Your marriage might not have lasted, but your money can. Here's how to have a financially friendly divorce

Your marriage is over and your financial future is top of mind.

Here’s my best advice to ensure you and your ex hold on to as much money as possible.

Get organized, together

Your goal is to identify all assets and liabilities, first. This will help to establish your household net worth at the official date of separation. It’s also referred to as a net family property statement. 

That means listing every single account and associated balance at that time of separation, and getting a professional assessment of any real estate assets. Indicate insurance policies, pensions, investment accounts as well as shared accounts for children such as RESPs.

If a business is involved, having the financial statements and possibly a recent valuation is important (business valuators may need to be hired to perform this assessment if it’s never been done before, or if too much time has passed since the last assessment).

I like to recommend the couple identify account numbers for each item, to help expedite any eventual financial exchanges that might happen.

Next steps are to gather your respective Notices of Assessment and current employment income. An employer can provide a statement of employment that states the base salary as well as any potential bonus or commission potential. If there are essential expenses to support the children of the marriage, those also need to be listed out and include core essentials plus things like orthodontic costs or activity camps. All of this information helps formulate appropriate support payment levels, if applicable.

If this is a tricky task for the two of you to compile and organize, consider hiring a Certified Divorce Financial Analyst (CDFA), mediator or a money coach who has a background in mediation. Certainly, lawyers can also help with this step, but that will cost more than these alternative professionals.

If cohabitation agreements or pre-nups were in place, gather copies of those docs, too. 

If you’re not on talking terms with your ex, the alternative is to compile this information through a third party mediator or lawyers.

The more disorganized and less transparent the couple is, the more expensive, time consuming and emotionally destructive the financial disclosure process will be. 

Once your financials are pulled together, it’s time to negotiate

A separation agreement is typically drawn up once the parties are satisfied with the negotiations around splitting property, confirming support payments (spousal and child support, if applicable) and defining custody arrangements for children and pets. A mediator or lawyer can draft this agreement for you or you can DIY it, but you’ll both want to get independent legal advice before you sign.

In my experience negotiations proceed more easily when each partner has given some thought to what is most important to their lives going forward. 

Think about what matters most in your new life as a single person; then negotiate in support of that vision. For example, you may want to send your kids to the best universities, travel by using up the airline points you both collected over the years, more free time in your life, which could require moving house in an effort to reduce commuting.

Your wish could also simply be to launch into your new life having had a fair divorce. In addition to negotiating for financial fairness, your lawyer or mediator can use this vision to try and get you the best outcome possible. If you’re not going that route, and want to DIY your negotiations, this can be as easy as telling your ex what you want, and vice versa.

Asset transfers typically happen after the separation agreement is signed.

If you’re paying support payments, or receiving them, moving to a new home, or staying put, a complete redo of your budget is in order. Chances are you’re going to have less money going forward. If your costs are not adjusted, you may fall into debt.

Using whatever budget template you like, line up the new sources of income (or lack thereof), and offset that with revised costs that encompass basic needs such as rent and groceries, and variable expenses for interest payments on lines of credit or personal wellness spending (you’ll probably need to add a line for therapy).

If you’re paying child support, add that to your budget. If you’ve wound up with a pile of debt after the divorce, include payments towards it. Contributions to RRSPs and TFSAs can be incorporated, and I recommend meeting with your financial adviser to work on what makes sense for you now that you’re single. That professional will also be able to build you a new retirement plan.

A new budget is like an opportunity to hit the reset button, and it can be very helpful to get practical about your new financial reality.

Having negotiated many separations and divorces, the key to retaining as much money as possible is to be fair, transparent and amicable with each other. Do whatever you can to keep your emotions at bay, so that you can protect yourselves and your respective future finances, and keep the needs of any children involved top-of mind. Both parties will need to compromise here and there.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.