A house divided

Clients turn to specialists for help navigating complications of divorce

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It may be tough to put a price tag on love. But a cost can certainly be put on the fallout of love gone wrong -- just ask anyone who has been through a separation and divorce.

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Opinion

Hey there, time traveller!
This article was published 05/02/2011 (5358 days ago), so information in it may no longer be current.

It may be tough to put a price tag on love. But a cost can certainly be put on the fallout of love gone wrong — just ask anyone who has been through a separation and divorce.

And it’s likely not hard to find someone to survey — at least off the record — who has been through this financial and emotional grinder. According to a 2010 report by the Vanier Institute of the Family, 40 per cent of first marriages end in divorce.

From a legal perspective, a divorce is basically the dissolution of a business partnership — only much more complicated. On top of splitting up assets, it often involves parties in volatile emotional states and conflicts over child custody.

SUBMITTED PHOTO 
Family lawyer Seneca Longclaws (left) and certified divorce financial analyst Tesia Brooks (right) specialize in the collaborative divorce process.
SUBMITTED PHOTO Family lawyer Seneca Longclaws (left) and certified divorce financial analyst Tesia Brooks (right) specialize in the collaborative divorce process.

Not only does a matrimonial breakdown often require the unavoidable expertise of lawyers, but even legal eagles these days find themselves lacking the specific skill sets to deal with the complicated financial ramifications of splitting one household into two, says Winnipeg lawyer Calla Coughlin.

“The best way to show clients all their options thoroughly is to have experts in those areas that I’m not, and financial issues are one of those areas,” says the lawyer whose preference is family law. “I’m a legal expert, not a financial one.”

The financial components of a divorce have many variables: tax implications, pension valuations, and calculating future cash flows. For this reason, some lawyers and their clients increasingly call on the services of a certified divorce financial analyst (CDFA).

“There’s a lot more involved in separating than just splitting things down the middle,” Coughlin says. “That means finding a legal expert or whatever other experts are appropriate, like divorce financial experts, to give you a good understanding of where you stand and that you do have choice within your situation.”

Diana Shepherd is a spokeswoman for the Canadian Institute for Divorce Financial Analysts, which provides certification for CDFAs. She says “not all assets are created equal” in a divorce settlement.

But for both client and lawyer, it may be difficult to value assets unless they’re familiar with family law, taxation and finance, and how all three of those aspects intersect.

For instance, some assets, when split, generate a tax bill for one or both spouses, which other assets do not.

“Is it really fair to say, ‘I have $100,000 in cash and this piece of property is worth $100,000, so why don’t you take the property and I’ll take the cash?’ ” Shepherd says. “Well, it’s very different because when you go to sell that property there might be a capital gain on it.”

Winnipeg-based CDFA Tesia Brooks says there are often many different ways to allocate financial assets fairly in a divorce, and an analyst will try to come up with projections 10 or 20 years out to show as best as possible the consequences for one or both parties if they were to accept a proposed settlement.

“There could be half a dozen different ways to make it equitable for both parties,” says Brooks, also a certified financial planner. “If they just look at one proposal, they could find that 10 years down the road, one person is flat broke as a result of the deal and the other has half a million bucks.”

Analysts do not usually make recommendations directly to clients. Instead, they usually “flesh out” what the available options are and pass them on to the lawyer and client, who then decide what path to choose.

“It works well with a lawyer because I can give financial advice but I can’t provide legal advice,” she says.

While they can’t provide advice, Shepherd says analysts — who take a home-study course that usually takes about three months to complete — are provided with the basics of matrimonial law in Canada to help guide their financial recommendations.

“It’s not that they’re ever going to be providing legal advice,” she says. “In fact, they’re specifically prohibited from that unless they’re a lawyer, but at least they’re going to know the ins and outs of how property distribution works in their particular province.”

Often, analysts work with lawyers and clients in what is called the collaborative divorce process, which doesn’t involve litigation.

“This is seen as a kinder, gentler process,” says Shepherd, who is a CDFA.

The collaborative process involves both parties sitting down at the table with their respective lawyers to work out their settlement fairly.

“There’s an official collaborative process in which people actually sign a contract,” says Winnipeg lawyer Seneca Longclaws, adding the two parties are bound by the contract to work together in good faith for a resolution.

All discussions that take place in the collaborative process are deemed “without prejudice” — meaning if the process breaks down, they cannot be used in litigation against either party.

“If you choose to litigate afterward, there is a financial consequence to breaking that process,” Coughlin says.

“You can’t use the lawyers you just had. You have to get a new lawyer.”

While the collaborative process isn’t appropriate in all divorces — both parties must agree to it, which isn’t always the case — it is often one of the least disruptive ways to settle the split-up.

“Litigation is adversarial,” Longclaws says, whereas the collaborative process is all about working together without any hidden agendas.

The collaborative process often does likely add fee costs. Collaborative contracts even often stipulate both parties require the services of financial and family counselling experts. Still, it can be less costly in the long run than a protracted litigation battle that may go on for years, Coughlin says.

And in many cases, working toward a settlement without conflict leads to what will be best for everyone involved, Shepherd says.

“Some people are in the worst emotional state of their lives, and they are making these really big decisions that are going to affect the rest of their life,” she says. “So if you can have a process that doesn’t foster animosity and polarization, it’s likely going to work out more fairly in the end for everyone.”

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