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Understanding Divorce Before it Happens Can Put You on Stronger Financial Footing

By Hailey Eisen

When couples begin to think about separation and divorce, they’re often stressed, emotionally fraught, and overwhelmed. The stress can intensify when the financial implications of ending a relationship are taken into account too.

While no couple enters into a marriage thinking about its potential demise, several elements can contribute to a marriage ending in divorce. Although the number of divorces recorded in 2020 (42,933) was the lowest since 1973, this was likely a result of barriers preventing access to court services during the COVID-19 pandemic. Being prepared for any outcome in a relationship can quell any worries about the future. As such, being aware of your financial and legal position is one of the best things a woman can do early on in a relationship.

Discuss Money Matters Early

Don’t wait for things to get bad to start talking about money. “Transparent conversations about finances and other often uncomfortable topics are a recipe for a healthy relationship,” says Pat Marshall, Director, Wealth Strategies with CIBC Private Wealth. “Keep these conversations going throughout your partnership. If you don’t know where to begin, setting up a meeting with a financial advisor is an excellent place to start.”

For women who have significant wealth, things can get even more complicated. “We know that a lot of women will have money either through generational wealth transfer or through their own entrepreneurial means,” says Marshall. “These women benefit from thinking about how to protect themselves financially in case of divorce.” This can come in the form of a domestic agreement or prenuptial agreement. “Having a legal agreement in place is especially beneficial if the two individuals have different levels of wealth,” Marshall explains. The time to begin these conversations is before marriage. The sooner, the better.

Get the Facts on Separation Laws

When it comes to the division of finances and property, ‘who gets what’ can differ depending on the province or territory where you live. “I find that people get really nervous when it comes to understanding their rights and obligations, and the sooner you speak to a lawyer for reassurance, the better,” says Nathalie Boutet, Managing Partner with Boutet Family Law and Mediation.

As a general rule, the value of any property acquired during the marriage will be split evenly between the spouses. Because marriage is viewed as an equal partnership in the eyes of the law, it doesn’t matter whether a spouse runs the household or works full-time earning all the family income.

Property that was brought into the marriage will belong to the person who brought it in, except for any increases to the value of the property during the marriage. That increase will be split. The only exception is the marital home. Even if you owned that house or condo prior to marriage, if it’s been the place you lived together throughout your marriage, then both spouses have an equal right to that property.

Know Where You Stand Financially

Preparation is key to navigating life’s unexpected turns, especially when it comes to divorce. Having a solid grasp of your financial situation ensures you’re already on firm ground, ready to make informed decisions and move forward with more confidence. “No matter what stage of life [a divorce] occurs in, the first step is always to know where you stand and what you need to carry on with your life,” Marshall says.

Every relationship is unique, and partners often divide domestic responsibilities in a way that suits their dynamic best. It’s common for one partner to take a more significant role in handling banking and money matters, which can work well under normal circumstances. However, when there is a significant life change that requires a thorough understanding of finances, the person who is not familiar with the family’s financial affairs will need extra time and support to become knowledgeable during the legal separation process.

“Some people just aren’t interested in finances and though they are extremely intelligent and successful, they leave the banking and money management to their partner,” says Boutet. “If they divorce and have to produce their financial statements, they often don’t know where to begin.” For this reason, Boutet highly recommends women take the time to educate themselves about their finances early on. “I have a client now who is petrified that she won’t have enough when she moves out on her own after the divorce, and while I know she’ll be just fine from a preliminary review of their financial documents, she needs extra time and support to feel safe.”

Choose Expert Advisors You Trust for Guidance

During separation or divorce, it’s vital for women to have financial clarity and confidence. The right financial advisor — someone with deep expertise who can help you navigate the complexities of this transition – can make a significant difference. “Finding a financial advisor who understands your situation and speaks in a way that you understand is paramount,” says Marshall. “This is a relationship that will benefit you greatly.” Boutet concurs. She enjoys working with financial advisors who can help clients better understand the implications of various settlement proposals that will be exchanged during the legal separation process.

Marshall explains that the same goes for a lawyer. “Please request that your lawyer slows down and involves you in the process. If your lawyer is making you feel less than or is adding additional anxiety, it may be time to switch Your team is an invaluable part of getting through this difficult time.”

Boutet agrees the right lawyer is key, and sometimes that means paying for consults with a few lawyers who practice in different modalities such as lawyers who practice in collaborative law vs litigation. “Once you’ve selected a lawyer you are comfortable with and have been able to understand your rights and obligations, then you will be better able to take the time you need to start grieving and to start attending to the issues that are the most pressing. Sometimes that is building a parenting plan with specialists such as a social worker, or starting to gather the financial information that will be required to separate the assets and to determine support issues.”

Securing Your Financial Independence

Being prepared to navigate different financial situations can significantly influence your independence and security in any relationship. Starting early to understand and manage your finances is ideal, but it’s equally important to know that improving your financial knowledge is possible at any time.

The right advisor can be a pivotal ally in this journey. “It’s best to partner up with someone who can help you by providing objective advice,” Marshall says. By seeking out expert guidance, you pave the way for a future where you are in control, informed, and financially secure.

Because the laws can be difficult to nail down, no couple should assume anything without first consulting a legal professional who specializes in family law. CIBC Private Wealth can provide support through all of life’s transitional moments — both planned and unexpected. If you have inquiries about safeguarding your wealth or would like to explore further, please visit CIBC Private Wealth to find out more.