+ How to Answer the Question; What is My Divorce/Separat ion Going to Cost? James Jeffcott
+ Four Aspects: � Legal � Tax � Costs � Process Costs
Hypothetical � Jim � 40 � lawyer (employed) - $100,000 � Laura � 38 � lobbyist (employed) - $60,000 + � married 15 years; together 20 years � marriage contract excluding family business � 2 kids � 10 & 7
+ Legal Support Child Support � Entitlement � basically the � Calculating incomes child or the person with � Key to determining whom the child lives primarily is entitled to support support from a parent of the � Income is different child depending on what we � The obligation continues are looking at as long as the child is � a � For example, taxable child of the marriage or relationship � income is not the same as income for the � Child support always comes purposes of child first before any other obligation support
+ Legal Child Support � Table Support � Based on the Child Support Guidelines � Tables consider the number of children and the income of the payor - table gives us the amount � If the child lives primarily with one parent, the table amount is the amount the payor pays � If shared time (at least 40% of the time), the table amount or up to the table amount is paid � If split time (one or more child with each), then set-off the table amount for each party
+ Legal S. 7 Expenses � In addition to the table support � Doesn � t matter how much time each person spends with the child � 4 categories: � child care, health and medical, school, extra-curricular � All have to be special or extraordinary and these are outlined *Guidelines are statutory � they are mandatory*
+ Legal Spousal Support � Entitlement - depends on � Three types: whether married or � Contractual unmarried � Compensatory � If married the obligation is automatic � Means and needs of the parties (non- � If unmarried one has to compensatory) live with the other person for at least 3 years before � Factors � there are an obligation is incurred innumerable factors to consider in determining the support amount and duration
+ Legal Spousal Support � SSAGs establish a range of � Spousal Support Advisory support based on Guidelines comparison of after tax � after support income (net � Contrast with Child disposable income) Support Guidelines � they are not mandatory � � Duration is indefinite � just provide a depends on the recommended range of circumstances � length of support the marriage/cohabitation is key � Two formulas: � Enforcement � won � t deal with here � a whole other � With children topic � Without children
+ Legal Property � Entitlement - depends on whether married or unmarried � Married � we assume that the parties will share equally in the assets they have accumulated during the marriage � Unmarried � depends much more on the intentions of the parties and the extent to which they contribute to the wealth of the other and the extent to which they combine their wealth during the cohabitation � Equalization � Married � they equalize their Net Family Property � Unmarried � they divide based on their respective contributions
+ Legal Property � We divide values, not things (with some exceptions) � We have special rules for: � Matrimonial Home � Pensions � Jointly-owned property � Gifts and damages (including inheritances)
Taxes Support Payments � Spousal support is deductible if periodic + � Spousal support is not deductible if lump sum � Child support is not taxable � Retroactive support can be deducted up to one tax year before the order or agreement which provides for retroactive support
Taxes Collecting Support � General rule + � One can deduct costs of obtaining or enforcing support payments if it is the recipient � The payor cannot deduct expenses
Taxes Deductions and Credits � Spousal Credit (not available if separated) � Eligible Dependent Credit (if no spouse can claim for a related dependent) � Adoption Credit + � Children Fitness Tax Credit � Child Care Expense Deduction � Child Tax Benefit � Universal Child Care Benefit � Tuition and Education Credits � Pension Income Splitting
Taxes Property Transfers After Separation � Capital Gains and Losses � Principal Residence Exemption � can be claimed on disposition � if joint, has to be + claimed by both � Family Businesses � complicated � need advice � Pensions and RRSPs can be transferred to a spouse on a tax-free basis
+ Costs Legal Fees Other Party � Charged by each lawyer � Decided by the court � Usually an hourly rate � General rule: loser pays � No contingency fees are � Offers could affect that � try permitted to encourage early settlement � Some block fees � ie uncontested divorce � Also used to punish bad behaviour or failure to � Key drivers of cost = comply with rules conflict and complication
+ Costs Court Fees Personal Costs � Filing fees � Time consuming � Fees to obtain a divorce � Stressful � Incidentals (the service of � Damage to relationships documents)
+ � Negotiation � Mediation Process � Collaborative Practice Options � Arbitration � Litigation
+ Role of the Financial Professional � Act as financial neutral in a negotiation process � Provide consultative professional services to the parties about financial issues
+ Questions or Comments �
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