How to protect yourself financially from divorce

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In Canada, about four in 10 marriages end in divorce. But breaking up could cost you a lot more than heartache. Melissa Leong, personal finance writer at the Financial Post, has a few tips to help us protect ourselves financially in the event of a divorce.

How much does a divorce cost in Canada?

Let’s address the legal costs first. An uncontested divorce (one where both parties agree on all issues) ranges from $800 to $1600, according to a recent legal fees survey.

A contested divorce, meanwhile, can cost between $5,700 to $34,000 bucks. If your case goes to court, you could face higher legal fees than that and this is before any child or spousal support is factored in.

How much spousal support can you ask for?

You can try to negotiate this amount with your ex otherwise, the court will look at tons of factors to decide if and how much spousal support you should get: how long you lived together, the division of labour, the care of the children, etc. Judges must consider how to compensate the spouse with the lower income for sacrificing some power to earn income during the marriage.

One of the first things anyone should do when you are separating is figure out your financial present and future. Write down your income and expenses and how much you’ll spend on transportation, clothes, cars, home insurance, etc. That will help you figure out what you need to live on going forward.

A lot of women tend to be attached to the home and leave liquid assets to the former spouse. But this could leave you house rich and cash poor without a plan for the future. You need liquid money to survive.



What are some tips to help you save money in a divorce?

Firstly, watch your interactions with your lawyer. She is not your girlfriend. She isn’t your counselor or support group member. Do not call her to rant about what a huge butt-head your ex is. She’ll be happy to chat with you but it’ll cost you $400 an hour. She’ll reply to your emails but it’s $50 per email. Write all of your questions down and ask them at once.

How else can you cut your legal fees?

Stay out of court. Consider other ways. Opt for a neutral mediator who will help both parties come to an agreement, or use the collaborative process. In this case, both you and your former partner find collaborative lawyers who agree to help you reach a settlement out of court.

How can a marriage contract help?

A marriage contract, which is more commonly known as a prenuptial agreement, is a good way to protect yourself.

Even common-law couples should consider a cohabitation agreement that will outline who gets what in the event of a split. For about $800 to $1,500, you can create a document that could save you money and stress in the future.

What happens in Canada to the assets of a couple who start a business together or invent something during their marriage and then split up?

Business assets are complex but if a business belongs to both people, it would generally be divided upon divorce.

But let’s say you had a business before the marriage began, when you split, you might have to share the increase in value or if the spouse helped with the business, a judge might say it is a marital asset and split the business.

Read more of Melissa's advice in the Financial Post and follow her on Twitter @lisleong.

 

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