Divorces historically have assumed that the role of the lawyers was to fight for you, and the process was all about winning and losing with little compromise. They cost a lot of money and damaged relationships, often beyond repair, with little thought into what was best for the children.
A more sensible approach has emerged which allows for better separation agreements, reduced costs, a focus on preserving relationships and making the well-being of children a priority.
Alternative dispute resolutions, such as Collaborative or Mediation, use a team-based approach involving lawyers or a mediator, a family professional (normally a social worker), and a financial professional. Lawyers deal with the legal aspects, leaving family and financial specialists to deal with everything else, which are often the bulk of issues to be resolved. These processes also eliminate the nasty letters that are often sent between lawyers, unnecessarily adding to the conflict and high emotions.
The best separation agreements are made in collaboration with other professionals to ensure sound decisions are being made. You can and should be in control of the decisions you are making – no one knows what is right for you, but you. Your agreement should be unique to your situation and not the same as your friend’s or neighbour’s. Since some needs change over time, agreements should leave room to provide flexibility in the future.
The family and financial professionals are neutral parties and are retained by both spouses. This allows clients to split the fees and keep costs down.
The role of the family professional:
- To help with the emotions and parenting plans
- They can help script the discussion around telling the children of the separation
- Prepare parties to be ready to negotiate (ie those that are still emotionally fragile or angry)
- Work from the mindset that children need to maintain a healthy relationship with both parents
- Screen for domestic violence and power imbalances
- Usually acts as a case manager and runs the team meetings, which include the clients and all professionals
- Helps clients recognize divorce as a profound loss and work towards promoting a productive divorce process that improves communication and emotional well-being
The role of the lawyers:
- Establish entitlement for spousal support – while child support is the right of the child, spousal support is negotiated
- In Collaborative, one lawyer takes Progress Notes to summarize meeting discussions, document any decisions made, and noting homework items; these are then reviewed and revised as needed by the other team members before distributing to clients
- Ensure clients understand their rights under the Family Law Act
- Advocate for their clients and provide support
- Advise of what they are giving up should they wish to come to an agreement that is outside the Legal Model
- Draw up the draft Separation Agreement – in a team-based approach, one lawyer drafts and all the professionals review to ensure accuracy of what has been agreed to
- Review the final Separation Agreement with their client and have them sign
The role of the financial neutral:
- to gather clients’ financial disclosure from the date of separation or agreed upon valuation date
- Complete the Net Family Property Statement which summarizes assets and liabilities at the valuation date, life insurance, assets they brought into the marriage and any gifts or inheritances
- Calculate notional tax rates for registered assets; calculate disposition fees on property; calculate notional capital gains on investments
- Engage other professionals as needed – these could include mortgage brokers, accountants, cross border tax specialists, Chartered Business Valuators, realtors, pension administrators and actuaries
- Calculate the Equalization Payment and explore options for property settlement
- determine income for support purposes – simple with T4 employees, but not as straightforward for self-employed, business owners or executives with complex compensation plans
- run child and spousal support calculations
- assist parties to financially plan for separate homes and financial independence
- and most importantly: ensure all parties have a good understanding of the numbers and help them make informed decisions about their future
Additional value-added benefits a Financial Divorce Specialist provides:
- Lifestyle analysis – a budget and cash flow analysis can help answer many questions, such as: will my separation affect my retirement date?; can I afford to keep the house?; what will my future net worth look like? The projections can also help determine which of the various options for property settlement are most appropriate. These may be in the form of a pension rollover, cash, or an RRSP transfer
- Set clients up with a financial planner or refer to a new one – it’s surprising how many women never liked their husband’s choice of advisor! I encourage them to start with a financial plan and ensure they address estate planning, risk management, and establish priorities (debt reduction, emergency funds, RESP, and retirement planning for example)
- Insurance needs analysis – if they have a child or spousal support obligation, an irrevocable beneficiary is required on policies until that obligation ends
- Benefits plan replacement
- Reduce stress when they are feeling very fragile and unsure of the future
- Provide a lot of education with advice and support throughout the process