While there’s no getting around a knowledgeable specialized lawyer when it comes to settling a divorce, the complexities of a divorce often benefit from the input of other specialized professionals to ensure a fair and equitable arrangement.
A financial planner is one of those professionals. But, not just any planner will do. The financial planner’s role, beyond ensuring a fair split of all family assets, is to evaluate the full financial impact the division will have on both party’s future lifestyles and to provide counsel on the realities of their new financial abilities.
For those reasons, you’ll want to seek out a qualified financial professional, ideally a Certified Financial Planner (CFP®) who has experience with these types of cases.
A pre-divorce financial plan will provide you and your lawyer with a complete and clear picture of all the financial realities that will affect the rest of your life, including:
Pointing out the realities of your budget going forward
An experienced financial planner will be able to objectively advise you and your other professionals on the financial realities you will face post-divorce.
One such reality is the fact that your individual expenses following a divorce will essentially double while your income will remain the same. A divorce usually means one or both spouses will need to find a new home or rent a new space and will assume the costs alone. This alone can increase costs significantly.
Therefore, a new budget must be taken into consideration to evaluate your current and potential future lifestyle, and changes that might need to be considered to protect your future income needs and retirement goals.
Ensuring a FAIR split of Assets
Although the law can at times dictate how the assets are to be split; certain assets aren’t as easily identifiable.
- Valuation of pensions
- Valuation of businesses
Restructuring of debt
These can sometimes require complex actuarial calculations and detailed evaluations of cash-flows that require specialized knowledge of how business structures work, including debt management, restructuring, and retirement planning.
Spousal and Child Support
The law in Quebec is quite clear as to how we determine the amount required to be paid as child support, but what about the spouse? How do we determine what amount is fair in terms of spousal support payments. There are many different scenarios to consider:
What if the spouse worked in the company but was never remunerated?
How do you calculate the compensatory allowance?
What if the payer passes away?
Do you have life insurance to protect the alimony?
Which kind of life insurance should you get?
Estimating and projecting tax consequences
There’s a difference between receiving money pre-tax or after-tax. Both spouses are often not in the same tax bracket or fiscal situation. A financial planner can evaluate different options and advise on the most equitable strategy to split the assets.
Evaluating/projecting the effect of inflation and rates of return on future income
One such reality is the fact that your individual expenses following a divorce will essentially double while your income will remain the same. A divorce usually means one or both spouses will need to find a new home or rent a new space and will assume the costs alone. This alone can increase costs significantly.
Therefore, a new budget must be taken into consideration to evaluate your current and potential future lifestyle, and changes that might need to be considered to protect your future income needs and retirement goals.
Whatever your particular situation, a financial professional who is specifically qualified and trained in divorce planning can collaborate with your divorce lawyer to bring objectivity and clarity during a very emotional and critical life event