The Silver Lining In Silver Divorces

Does heartbreak have an age limit? Divorce rate amongst couples over 50 has doubled in the last 25 years, amongst couples aged 65 or more, divorce rate has tripled since 1990. Loss of a spouse is a tragedy, end of a marriage is equally traumatic. It is the end of a lifestyle; identity and perceived financial security.

While the Finances are a major consideration, children are usually older, which makes for simpler solutions around parenting time.

The financial implications of later life divorces are enormous.

• Couples are approaching retirement and may have limited earning years
• While assets get split, both need to consider a plan that would support them for 25-30 years.
• Pensions are a crucial asset
• Division of investments, RRSPs, TFSA’s plays a big part.
• Spousal support is often on the table
• Health care expenses and insurance needs to be considered. Women typically outlive men by 4- 5 years, not only must they support themselves, but also consider planning for additional health care expenses.
• Financial Planning is important.

Second or third Divorces, blended families:

In north America approximately 50% of first marriages; 67% of second and 73% of third marriages end in divorce. It is likely that in second and third marriages, one or both parties have brought assets into the marriage. There may be children from previous marriages, support payment, businesses and other assets to consider.

Another important consideration is the mismatch of knowledge. Often in a marriage one party is responsible for and is better equipped in managing the finances. This leaves the other party vulnerable and at a disadvantage at both getting a fair settlement and managing the proceeds from the settlement.

Understanding your limitations so you can educate yourself and get the right help and advice is important.  As a Chartered Divorce Financial Specialist) I can help clarify your options.

For Instance:

Spousal Support vs lumpsum payment.

Depending on the situation, when deciding whether to negotiate a monthly spousal support payment or a lumpsum payment consideration should be made towards:

• Taxes – spousal support is taxable in the hands of the recipient and a tax deduction for the supporting spouse, while there are no tax implications for a lumpsum payment.
• Stability in Income- If the supporting spouse loses his/her income, it is unlikely they will be able to continue paying.
• When receiving a lumpsum payment, the investment knowledge and ability to manage finances of the receiving spouse should be considered.  Risk of not investing or on the other extreme, investing in high risk securities inappropriate for their risk profile could both be detrimental.
• Addictions like alcohol or gambling.

Division of Assets:

Division of assets can be complex. The basic principal is taking stock of all the assets accumulated during the course of the marriage; subtracting all the liabilities or debts to arrive at a net worth, which will then be divided between the two parties. However, some assets may be difficult to value, like pensions and businesses.

In addition to valuing the assets, the practical issues need to be considered. For example:

• Does your pension administrator allow for the pension to be split?
• If one party elects to keep the family home, will he/she qualify for the mortgage.
• As a part of the settlement, one party gets the Locked in RRSP account, only to realize that are unable to withdraw from it till they reach a certain age.
• The real estate portfolio or investment portfolio is down due to market conditions. If one party chooses to take a cash value of the current net worth, the long-term impact on their future cash flow and net worth may be significant.
• One party keeps the family home, the other the investment property. Tax implications must be considered.

Then, there is an underlying lack of trust. One party may not want to work with the Accountant of Financial Planner that has been working with the family for a while due to perceived impartiality.

It sounds complicated. How can you negotiate a fair settlement when you don’t fully understand its implications?

Working with a Divorce Financial Specialist

I am a big believer in education.

Your Finances are an integral part of you and your life. When dealing with a divorce, especially in the later years, much is at stake and you cannot afford to get it wrong. Professionals like myself can help you, but you are the only one in the unique position to know:

• What is important to you;
• Your comfort;
• Your vision for your future; and
• Your fears.

There are many ways a settlement can be reached, as a Chartered Divorce Financial Planner, I look for solutions that address your unique situation.

You may not have the ability to crunch numbers or figure out the tax implications of certain decisions, (that’s my job) but you can educate yourself enough to ask the right questions.

Your input is vital, and your clarity will reward you in many ways. It will reveal options you hadn’t considered so that you may negotiate powerfully for things that really matter to you.

Divorce brings with it a complete disruption in every area of your life, but when the storm passes, you have the opportunity to start again with a new foundation and build a life of your choosing.