Written by Kathryn Jankowski, Vice -President, Financial Divorce Specialist, B.A, CFP, FDS, FMA, FCSI
The mention of the Financial Divorce Specialist (“FDS”) designation conjures up various ideas and definitions. What does the designation have to do with the role of the financial planner?
Let’s start with what it is not. An FDS does not replace a lawyer, or negotiate the financial issues around a divorce with a soon-to-be-ex which are, all too often, assumed the responsibility of the FDS. So, what then, does a Financial Divorce Specialist do?
If we were to break it down there are up to three issues to be negotiated when divorcing: children custody, children access and division of the financial pie. When negotiating the financial piece the solution is not as simple as dividing half of every asset. What needs to be divided is net family property. Consequently, assets are allowed to be swapped. For example, RRSP assets can be floated over to the “ex’s” side of the balance sheet in favour of keeping more equity in the family home, especially if it’s an asset you intend to keep. Where an FDS’ expertise is important is how your financial future plans pan out once you give away your existing retirement funds. Have you done a financial budget? Can you afford to keep the house? Are you able to save for the children’s education? What do you need to reconsider with respect to re-writing your Wills and Powers of Attorney? What are your financial goals going forward, on your own?
Let’s look at an example. A wife I was working with had the option of either sharing her pension or paying spousal support along with an equalization transfer of non-registered assets. Through my calculations, we were able to ascertain that keeping her pension whole and opting to pay spousal support, with a cash offset, placed her in a better financial situation rather than sharing her pension. Another wife wanted to keep the family house but she couldn’t afford to keep it on her own. Because the husband also wanted to maintain the family in the home, at least until the children had gone through high school, I calculated that she would be short about $30,000 in net income a year. As a result, the husband agreed that the wife could make up to $30,000 in income before affecting her spousal support. Imagine if she had not retained the services of an FDS and had kept the family home? The youngest child was still in grade 8 so the wife would have been in the house for 5 years with a deficit of $30,000 a year, amounting to a total liability of $150,000!
A focus on the financial piece of a divorce by an FDS provides objectivity, often when emotions are running high. Looking at your financial picture and what it would look like while on your own from a place of objectivity can cause the mind to open to new possibilities, especially if you are aware of the financial effects. Sometimes negotiations can get stalled because one person doesn’t fully understand the financial piece and can’t move forward to agree to anything in the proposed agreement. An FDS can help, through teaching and the sharing of knowledge, the spouse who is “stuck,” continue the negotiations with confidence. I’ve even had a husband hire me to help his wife as he knew she was less confident in her financial knowledge and no longer trusted his advice.
I have often heard people tell me that, because they have retained a lawyer, they don’t want to pay another professional in the divorce proceedings. My question back to them is, “Can you afford not to?”
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