similar for a house, for a condo, for travelling expenses, etc. Your cashflow is now way less than it potentially was before. Our priority at Tetrault Wealth Advisory Group is to make sure we can generate that cashflow. We do it in the most tax efficient way possible.
You certainly want to make sure you look at all the documentation, the insurance needs, the beneficiary change. You’ll want to look at the liabilities, look at any joint bank accounts with your name on it. There’s unfortunately a laundry list of things that you need to go through and some of this stuff can easily be forgotten. The worst case scenario is that you forget one of these factors and the next thing you know, you’re jointly held liable for something with your ex-spouse. This is not an idea situation.
Tons of things to consider if you happen to be going through a divorce. We covered a lot of stuff here today folks.
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