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Preparing for Separation and Divorce

Ken Maynard’s Divorce Survival Guide


Contemplating separation/divorce, most people put themselves under undue stress worrying about their financial well-being. Much of that stress is due to the fear of the unknown. So what do you do about it? Before, during, or after a divorce, it is important to keep yourself in reality as to your financial situation. Doing so will give you a sense of control over your life, which will reduce your stress level. Your financial situation can be broken into four different categories: assets, liabilities, income, and expenses. The follow-ing are some tips on how to effectively do that. Assets: Assets have a way of disappearing after divorce proceedings start. As soon as divorce becomes a possibility, start by listing what assets you think the two of you own; use the ‘Asset Track-ing Worksheet’ in the companion workbook to help with this. That list should include:

Cash: Do you keep any at home or in a safe-deposit box? Checking Accounts: The list should include personal, joint, business, or trust accounts. Savings or money-market accounts: Don't forget accounts set up for a "special purpose" such as Christ-mas club or annual or semiannual expenses. Those accounts are usually funded by payroll deduction and are set up to fund large and infrequent expenses such as the annual premium on the home or auto insurance, Christmas, and so on. These accounts are easy to forget. Retirement accounts: These include RRSPs, defined contribution plans and pension plans (government and private). Don't forget any plans from previous em-ployers that were left behind. Non-retirement investment accounts: These include TFSAs, mutual funds, brokerage accounts, annuities,

cash-value of life insurance, certificates of deposit, and stocks or bonds held in certificate form. Real Estate: This usually consists of the house and any other property owned by the couple.

Your Financial Reality

Understanding your fi-nancial situation will give

you a sense of control over your life

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Total of Contents

Your Financial Reality 2 Assets: 2

Cash: 2 Checking Accounts: 2 Savings or money-market accounts: 2 Retirement accounts: 2 Non-retirement investment accounts: 2 Real Estate: 11 Employer-funded incentive programs: 11

Liabilities: 11 Income: 11 Expenses: 11

The 411 on Property 4 Financial Assets: 4 Pension & Retirement Assets: 4 Employee Benefits: 5 Personal Property: 5 Real Estate: 5 Debts: 5 Closely Held Business: 6 Property Settlement Note: 6 Life Insurance: 6 Other Assets: 6

How I Helped One Couple 7 Move Forward to Settlement 8

Know what your marital assets are? 8 What if there's a business or professional practice involved? 8 What about a budget? 9 What about personal property? 9 What about pensions? 9 What about your home? 9 What do you want and why? 9 The bottom line: 10 Remember: 10

Cut Costs | Ease Stress | Save Time | Safeguard the Children

Ken S. Maynard AccFM, CDFA How I Help Separating/Divorcing Individuals and Couples The financial ramifications of a divorce can be devastating. However, with proper planning and expert help from professionals spe-cializing in financially equitable divorce settlements, you can increase your chances of arriving at a settlement that fully addresses your long-term financial needs and your spouse’s too. What's missing in most divorce processes is financial expertise. As a Certified Divorce Financial Analyst™ (CDFA™) I can forecast the long-term effects of the settlement. By using a divorce financial specialist, both partners have a clearer view of their financial futures. Only then can they approach a settlement that fully addresses the finan-cial needs and capabilities of each. I help clients determine the short-term and long-term financial impact of any proposed divorce settlement. I also provide valuable information on financial issues that are related to the divorce, such as tax consequences, dividing pension plans, continued health care coverage, stock option elections and much more. As a divorce financial specialist and trained family mediator I take a facilitative role with my mediation clients. More About Me I bring a wealth of personal and particle experience to my clients, with more than 25 years of experience as a senior business executive. Leading the Divorce the Smartway team, I am committed to guiding and facilitating couples through Divorce the Smartway’s Family Harbour™ mediation process. This unique step-by-step approach to divorce mediation is a new paradigm, deliver-ing acceptable outcomes for all parties I feel my unparalleled financial, negotiation, business experience, as an accredited family mediator (AccFM), Divorce Financial Spe-cialist (CDFA) and a Certifed Business Valuation Analyst (CVA), combined with our own innovative Family Harbour™ process. I can help to save clients money, provide clarity to property division, accelerate timelines, reduce emotional chaos and empower each couple faced with separation/divorce. Δ

For mediation, we are right for you if: • You are both committed to moving through your divorce in a strategic, pragmatic, proactive way.

• You have assets (complicated or not) you want to preserve and protect. • You want to minimize the impact on your children. • You are amicable or conflicted. • You can, on at least 1 or 2 occasions, sit in the same room with your spouse and myself as mediator.

If you think Divorce the Smartway might be right for you, please call today. We will answer your additional questions, and schedule your free 1/2 hour telephone consultation. We have offices throughout the Greater Toronto Area.

Serving the Greater Toronto Area

You should make every effort to negotiate your settlement agreement rather than fight over every item in court. Such agreements have sev-eral benefits over a judge's ruling including: they take less time, they re-duce the financial and emotional costs, and the parties are more likely to abide by the terms of the agreement. Your settlement agreement should be very comprehensive, particularly with regard to how the property is divided. Once you sign an agreement regarding property division, it cannot be changed unless both of you agree to the changes. It's up to you to make sure that you don't leave any assets out of your settlement agreement (unless it's something that you're going to litigate in court). You don't necessarily have to list every single personal possession in your settlement agreement, but you should list personal items that are important to you. You should also list financial assets, including retire-ment assets and real estate. This article will cover property issues only; your settlement agreement will need to thoroughly address spousal or child support as well as cus-tody and visitation issues. Your agreement should state who gets each asset or how the asset or the proceeds from its sale will be divided. Let's look at the most common categories. Financial Assets: Financial assets include cash, savings accounts, checking accounts, Cer-tificates of Deposit, money-market accounts, stocks, bonds, Real Estate Investment Trusts (REIT), mutual funds, and savings bonds. These assets may be more important to the non-working or lower-income-earning spouse. He or she may need to use these assets to cover some of his or her living expenses. Pension & Retirement Assets: Remember that not all assets have the same tax consequences. Retire-

ment assets are generally before tax assets. This means that in order to access the money, you have to pay income tax on any distributions you receive. In some cases, you may also have to pay a penalty on the distri-bution in addition to any income tax that you pay. For example: Mary suggested to Gus, "You keep your retirement assets, valued at $100,000, and I'll take the money-market account, valued at $100,000." Gus agreed because it was an equal division of the assets. However, when Gus retires in a couple of years, he will pay tax on the distribu-tions. So if Gus pays tax at a rate of 25%, then he would end up with only $75,000 versus the $100,000 that Mary received. In Canada, there are two basic types of pension plans: "Defined Contri-bution Plans" and "Defined Benefit Plans." Both types set out who is to make the contributions to fund the plan, how much they are to contribute, and when they are to make the con-tributions. With a defined contribution plan, the member will not know how much their pension will be until they reach retirement age. A quali-fied pension valuator will ensure that the value includes accrued contri-butions and a reasonable income tax allowance. A defined benefit pension plan, however, will have a formula for determining the amount of annual pension that the member has earned. The projection of these future pension payments, not the amount of contributions that have been made must be valued by a qualified expert. Depending on the type of plan and which province you live in, a portion of the pension (usually the portion accumulated during your marriage) may be subject to division like any other family asset. Some provinces have a provision for splitting the value of the pension between the parties when the member retires, so that each person ends up with their own individual pension. This may allow the non-member spouse to share in the value growth of the pension earned after the date of separation. Federal pensions governed by the Pension Benefits Standards Act (PBSA) provide for the possibility of transferring to a retirement vehicle for the spouse up to the full value accrued dur-

The 411 on Property

What you should know about property before negotiating a settlement agreement

ing the marriage; however, there may be no relationship to the value under the PBSA and the proper value for marriage breakdown pur-poses. If one or both spouses have Registered Retirement Savings Plans (RRSPs), the portion accumulated during marriage will also be subject to division. The Canada Pension Plan (CPP) also provides for the sharing of pension credits accumulated during a marriage. The plan is designed to ensure that low or non-income-earning spouses will have some pen-sion coverage when their marriages end. You should be aware that there is more than one way to value a pen-sion; if the amounts are significant, you should consider having an ex-pert valuation done. Employee Benefits: In addition to retirement plans, many employers provide other fringe benefits and incentives to their employees. These benefits include year-end bonuses, accrued vacation time, accrued sick time, health insur-ance, life insurance, disability insurance, expense accounts, stock options, and more unusual benefits such as Phantom Stock, Stock Ap-preciation Rights, and Restricted Stock. Some of these benefits may be included in your list of assets; other benefits may be included as income, and some may not be included at all. Determining if a benefit should be treated as a marital asset, in-come, or nothing at all can be very subjective. Different jurisdictions and judges may view the benefits differently. As a rule of thumb, if the benefit is guaranteed, then it should be included as an asset or as in-come. A year-end bonus could arguably be an asset, an income item, or noth-ing at all if it is not guaranteed. For example: Barbara and Jeremy were married for 15 years. Jeremy, the employee spouse, received a bonus every year. Barbara could certainly make a reasonable argument that it is an asset or income for purposes of calculating child and spousal sup-port. Vested stock options would also be an asset; with the changes in the market, they may not have any value, while unvested stock options, on the other hand, may not be an asset. Personal Property: List your personal possessions, particularly those that are important to you, and note how they are going to be divided. This would include big ticket items, such as cars, boats, and motor homes, as well as items such as jewellery, furniture, photos, and personal papers. Keep the value of these assets in perspective - and recognize when it's time to give up the fight. We've all heard of those cases where parties spend thousands of dollars fighting over an asset that's worth less than $100. Each spouse should keep copies of joint tax returns. We recommend that you keep at least the past five years. In addition, you will need records to calculate the cost basis for any assets that you keep. Real Estate: Real estate includes your marital home and any other homes, vacation properties, timeshares, and rental properties, commercial and residen-tial as well as any business property. The properties should be listed and the settlement agreement should address how they are going to be di-vided. If the property is going to be sold, the following issues need to be

addressed: Who is going to pay the expenses until the property is sold? How will the proceeds be divided? If one spouse pays the expenses, will he or she be reimbursed from the proceeds before they are divided? Debts: Generally, the person who takes the property will be expected to pay the mortgage or debt related to the property. Does this mean that the other spouse has no financial obligation for a joint debt? Absolutely not. Unless the spouse who takes the property refinances the mort-gage, both spouses will still be obligated to pay the debt. The divorce decree cannot terminate your financial obligation to your creditor. For example, Bob and Amy are dividing their assets as shown in "Table One" (below).

After the divorce, Bob would be liable for the car payment and Amy would be liable for the mortgage. If either neglected his or her payments, the other spouse would still be liable. But if Amy and Bob re-finance after the divorce, the other spouse will no longer be liable for the debt. Requiring the other spouse to refinance after the divorce is something that should be put in the settlement agreement. They could, for in-stance, allow a certain time period to refinance. If the debt is not refi-nanced, then the asset support could be sold and the loan could be paid off with the proceeds from the sale. If only one spouse is obligated on the debt during the marriage, then the other spouse cannot be held liable. This occurs most frequently with credit card debt. However, if it is a joint debt, then just like the mortgage, if one spouse is responsible for paying the joint credit card debt pursuant to the terms of the settlement agreement, this does not mean that the other spouse is no longer responsible for the debt. Un-fortunately, both spouses will remain liable to the creditor. If one spouse refuses to pay, then the other spouse will have to pay off the debt. If you can afford it, the best way to deal with credit card debt (un-secured debt) is to pay it off with liquid assets. Closely Held Business: A closely held business can be in the form of a sole proprietorship, cor-poration, general or limited partnership, or limited liability company. Before one spouse agrees to take a business interest, he or she has to make sure there are no restrictions on owning the interest. There could be legal or contractual restrictions on which spouse could own the busi-ness interest. If the business, for instance, is a professional corporation, then one


spouse may be legally restricted from maintaining an ownership inter-est. For instance, if Joe is a physician and Barb is an accountant, in many provinces, only Joe could own his medical practice and only Barb could own her accountancy practice. Another restriction may exist if there is a liquor license or taxicab medallion that is only transferable with government approval. A "buy-sell" agreement is an example of a contractual restriction that may preclude a transfer to a spouse. If the "non-owner" spouse is awarded the business interest in the divorce, then the spouse may be forced to sell the business interest at a substantial discount. For exam-ple: Joe owns 25% of a business that has a total value of $100,000; his share is valued at $25,000. If the buy-sell agreement requires Barb to sell her interest at 50% of the value, and if she is awarded the stock in the divorce, she would be required to sell her interest for $12,500. Property Settlement Note: A property settlement installment loan is one way to equalize the as-sets. Other possibilities include a cash payment or the transfer of a par-ticular piece of property. For instance, if the wife is entitled to $50,000 for her interest in the family property, and the matrimonial home has equity of $50,000, the court could order that the home be placed in her name alone to satisfy her interest. Here's an example: Mike and Julie have the following assets (shown in "Table Two," below). To equalize the division of assets, Mike should pay Julie an additional $50,000. This can be structured as a loan payable to Julie in the amount of $50,000 at an agreed-upon interest rate. If Mike and Julie agree that the loan would be payable over five years at a 5% interest rate, then the annual principal and interest payments would be $11,549. This type of loan can have some significant draw-backs, however, including:

Life Insurance: Some life insurance policies have cash value. This means that the owner could borrow money from the policy or trade the promise to pay a future sum at death for the current cash value, less any costs or charges. Other policies, such as term insurance, have no cash value. Term insur-ance may still be valuable though, particularly if the insured person is now uninsurable.

The settlement agreement should address who will own the existing life insurance policies. If the non-insured spouse is supposed to be the beneficiary, then the best way to protect his or her interest is to have the non-insured spouse own the policy. Using the above example, if Mike owns a policy and is the insured, and they agree that Julie should be the beneficiary, then he should transfer ownership of the policy to Julie. She should verify that she is the beneficiary of the policy. They can structure it so that he pays her the premiums as spousal support. That way, she can be sure that the payments are made and that she re-mains the beneficiary. Otherwise, she is at risk if he lets the policy lapse or changes the beneficiary. Other Assets: Some other assets to address in the settlement agreement include: Frequent Flyer Miles, lottery winnings or other prize winnings, club dues and annual membership fees, inheritance and gifts, and trusts naming one spouse as a current beneficiary. Keep in mind the assets listed in this article are by no means exhaus-tive; you and your spouse may have assets in addition to these. They can make a huge difference in your post-divorce life, so take the time to list them carefully and discuss them fully before you settle things, once and for all. Δ


• If the agreement isn't followed, it becomes another issue to fight over. What happens if Mike doesn't pay?

• Should Mike pay interest on the loan? • If the loan is unsecured, it would probably be discharged

in bankruptcy. • What happens if Mike dies or becomes disabled before

the loan is paid in full?

TABLE TWO Value Mike Julie

Home (Equity) $40,000 $40,000

Cash & Chequing $3,000 $3,000

Mutual Funds $7,000 $7,000

Mike’s Business $150,000 $150,000

Total Value $200,000 $150,000 $50,000

Property Settlement Note ($50,000) $50,000

Revised Total $100,000 $100,000


How a I Helped One Couple: Let's look at an example on how it all fits in. John and Jane are 40 years old and have two children. They own a home worth $365,000 with net equity of $77,500. Their retirement accounts total $165,500 in value. John earns $90,000 a year and has take-home pay of $67,429 a year. Jane has never worked outside the home and has no job skills, but she hopes to get a job eaning $22,500 a year. The following settlement has been suggested. After the divorce, Jane and the children will live in the marital home, which will be deeded to her. She will also receive $44,000 of the retirement money and John will receive $121,500, thus dividing the assets equally. John will pay Jane spousal support of $250 per month for five years and child support of $225 per month per child. He will also pay college costs, which start in four years. John's expenses include his normal living expenses, child sup-port, spousal support, and college costs. Jane's expenses include support for the children and are reduced when each child leaves home. This appears to be a reasonably fair settlement. However, an analysis creates the financial future illustrated in Graph #1 (below). Jane's assets will be completely depleted within seven years while John's investments will grow dramatically. The rea-son is that, soon after the divorce is final, she will need to tap into her assets to make ends meet. As an experienced Divorce Financial Specialist I anticipated this situation and suggested an alternative settlement that would work for both John and Jane.

To improve Jane's financial future, the settlement could provide her with increased spousal support of $471 per month for 10 years. After all, a major consideration for determining spousal support is the need of one spouse and the other's ability to pay. Both numbers are a result of income minus expenses. The correct child support, according to the Child Support Guide-lines in their province, is $1,293 per month for two children for a couple with their income. Jane could also be awarded an addi-tional $24,300 from the retirement plans. She may also need to cut her expenses by 10%. These changes in the original settle-ment will produce the results illustrated in Graph #2. John will still have a surplus, which he can add to his investments. If John stays within his budget and invests all of his extra income, his in-vestments have the capacity to grow to $2.5 million by the time he is 60. This sample case illustrates the value of preparation and analysis as a means of reaching a more financially equitable divorce set-tlement. If the separating couple’s intent is to treat both parties in a separation as equitable as possible, it is essential to analyze the marriage as if it were a financial contract, with tangible in-vestment into it by both parties. Without preparation, they wouldn't have been able to make an informed decisions for more spousal support or an uneven split of assets.

How I Helped One Couple


During the course of your marriage, you accumulated both assets and liabilities. Although there are regional differ-ences when it comes to who gets what, basically every-thing purchased, received, or saved during your marriage must be divided when you divorce. So now you're about to sit down and negotiate a financial settlement with your ex but are you truly ready to do so? As with any negotiation, preparation, including a thorough understanding of the situation, as well as assistance from professionals to ensure your interests are being expressed is the key to success. Here are a few questions you need to be able to answer before sitting down to negotiate. Know what your marital assets are You can't divide the marital assets fairly if you don't know what's there. The disclosure process, which can be infor-mal or formal, is important in every divorce. The informal way is to exchange lists of your assets and debts in an affi-davit form. This method should only be used if you are sure that you know everything that exists in your estate. If you're not sure, then a more formal means of discovery should be utilized. What if there's a business or professional practice involved? A business or professional practice tends to complicate a divorce. More often than not, the value of the business becomes a focal point of contention. Couples need to seri-ously consider getting a professional and objective valua-tion of the business. The costs of a professional valuation are usually steep, but you can't divide something fairly if you don't know its true worth.

Then comes the question of what to do with the business. There are a few options, such as: In a business-owner situation, the business is usually most or all of their net worth, so there aren't enough other as-sets to compensate the other spouse. Even if selling the business is an option (it usually isn't), finding a buyer to pay the right price within an

acceptable timeframe is practically impossible. Most di-vorcing couples don't want to maintain a relationship, not even a business relationship, after the divorce. So what do you do? The only real options are a property settlement note (one spouse buys the other's share in a series of installment payments at a market-inter-est rate) or a spousal support arrangement to compensate for the difference. What about a budget? It is critical to determine the incomes and expenses of the parties and to try to estimate what the future expenses will be after the divorce is final. If there are children, one

Move Forward to Settlement

• One spouse keeps the business and gives the other a reciprocal dollar value using other as-sets.

• Sell the business and split the proceeds. • Keep ownership in the business at 50/50.

When you're negotiating your divorce settlement, preparation is the key to success. Getting ready to negotiate.


spouse will probably pay child support to the other, and in many marriages, one spouse will also pay spousal support (‘alimony’). It is important to determine income levels and future needs before you start negotiations. A Divorce Fi-nancial Specialist such as a Certified Divorce Financial Ana-lyst (CDFA) can play a critical role in determining both a budget and cash-flow needs. A Divorce Financial Specialist can also help map a course of action for the future by preparing different scenarios based upon anticipated changes in needs and income lev-els.

What about personal property? Personal property is important, but don't spend thousands of dollars fighting over property with more sentimental than real value. Items such as collectibles, favourite home furnishings (from chairs to rugs to pots and pans), hobby equipment, and other per-sonal property must not become the focus of your negoti-ations. A divorce financial specialist mediator can help you gain perspective on these items and focus on the big pic-ture when you're getting ready to negotiate a settlement. Remember that an expensive television or computer has almost no value a few years after you made that big-ticket purchase. The courts don't look at replacement value but rather the actual value of the item, which, in the case of used furniture, is often a garage sale price. What about pensions? In many divorces, the most valuable assets are future ben-efits such as pensions. These must all be determined and considered before starting to think about a settlement. In most cases, the marital portion of these benefits, in other words the portion of the pension or other deferred bene-fits that have been acquired during the marriage are sub-ject to division as part of the divorce settlement. A divorce financial specialist will help you consider these benefits as part of the overall settlement plan, making sure your fu-

ture needs will be met. What about your home? Over the years, we have seen people who were determined to stay in the marital home no matter what. In some cases, that can be a big mistake. First of all, it may be too expensive to maintain. In some situations, it's better to sell the home and find another one that's smaller and less expensive to pay for and maintain. As you move ahead and rebuild your life, it may be better to start fresh in another home. Aside from the financial considerations, there may be too many mem-ories attached to the marital home to let you move for-ward emotionally as long as you're still living there. There are several ways to handle a marital home: What do you want and why? You must have a game plan when you enter into settle-ment negotiations. Do you know what you want? Do you know what you need? Are you thinking about all options? Are you being realistic in your demands? It is standard ne-

gotiating practice to ask for more than you expect to re-ceive without going to extremes. Don't be a doormat, but don't be excessively greedy either. Insoluble disagreements arise when divorc-

• It can be sold immediately. • One spouse can buy the other out by refinanc-

ing the home or by trading the home for other property.

• Both parties can hold it jointly for a number of

years for instance, until the parent who has custody of the children remarries, or the chil-dren reach a certain age after which the home is sold and the proceeds divided in some fash-ion. In many cases, the party who remains in the home pays the mortgage and taxes and gets credit for any reduction in principal on the mortgage from the date of the divorce until the date that the home is sold or one party buys the other out. Major repairs are often divided between the parties with the person who ad-vances the money for repairs being repaid at the time of the closing on the sale or buyout of the home.

this article continues on page 10


ing couples are negotiating based on wants rather than needs. Take the time to objectively determine your own needs and those of your spouse before starting to negotiate.

‘Be prepared to trade your Wants, for your Needs’

We have found over the years that if your demands are reasonable and based more on needs than wants, then the chances for a quick, fair settlement are good. There must be give-and-take and wiggle-room in your settlement propos-als; your lawyer and financial advisor can help you strategize and come up with different game plans and scenarios as you prepare for this negotiation.

The bottom line: You must be well informed and advised in order to negotiate effectively. This includes knowing the "ingredients" of the marital pie, and also how much of that pie you can realisti-cally expect to keep as you prepare to negotiate your settle-ment. A team consisting of a Divorce Financial Specialist, mediator and perhaps a family specialist if emotional or child issues are getting in your way. Along with access to good legal ad-vice. Can help you understand your rights. And help you voice your needs, concerns and fears when you sit down to negotiate with your spouse. Divorce is one of the most difficult and stressful experiences you'll ever have. During this emotional time, it can be hard to think clearly or rationally, so make sure you enlist the help of professionals who can guide you when you've lost your way . Remember: If both sides are somewhat unhappy with the outcome, then the negotiations went well. Δ

Forward to Settlement, continued from page 9


Employer-funded incentive programs: These include stock option programs, country-club initiation fees, and banked vacation and sick days.

Once you have your completed list, start collecting statements for every item on it. Investment companies send statements monthly or quarterly, depending on the type of account, the level of trading activity, and the company's policy. Most em-ployer sponsored plans send out a year-end statement in the first quarter of the following year, so don't panic if a statement you're looking for doesn't show up at the end of the first month after you start the process. If you have a safe-deposit box and you don't have a list of its contents, visit the bank and make a list. Finally, make a copy of the last mortgage closing paperwork. In order to qualify for a mortgage, you had to disclose all of your assets, liabilities, sources of income, and the last five years' tax returns. Tax returns will show the sources and amount of in-come, especially if your spouse is self-employed. Liabilities: Liabilities, unlike assets, have a way of appearing when divorce is pending. Other than listing liabilities, keep track of excessive increases in debt levels. If you see that happening, notify your lawyer immediately. As a general rule, any debt associated with an asset should travel with it. For example, whoever gets the car should get the car loan. If there's a business involved, always question any debts to relatives, friends, employees, and espe-cially the owner's spouse. If you detect such a loan, ask for a signed loan agreement, what the purpose of the loan is, and a payment plan. Income: The next step is to identify the sources of income. Income in-cludes revenue from full and part-time employment, investment return, and self-employment income. Add up all the income from different sources to come up with the total income. Your income levels are a factor in calculating child support, and they play a role in arguing for spousal support. Beware of close-rela-tionship employers. I had a client who didn't understand why

her husband's income was cut in half after he filed for divorce, after all, he worked for his brother's construction company. Expenses: The next step is to figure out your budget now and post divorce. Remember that the same amount of income supporting one household will need to support two. The first step is to gather the necessary documentation that you need in order to be objective. This includes your check register and credit-card statements. As you list your expenses, make sure you don't "double dip." For example, if your cell phone bill is directly charged to your credit card, don't count your cell phone bill and the credit-card payment. An area that most people miss is cash withdrawals using ATM cards. You should be able to account for where that money was spent. When working on a budget, a good test is to have a num-ber in each category and have a trusted and objective friend criticize your inputs. Start with the pre-divorce scenario using the budget table on the next page as your guide. Using two copies of the chart, fill in pre-divorce expenses and post-divorce expenses. Go to the post-divorce chart and carry over each ex-pense with an increase or decrease in its value. For example, an increase would be lawn care, if you would need to hire it out; food, on the other hand, would probably decrease. Now you're ready, you have a list of your assets, income, and ex-penses. Δ

Your Financial Reality, continued from page 2

The Alphabet Soup of the Divorce Neutrals

AccFM Accredited Family Mediator Separation and Divorce Mediation

The AccFM designation is the Family Mediation standard in On-tario, recognized by The Ministry of the Attorney General and in the Family Court System.

CDFA Certified Divorce Financial Analyst Divorce Financial Planning

CDFA: Issued by The Institute for Divorce Financial Analysts™ (IDFA™)

CVA Certifed Valuation Analyst Business Valuation

CVA: Certified Valuation Analyst – awarded by the National Association of Certified Valuation Analysts


• Who stays in the home? • Who will pay the mortgage (and other regular

expenses such as gas, electricity, and home re-pairs) while you're apart?

• How will you share the money in your

joint bank accounts? • How will you share assets such as stocks

and bonds? How about the pension(s)? • Who keeps the family home/car/boat

washing machine, etc.? How will you split big-ticket items?

• What about the joint credit cards? You

should cancel or freeze them ASAP. If you've never had credit in your own name, however, you should apply for your own credit card before the joint cards are cancelled.

• Are your income tax returns up to date? Are

there taxes due or refunds owed, or other problems pertaining to tax returns that will surface after the divorce that will have to be addressed in the division of property and lia-bilities?

• Will one of you be paying maintenance

to the other? How much will it be? Will it be in the form of a lump-sum or periodic payments? When will the payments end? Note: how you choose to pay maintenance can affect your tax status.

• Will one of you be paying child support to the other? How much? When will the pay-ments be made? When will they end (e.g. when the child turns 21, or leaves home, or completes college, etc.)?

• Will one or both of you be contributing

to a college fund for your kids? How will the payments be made?

• How will you share responsibility for the

care and raising of your children: joint, or sole custody? When will the children be staying with each of you?

• Who will pay for legal fees? Will each of

you be responsible for retaining and paying your own lawyer and mediation cost?

• How will you handle your current debts? • Who will be responsible for the debts

either of you incur while you're separated? Δ

Before you start negotiations with your spouse, you need to ask yourself some questions. Start with the worksheet enti-tled "My Priorities" (next page) to give you the big picture, then narrow your focus to items such as:

Checklist: Getting Started Use this list of questions to start setting goals for your divorce.

A Certified Divorce Financial Analyst™ (CDFA™) can help you find answers to many of these questions – increasing your chances of reaching a settlement that fully addresses your

long-term financial needs, and securing your financial future.


If you don't really know what your priorities are, you won't know to express your interests, concerns, desires or fears and what to negotiate hard for, if necessary - and what you can live without. Saying "I want it all!" is useful neither to you nor your lawyer or me-diator. Use this worksheet to help you identify your priorities before entering into serious negotiations, and share this information with your lawyer or mediator. If you need more space, copy this worksheet onto separate pages of a legal or letter-sized pad; use the top half of each page to list your priorities, and the bottom half to list your spouse's. Add or delete items to suit your individual case.

Worksheet: My Priorities How to figure out what's most important to you - and what you can live without

a)

b)

c)

d)

e)

f)

a)

b)

c)

d)

e)

f)

Property division My priorities are:

a)

b)

c)

d)

e)

f)

Finances (spousal support, division of assets and debts) My priorities are:

a)

b)

c)

d)

e)

f)

Children (support, custody, visitation) My priorities are:

a)

b)

c)

d)

e)

f)

Children (support, custody, visitation) My spouse's priorities are:

a)

b)

c)

d)

e)

f)

Finances (spousal support, division of assets and debts) My spouse's priorities are:

Property division My spouse's priorities are:

Note: if you and your spouse don't agree on custody and visitation, write down why you feel your custody and visitation arrange-ments are reasonable and in your children's best interest, and why your spouse's may not be. Δ

A Certified Divorce Financial Analyst™ (CDFA™) can help you to understand: the difference between personal vs. marital property; the general rules for how property is valued and divided during divorce; retirement and pension issues; how spousal and child support work; splitting the house; tax problems and solutions; and which settle-ment to choose.

Lifestyle BudgetingChances are with separation your budget will be a lit-tle lop-sided, with much less monthly income to use than your current lifestyle. Now is the time to re-eval-uate your budget, not months later when you’ve got-ten deeper into debt and your credit has been ruined. Important! Your Lifestyle Budget is an integral component in establishing spousal support amounts, terms and duration. List all sources of your current income. Don’t forget any money you may get from consulting work or a second job. Make sure you don’t forget to either add or subtract any spousal support or child support you may receive or have to pay. Make a list of all of your set expenses and see what you can eliminate. Set expenses are those that you have every month, like car pay-ments, mortgage payments, or insurance. Will you be moving to a smaller place, or downsizing your family mini-van? Can you cut back on any insurance expenses like vision insurance or extra disability insurance? Do you really need a cell phone and a land-line in your home? Can you live without bottled water delivery, cable television or internet service? Look at your fluctuating expenses. Fluctuating expenses normal include those little luxuries we enjoy. Dining out, hair styling, manicures, your morning Star-bucks, gold club fees, snacks from the machine at work, or gym membership. Be willing to cut out all expenses that are not ab-solutely necessary. Compare your income to your expenses. When you compare your income to what you currently are spending, you may see a noticeable lack of balance. Go back and decide what you can eliminate. Can you pack a lunch rather than eating out at lunch daily? Can you give up that weekend movie night? Can you do your own hair coloring or nails for now? Call your creditors and ask for lower payments. Most are willing to work with you to make sure you don’t fall behind. Keep eliminating unnecessary expenses until you have income left over at the end of the month The changes don’t have to be permanent. Remember your changes don’t have to be permanent, just until you can increase your income. Once you have been on your own for a while, without benefit of a double income you will be able to better gauge how far you can stretch your income. It helps to eliminate extras if you know you can have them back at some point. There is a difference between wanting and needing.

Consider your wants versus needs. Survival may come down to eliminating everything from your budget but needs. Your priori-ties may need to shift. Many of the things you thought were ne-cessities become optional. Look for ways to bring in extra cash by taking a second job. You might want to take part of any savings you have to pay off some of your fixed expenses so you will have more left each month for other things. Take a good look at the talents you possess and get creative in ways you can build your cash flow. Can you do some freelance writing? Do you have artistic ability? Could you run an ad to do home maintenance for others? One man who had re-cently divorced did all his friend’s auto oil changes until he paid off some credit cards. Put on your thinking cap and you will come up with ways to earn extra monthly income. Avoid any new debt. It may seem tempting to use a credit card rather than giving up a luxury you enjoy. Don’t give into the temptation. It will make your future financial picture much gloomier for much longer. Don’t allow the emotional stress of divorce cause you to sooth yourself by spending more than you can afford. Avoid extra stress by staying on budget. Financial problems bring stress, and avoiding that stress may make it easier to give up things you can live without. Your situa-tion is not permanent and this, too, shall pass. Your financial pic-ture does not have to be as bleak as it first appears. Use your creativity and self-control to make some needed changes, and you’ll be back on your feet much sooner.


Worksheet: BudgetingHOME EXPENSES MONTHLY ANNUAL

Rent/Mortgage $ $

Condo/Association Fee $ $

Home Equity Loan $ $

Property Taxes $ $

Telephone $ $

Cell Phone / Pager $ $

Internet $ $

Security System $ $

Cable/Satellite $ $

Electricity $ $

Gas $ $

Water/Garbage $ $

Landscape Maintenance / Lawn Cutting $ $

Snow Removal $ $

Exterminator $ $

Home Repairs/Maintenance $ $

Home Improvements/Upgrades $ $

Housecleaning $ $

Miscellaneous Household/Pool $ $

TOTAL HOME EXPENSES $ $

FoodGroceries $ $

Dining Out $ $

TOTAL FOOD EXPENSES $ $

CLOTHING EXPENSES $ $

Clothing $ $

Laundry/Dry Cleaning $ $

TOTAL CLOTHING EXPENSES $ $

Entertainment/RecreationEntertainment (Excludes Dining Out) $ $

Videos/CDS/DVDs $ $

Hobbies $ $

Movies and Theater $ $

VacationslTravel $ $

Classes/Lessons $ $

TOTAL ENTERTAINMENT/RECREATION EXPENSES $ $

MEDICAL (AFTER OR NOT COVERED BY INSURANCE; EXCLUDES CHILDREN)

Physicians $ $

Dental/Orthodontist $ $

Optometry/Glasses/Contacts $ $

Prescriptions $ $

TOTAL MEDICAL EXPENSES $ $

Insurance $ $

Life Insurance $ $

Health $ $

Disability $ $

Long-Term Care $ $

Home $ $

Auto $ $

Other (Umbrella, Boat, Cottage, etc.) $ $

TOTAL INSURANCE EXPENSES $ $

TRANSPORTATION MONTHLY ANNUAL

Auto Payment $ $Fuel $ $Repair/Maintenance $ $License $ $Public Transportation $ $

TOTAL TRANSPORTATION EXPENSES $ $

MISCELLANEOUS

Postage $ $Gifts/Holiday Expenses $ $Vitamins/Non-Prescription Drugs $ $Toiletries $ $Beauty Salon/Hair/Nails $ $Pet Care/Vet $ $Books/Newspapers/Magazines $ $Donations $ $Home Improvements/Upgrades $ $Memberships/Clubs $ $Miscellaneous $ $Credit Card $ $

TOTAL MISCELLANEOUS EXPENSES $ $

OTHER PAYMENTS $ $Quarterly Taxes & Add'l Tax Payments $ $Spousal Support Payments $ $Child Support Payments $ $Eldercare Expenses $ $Professional Fees (Accounting, Financial Planning, Legal, etc.)

$ $

Entertainment (Excludes Dining Out) $ $Service Fees (Banks, Investments, etc.) $ $

TOTAL OTHER PAYMENTS $ $TOTAL EXPENSES (EXCLUDING CHILDREN) $ $

CHILD RELATED EXPENSES

EducationlTuition $ $School Lunches $ $Counselor $ $Sports/Cam ps/Lesson s $ $Hobbies/Field Trips/School Activities $ $Toys/Games $ $Boy-Scout/Girl-Guide Dues $ $Clothing $ $Medical $ $DentaI/Orthodontics* $ $Optometry/Glasses/Contacts* $ $Prescriptions* $ $Allowances $ $Miscellaneous/Haircuts $ $

TOTAL CHILD RELATED EXPENSES $ $

TOTAL EXPENSES (INCLUDING CHILDREN) $ $

* costs not recovered by a benifit plan


You will save time, money, and lower your stress levels if you can put your hands on a document the mo-ment your lawyer, mediator or CDFA™ asks for it. An accor-dion folder is a good way to keep everything in one place and it’s portable so your files can go with you to meetings. You will want to re-label some of the tabs so they’re spe-cific to your situation. For instance:

• Documents for my Lawyer/Mediator • Documents from my Lawyer/Mediator • Documents for my CDFA™ • Documents from my CDFA™ • To-Do Lists

* These documents would include items such as: 1. At least three years of income tax returns for both

parties (if possible) 2. Details regarding investments 3. Employee benefit/retirement information 4. Information regarding your mortgage(s) 5. Most recent paycheck stubs for both parties (if ap-

plicable) 6. List of assets 7. List of debts 8. Marital property inventory and/or receipts 9. Non-marital property inventory and/or receipts 10. Household inventory (use the “Household Inven-

tory Worksheet” to help with this) 11. Household bills and/or receipts 12. Bank account statements

(joint and separate) 13. Credit card statements (joint and separate) 14. Child or spousal support (paid or received) 15. Insurance information 16. Any other documents that would have a bearing

on your financial situation. 17. Private Pension Pan Statements(s) 18. Canada Pension Plan Statement(s)

If you have never made a To-Do List, now’s the time to start. There’s simply too much to remember, and too much can fall through the cracks at this stressful time. There is computer software that can track tasks and ap-pointments, or you can purchase a diary or appointment book that you will refer to every day. Make sure to put deadlines on everything: you don’t want to keep your lawyer/mediator waiting for a document you promised last week because you forgot about it. Δ

T imeTo Get Organized

Checklist: Getting Organized IF DIVORCE IS AT YOUR DOORSTEP, you need to develop an organizational system that will work for you –

and prevent you from drowning in a sea of paperwork.


To-Do list ITEM COMPLETED DEADLINE

Example

Meet with Ken Maynard CDFA & Mediator ASAP √


If you will be seeking spousal support, you need to demonstrate that your sacrifices and contributions during the marriage allowed your spouse to get and hold a higher-paying job while keeping you in a low-to-no-income situation. You need provide evidence that your are a responsible, self-sacrificing, terribly underfunded adult. If you find you need more space for some of your answers, write or type them out on separate sheets of paper with headings such as "Contributions to the Marriage".

Evaluate your need and are you entitled to receive spousal support? Use this worksheet to help state your case.

Worksheet: Spousal Support

Describe the contributions you made to the marriage (e.g., working to put your spouse through school, staying home with the children, entertaining your spouse's boss and/or clients to help advance his/her career, etc.):

Outline your education, skills, and training. What would it take to qualify for a better job (what courses, length of study, apprenticeships, etc.):

Did you sign a prenuptial agreement? If so, provide a copy

Describe the contributions you made to the marriage that reduced your current earning potential (e.g., quitting a job to stay home with the children, etc.). How much would you be earning today if you had stayed in the full time workforce?

Describe your job vs. your spouse's job, including salary and potential for advancement

Your age: ___ The length of your marriage: ____ Will the children be living with you after the divorce?

� Full time � We plan to share parenting time

Your state of health (both mental and physical):


Valu

e as

of (

date

)So

urce

of

Paym

ent

Cost

Title

Hol

der

Date

Acq

uire

dDe

scrip

tion

of A

sset

Type

of A

sset

:Worksheet: Charting Assets

Make one copy of this page for each of the following assets you and/or your spouse own: Bank Accounts (including Investments and GICs); Retirement Accounts; Real Estate; Businesses; Vehicles; Patents, Copyrights, Royalties; Antiques, Art, Collections; Cash-Value Life Insurance; Licenses and Degrees (if applicable). Note whether Marital or Non-Marital funds were used to purchase the item under the "Source of Payment" category.


ItemDescription of item

(Serial # if applicable) QuantityPurchased during marriage?

Current value (approx.)

Who is keeping item ? Him Her Dispute

Worksheet - Household Inventory THIS INVENTORY WILL HELP TO REMIND YOU OF WHAT YOU OWN: JOINTLY AND SEPARATELY.

Make one photocopy of this page for every room in your house. Then fill in the blanks as you decide who gets what: it will help you during your formal

property division and let you know what you'll need to furnish your new home.

Room: (e.g. Living Room, Master Bedroom, Kitchen, etc.)

Cut Costs ¦ Ease Stress ¦ Save Time ¦ Safeguard the Children

Notes: