Divorces are challenging on many levels, but from a financial standpoint, they can be extremely stressful and even disastrous. To help you navigate the financial portion of your divorce, consider hiring outside help. In addition to your divorce lawyer, you may want to schedule some time to meet with the following three financial professionals:
1. Mediator or Arbitrator
Even happily married couples sometimes argue about money, but when you are in the midst of a divorce, those arguments typically become more intense and harder to resolve. As a result, compromises and solutions become elusive. Mediators and arbitrators help to keep financial conversation on track, and they help you and your spouse find financial agreements that are in the best interest of both parties.
Mediators simply add an unbiased third point of view to the debate, and they help steer you toward solutions. Arbitrators have a similar role, but unlike mediators, arbitrators have the power to impose their decisions. If you feel you need help coming up with ideas and comprises, a mediator may be the best option for you. In contrast, if you and your partner can never agree on anything – regardless of how fair it seems – you may prefer an arbitrator to impose good ideas on you.
2. Credit Counsellor
In addition to splitting up your assets, you need to split up your debts before you split completely. Depending on several factors such as your total debt and your debt-to-income ratio, this job can be extremely challenging, and the way you split up your debts can have consequences for years to come.
For instance, if you have a debt in both of your names and one partner agrees to pay it, you can detail that agreement in your divorce settlement. However, if that partner stops paying the debt, it may still become the responsibility of the other party. Regardless of who is or isn't taking care of the debt, it still shows up on both parties' credit reports. Ideally, you do not want your credit report connected to your ex-partner's ability to repay a debt.
If possible, you should split your debts in a way that you are responsible for everything in your name and your spouse is responsible for everything in his or her name. Shifting the debts around in this way may require you to take out a consolidation loan or transferring balances from one credit card to another.
Credit counselling services can help you with the ideas discussed above, and a credit counsellor can help you figure out the best way to get out of debt. Most importantly, he or she can help you come up with a budget plan that works with your projected post-divorce income. If you ultimately enroll in a credit management plan, that will show up on your credit report, but the initial meetings with the credit counsellor do not appear on your report.
3. Tax Accountant
The third and final financial professional you may want to see during a divorce is a tax accountant. The way you split up certain assets through your divorce can have huge tax implications. For example, if you withdraw from your RRIF to split your retirement savings with your spouse, you need to fill out a special CRA (Canada Revenue Agency) form to ensure you are not assessed a tax penalty for early withdrawals. Similarly, a tax accountant can also help you with issues such as splitting up your Canada Pension Plan (CPP) credits. If you own a business, a tax accountant can also help you wade through the tax-issues related to splitting up that, and they can also help you file your taxes, which is especially useful if you need to claim as married for part of the year and divorced for the rest.