Myth #1: To be separated, one of the spouses has to be living outside of the family home.
False. How odd! How can that be? I thought being separated meant living apart? For most folks it does, but there is no exact defining moment that applies to all separated couples. It really means on or about the time when two hearts grew very much less fond of one another. These two non-reconciled hearts can be cohabitating in the same home, although not usually sleeping in the same bed.
So what does that mean for the ‘Date of Separation’? Some discussion and agreement is required. Remember when you moved downstairs to the couch? Nothing was said really - you just stopped sleeping in our bed and neither of us minded and sort of understood what it meant. When was that, 3 months ago, 4 months? Your family lawyer or mediator will ask you for your date of separation and you can pick any one day over the last 3 or 4 months.
Myth #2: If one party commits adultery, he/she loses everything.
No, sorry, that’s false too. Canada has a no-fault divorce law. It takes only one to tango, and your spouse doesn’t even have to have been unfaithful for you to seek a divorce. The division of assets and liabilities is not affected by infidelity. Adultery can be relevant if one spouse is seeking a divorce prior to waiting a year after separation, but that’s a different issue.
Myth #3: All marital assets and liabilities MUST be split 50/50.
Wrong again. It’s not the individual assets and liabilities that are split, but the couple’s net worth. The formula is to subtract the total of all family liabilities from the total of all family assets to arrive at the net worth of the family. That’s the number that needs to be split 50/50. Horse-trading of individual assets and liabilities can accomplish much to equal the split, but usually some sort of payment from one to the other is needed. That payment is called the ‘equalization payment’. Just how that is funded can be yet another process; perhaps one remortgages the house, or sells some post-division assets. There is nothing stopping couples from agreeing to a payout period, much like a loan, but most opt for a ‘get it done’ approach and have it paid right away.
Myth #4: For purposes of division, we must value our assets and liabilities as of the ‘Date of Separation’.
Nope, these can be two different dates. It is very common to value assets and liabilities as of the date of separation, but it is not a requirement. Choosing the ‘Date of Valuation or Calculation’ is once again up to you. For example, you might decide that you separated on June 15th, but decide that valuation should be as of December 31st, six months later. Again, most do not have such a long period between separation and valuation, but in some instances there are good reasons to do so. Perhaps there is a business entity of which the value is better determined at year end, or perhaps documentation of other significant values are not readily available until year end. (A little side note here: For income tax filing, be sure to show you are separated as of June 15. The tax office takes a dim view of false statements.) Most of the time, however, couples use the date of separation for the date of calculation. It’s simple and obvious, often a good default way to go in life. Plus you can be granted a divorce a year from your date of separation.
Myth #5: Spousal support must always be paid.
There’s that ’must’ modal again, and you’re probably getting wise to my ploy here: There are few ‘musts’ in divorce. The only mandated support payment is child support which is dictated by Federal Child Support Tables based on incomes, number of children, province of residency, and who they live with at least 40% of the time. Spousal support is not mandatory, but instead is usually part of a negotiation and generally follows what are called The Spousal Support Advisory Guidelines. Many family lawyers and mediators tend to use these guidelines and we are told most judges like to see them followed. Spousal support is tax-sensitive – it is taxable in the hands of the recipient and is a deduction for the payor. Child support payments, on the other hand, are neither taxable nor deductible.
These 5 myths might be the most commonly held misconceptions, but there are many others. Try to remember - divorce is primarily about money and kids. Co-parenting plans are much easier to establish and agree to when you know what your financial future looks like. That future is often proven not to be as gloomy as expected. The old days of taking, or being taken, to the cleaners seems increasingly more properly stuck in the past where it belongs.
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Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.
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