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Helping couples through 'I don't'
Wednesday, April 02, 2003
When a Burnaby, B.C., woman and her husband decided to separate a year ago, they wanted the process to go as smoothly as possible. So they opted for a "collaborative divorce" approach, where both parties and their lawyers sit down throughout the process to try to come up with an amicable agreement.
Yet, she was still scared. "My husband knew so much more about the financial end, I basically knew nothing. I was in the dark about my future. My lawyer said we'd get there eventually and settle the questions, but I wanted answers now," says the woman, who would not be identified.
Last fall, she was able to allay her fears after hearing about a new kind of financial planner, called a certified divorce specialist, who can zero in on the financial issues most at stake when couples split.
The woman consulted Akeela Davis, a certified financial planner and certified divorce specialist in Maple Ridge, B.C., about 40 kilometres from Vancouver.
"She cleared up a lot of uncertainties and showed me how various financial settlements would affect me years down the road. I'm not frightened any more," the woman says.
Introduce yourself to one of the newest helpers for couples splitting up marriages and splitting up assets -- among the most contentious issues they face.
Certified divorce specialists say they are needed because lawyers don't know the financial intricacies and long-term impact of many of the financial decisions that get made when couples go their separate ways.
Why a special certification? There are specific considerations when people divorce which can get complicated and require specialized knowledge, especially in tax law, says Joseph Sloniowski, a family-law lawyer in Welland, Ont.
Mr. Sloniowski has called on divorce specialists three times in the past six months to help resolve a financial impasse. In one case, "the divorce specialist produced graphs that showed if my client got the RRSPs, the actual value of them after paying the tax was 31 per cent less than it appeared. Before I got the advice, I was just guessing," he says.
What certified divorce specialists like Ms. Davis can do is show how various financial scenarios will play out, using computer-generated spreadsheets that take into account how assets will be split and the income and expenses of both parties, post-divorce.
"We never tell a client what to do. We present the options and show the financial impact," says Ms. Davis.
For sure, there's no lack of potential business, with 37 per cent of first-time marriages in Canada now ending in divorce, says Ms. Davis. That fact, combined with growing interest in the collaborative law approach, which typically includes a team of experts in fields like mental health and financial planning, will fuel the industry, Mr. Sloniowski says.
Although a lot of lawyers are opposed, not wanting to relinquish control, collaborative law is growing in popularity, Mr. Sloniowski says. There are now about 250 lawyers practicing it in Ontario.
"Collaborative divorce reduces costs, keeps people out of court and makes the whole process more harmonious," he says.
Most clients who use divorce specialists are women, says Carol Ann Wilson -- a certified financial planner in Boulder, Colo., credited with launching the specialty here and in the United States -- in situations where there is a big disparity between their and their higher-earning husband's incomes.
Many want to hang onto the family home at all costs, and trade away too much to do so, says Ms. Davis. "It can be a big drain without adequate income. It's very expensive to cover the mortgage, taxes and maintenance."
There are many other areas where it's easy to make faulty decisions when you're caught up in an emotional divorce, with little understanding of financial issues, says Linda Cartier, a certified financial planner and divorce specialist in Sudbury, Ont.
Taking RRSPs can seem like a good idea, for instance, but the non-registered assets are often a better choice, says Ms. Cartier, a co-owner with her husband of Financial Decisions Inc., and a trainer in the certified divorce specialist program in Canada.
"In a lot of cases, much of the tax has already been paid on the non-registered holdings and the original investment dollars aren't taxable at all, whereas there can be a big bite out of the RRSPs when it's time to cash in," she says.
The question of how much spousal support will be paid, and for how long, is a big one. "Those paying the support are afraid that it's going to bankrupt them and they'll be the one out on the street, but if they look at our charts, they'll see it isn't so," says Ms. Davis.
The stay-at-home spouse may not be sure whether to seek a larger support payment over a shorter time or a smaller amount for a longer period. Often, it's best to go with the larger payment over a shorter term, to pay for retraining to become self-sufficient, and to break the ties faster, she adds.
Another contentious issue is the value of a pension buyout, when one party considers accepting a lump sum immediately in exchange for a portion of the spouse's pension at retirement.
The true future value of the pension is often underestimated, says Ms. Davis. In many cases, the buyout should be higher or there should be other compensation, such as increased support or a higher share of other assets, she says.
Even the division of assets isn't as straightforward as it first appears.
"The law generally calls for a 50/50 split and accountants will tell you that looks fair, but sometimes it isn't because there's such a disparity in earning power. If one party is going to be struggling to stay afloat, a 60-per-cent or higher amount can be more equitable," says Ms. Wilson.
Some court decisions in Canada have awarded as much as a 70-per-cent share to the spouse with lesser earning power, who may have stayed at home for several years to look after the children, Ms. Wilson says.
Divorce specialists are quick to say that they don't advise clients what to do. Rather, they present them with various scenarios and show the outcomes.
In fact, if they do proffer advice, they leave themselves open to malpractice because it can be construed as legal advice, says Ms. Davis, a fact that many financial planners aren't aware of.
After taking the four-day divorce specialist course and passing exams for accreditation, Ms. Davis also realized it would be a "conflict of interest" to represent one spouse if a couple that had been her clients decided to divorce.
She offers such clients referrals; after the divorce, she can handle their financial affairs again.
There's another conflict within the industry. It's predominantly financial planners who take the divorce specialist courses, but some who work for dealers and sell investments on commission haven't yet been able to take on clients, says Ms. Cartier.
"Because this is on a fee-for-service basis, some of the dealers they work for aren't clear how they would be compensated if they allowed their agents to do this, and the regulations are grey in this area," says Ms. Cartier.
While it may save money in the long run, consulting a certified divorce specialist isn't necessarily cheap. A straightforward case can cost about $500, but many are in the $1,500 to $2,000 range, says Ms. Cartier.
It was money well-spent, according to the Burnaby woman, who says she will consult Ms. Davis again for more suggestions if she and her husband are still unable to resolve their financial differences.
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