Dealing with Divorce
Divorce isn’t a pleasant time for anyone and, with emotions running high, it can make the inevitable untangling of your mutual finances tricky and time consuming. Although much depends on your personal situation, including how amicable your break up is, here are some good tips to help you to make the best of a difficult situation from a financial perspective:
In order to create a realistic budget after the divorce, you’ll need to be clear about the income and expenditure of your household. It’s also important for the judge to be able to make clear decisions on how assets are split. Expenses can include food bills, transportation, childcare and anything else that you spend on.
The next step is to predict what expenses are likely to be incurred in the future – you might use previous years for this but it’s also important to think ahead to big events such as college tuition which might have an impact.
Your financial records will be used throughout the divorce process therefore it is essential that they are comprehensive and up to date. Paperwork includes anything and everything, from bank statements to pay slips, tax returns and investment account statements.
In addition, make a list of your debts and which are both individual and joint, such as credit cards, mortgages etc.
Even if your relationship with your ex-spouse is amicable, the strain of disclosing financial information and negotiating about future finances can cause confrontation. Ideally, both parties will freely exchange information but this may not always be the case.
If your finances are complex, it may benefit you to work with a qualified individual who is an expert in untangling mutual finances and ensuring that you are not disadvantaged from a financial and tax perspective.
Now is not the time to make big financial decisions or changes, or to spend excessively due to the fact that the future is so uncertain. The best advice is to continue to use your individual and joint accounts as usual, without making major changes and keep all financial matters above board and transparent with your spouse until the divorce is finalized.
If you own joint savings plans, such as RRSPs RRIFs or TFSAs, you will need to divide them between you and set up new ones in your own names. In addition, you should inform the Canada Revenue Agency that you have divorced as this may affect your eligibility for certain benefits.