Calculating Family Property in a Divorce
When couples are divorcing, it is important to understand that they are unravelling years of both emotional and financial investments. The calculations that are being made are not just “dollars and cents”; they are also the hopes and dreams of a shared future and the memories of good times when milestones were celebrated. However, when things go wrong in a marriage, the couple’s attention eventually turns into a variety of financial calculations that they know are inevitable. The reason that finances are used to decide the value of things is because money is divisible, quantifiable and is the most convenient way to figure out the fairest way to come to an agreement.
When working through the details of dividing property in a divorce, there is much to consider. In the book, “Surviving Your Divorce – A Guide to Canadian Family Law by Michael G. Cochrane, L.L.B. 1999, Legal Intel, Toronto, Ontario, the author dedicates several chapters to describing and defining what property is. Property, for the most part, includes all real and private property and all interests in property. The best way to approach the division of property is to include everything that was bought by either of you between the date of cohabitation and the date you are separated – wherever the property is in the world. Property can include many things such as:
- household contents
- vehicles
- art collections
- pensions and retirement savings
- cash
- severance payments
- credit card/airline points.
- heirlooms
- pets
- etc., etc., etc.
The other side of what you, as a couple, have, is debt. Consider these examples:
- mortgages
- collateral mortgages
- loans from family members
- judgement by creditors
- credit cards
- car leases
- costs of selling assets (e.g., real estate commissions)
- taxes owed
- etc., etc., etc.
There can be property that can be excluded or exempted from the calculation. Here is a brief list of things that are often outside the realm of the division of assets.
- any property owned in advance of the marriage and brought into the marriage.
- a gift or inheritance received during the marriage.
- family heirlooms and antiques.
- property exempted by virtue of a marriage contract.
- property that was bought after the date of separation.
- gifts from one spouse to the other.
- personal items such as clothing, basic jewelry, sports equipment.
- etc., etc., etc.
For couples working out the details of their divorce, coming to terms with full disclosure of these three areas is usually the most difficult for each person. It has been my experience when collaborating with clients during this first phase of information gathering that helping them find the required information is most useful. Many couples have terrible record-keeping systems or in most cases, one person knows where the statements are kept and the other is oblivious to the financial details of their household. In a few instances, the person most knowledgeable about the family finances had taken or destroyed the statements out of spite.
If a couple are determined to divorce, the smartest and most cost-effective way to achieve this end is to make things as clean and tidy as possible. Most divorces cost too much money because time is wasted looking for information or fighting over bad or incomplete information.
In a recent case that I took part in as a Chartered Financial Divorce Specialist, the person who oversaw the finances had created over 23 different joint accounts. The person had accounts for clothing, vacation, car savings and car maintenance to name but four accounts. The other person, who was self-employed, relied totally on a bookkeeper who worked for the accountant.
The pedantic man was easy to work with once one came to terms with the 23 statements. The other person was more difficult to work with because she would not provide the necessary work except for a few incomplete bank statements. The case dragged on for six months because of her desire to withhold information. In short, the actual work to decide what was to be divided was not that difficult. The difficulty was convincing the self-employed person to be forthcoming of actual business activities.
What is the lesson of all this work? From my experience, people who cannot or will not share financial information in a prompt and complete manner have reasons that sense only to themselves. When they get around to sharing, either willingly or by compelled by the courts, the actual work done by the professionals can be done quite easily.
