Divorce is one of the greatest threats to our clients’ financial situation, budget and retirement plan. In my 25 years as a Divorce Lawyer, I have found that every person has a unique and different financial situation. Some are unemployed and rely on their spouse for support. Some have all the assets in their own name. Others are carrying lots of personal debt. These days, separating spouses have a greater need for financial advice than in previous times because of their unique financial situation. Divorce Lawyers need to regularly use financial professionals to achieve the best outcomes for their clients facing divorce.
Here are 3 ways that Divorce Lawyers should work closely with Financial Professionals to help families:
One of the very first steps necessary to help a separating spouse is to create an inventory of the assets, debts, incomes and expenses of a family. In Ontario, this involves the completion of a sworn Financial Statement in Ontario Form 13.1. Each spouse needs to complete this form. However, it is complicated, lengthy and confusing. That is why Divorce Lawyers should work closely with a client’s Accountant and Financial Advisor to collect all of the income, tax and financial records to complete the Financial Statement. In high net worth families, often the assets are held in investments, trusts, corporations and partnerships. Sometimes, they are held in the name of other people. In order to ensure that all assets and debts are accounted for, a Divorce Lawyer relies on a client’s Accountant and Financial Advisor to identify each account, credit card and asset for the Financial Statement. An experienced Accountant and Financial Advisor can help clients to gather, understand and organize the information needed to swear their Financial Statement. This is the first step towards a less stressful divorce process and eventual positive outcome for our clients.
2. Financial Planning
Before our clients accept a settlement, we need to create an individualized financial plan in order to provide a roadmap for the client’s future financial health. Running “what if” scenarios is effective at answering financial questions such as: “Am I going to be okay financially in the future?” “When can I retire?” “Will I have enough money to buy a home, travel or plan my daughter’s wedding?” The Divorce Lawyer and Financial Advisor working together are instrumental in helping clients understand the income and assets coming to them long after the divorce date.
Given the complexity of income tax, disposition costs, brokerage fees, registered investment such as RRSP’s and legal costs, there are many hidden costs and considerations when dividing assets. There may be several possible distribution alternatives. A Divorce Lawyer should work closely with an Accountant and Financial Advisor to assess different asset splits, looking at the needs of the spouses, with a focus on tax minimization. After the assets and debts are divided, the attention should turn to considerations such as budgeting, liquidity, retirement, portfolio rebalancing and achieving financial freedom post-divorce. This can be achieved with the right expert advice.
Given the financial complexities of divorce, the Divorce Lawyer, Accountant and Financial Advisor working together early in the process is necessary. Together the team will form an understanding of the client’s investment assets, financial position, budget and future income to achieve a positive financial outcome. This is especially needed for high-net-worth clients. In the end, our clients find the divorce process less challenging and, in fact, empowering. Divorce is not just the end of a chapter. It is the beginning of a new one.Share this article on: