Money Smart
Divorce Mediation

Financially Wise Separation Agreements

Gail Vaz-Oxlade's Guide To

For more than 20 years you have witnessed Gail Vaz-Oxlade’s trademark straight-up money wisdom, both on Radio and Television, most notably as host of TVs Till Debt Do Us Part, Princess and Money Moron. Gail is a multiple time, best-selling financial author, and one of the top Canadian authors of the past decade. Gail brings her common sense wisdom to answer your questions about The Divorce Process in Ontario.

 

Gail Vaz-Oxlade's Guide To

For more than 20 years you have witnessed Gail Vaz-Oxlade’s trademark straight-up money wisdom, both on Radio and Television, most notably as host of TVs Till Debt Do Us Part, Princess and Money Moron. Gail is a multiple time, best-selling financial author, and one of the top Canadian authors of the past decade. Gail brings her common sense wisdom to answer your questions about The Divorce Process in Ontario.

Gail Smile Transparent

An Overview to the Divorce Process in Ontario

Common sense says that your divorce process is about creating a separation plan that allows you and your family to make decisions, protect your interests, and move on with your life. This usually involves a combination of financial disclosure (revealing all of your finances to each other), creating and signing a Separation Agreement that deals with all of the issues and then once all of the contested issues are dealt with, applying for your divorce.

In Ontario there really is no such thing as legally separated….  If you are not divorced, then you are still married, until you are formally divorced.  One year from the Date of Separation you can apply for your Divorce Decree. In the meantime you and your spouse are to use that year to create a Separation Agreement that legally dictates how you will deal with your children, your home, all of your assets, your pensions, debts and any support issues. 

This means that the important document is NOT the Divorce Decree… the most important document is your Separation Agreement.

Your Separation Agreement is likely to be the most important document that you ever sign.  Do not approach this task lightly and do not simply put your faith in the fairness and equanimity of the family court system. The court system is expensive, frightfully over-burdened and often abused.  Below is a simplified road-map of what is involved in the divorce Process in Ontario. 

Determine your

In order to formally start the divorce process, you must clearly tell your partner that it is your intention to separate. The date that you have this discussion will usually become what is called your Date of Separation. This date is very important as it is that date used for valuations, dividing up your stuff, for your financial disclosures, for any support payments, and for your divorce application once you have completed your Separation Agreement. 

 

Financial Disclosures
Financial disclosure is when each spouse gathers a copy of all of their financial information and legally ensures that other spouse has a full reckoning of each’s full financial situation before they make any decisions. This is really, really important!  In order for your Separation Agreement to be not only legal, but also binding and enforceable, there must be full financial disclosure by both spouses. This is because the Province wants to ensure that you made your decisions understanding all of the numbers and comprehending all of the facts.

All financial accounts means disclosing all checking accounts, savings, investments, mutual funds, Pensions and retirement accounts, business valuations, life insurance policies, etc., that you have an interest in as well as a full record of all debts.  The account numbers, the name of the financial institution, and the value as of the date of your separation and the current value must be disclosed. It is one of the most important parts of the divorce process, as the courts can set aside a Separation Agreement if a spouse failed to disclose significant assets or debts.

Gathering and reviewing all of your and your spouse’s financial information is a long and arduous task. Before you swear that your financial statements are true and complete, you NEED to be absolutely sure that you have included everything required. A failure to complete proper financial disclosure is one of the main reasons that Separation Agreements are thrown out in court.

 

Have ALL of Your Pensions Valued
If you have a pension, as part of the Financial Disclosure process, you will need to speak to the Human Resource Department at your place of employment and ask for a pension valuation for family law purposes. To properly value a pension, you are required to get the Family Law valuation of the pension, as your regular statement is not acceptable for the disclosure process. This typically takes a few months from when you speak to your employer about it.

ALL Pensions will be divided in the case of divorce. It is very important to understand that A PENSION VALUATION is very different from a PENSION STATEMENT and it is not unusual for two pensions with similar statement values to have drastically different pension valuations for the purposes of family law. Valuations can be a huge challenge and come with serious tax implications.

 

Get Your Business Valued (if you are self-employed)
If you work for yourself, depending on your business structure, you may be required to value your business or value corporate assets such as vehicles, real estate, or items owned by your company.  If you work for yourself, expect that this will add a layer of complexity to your negotiations for the following reasons:

  • Your true income is likely not reflected by your tax returns because of deductions, write-offs, and exceptions
  • You will be expected to negotiate and determine your real income
  • You will have to agree on the value of the business


Have Your Matrimonial Home Appraised
When you get divorced, the matrimonial home will be sold. It will either be sold to you, your spouse, or to a third-party. If you choose to sell to a third-party, the value of the home will be whatever you can sell it for. However, if you or your spouse choose to buy the other out, you will need to get your home properly appraised by a licensed home appraiser.

Remember that when you do sell your house, the sale funds will be placed in trust with your Real Estate Lawyer (different from a divorce lawyer). As a Separation File, your sale funds will not but released until there is a a proper and legal Separation Agreement in place that tells them how to divide the money.

Negotiate Your Parenting Plan and determine Child Support
You and your spouse will need to formalize where your children will live and how each parent will have access to the children. You will need to coordinate GST/HST and Canada Child Benefit credits, create a benefits plan detailing how medical, dental, optical, and other expenses are paid, and determine how special or extraordinary expenses will be paid.

In Ontario, child support is considered to be the right of the child rather than a right of the parent, and both parents must contribute. You cannot opt out of paying child support and you cannot negotiate a different amount without special cause. The amount paid is made up of a monthly amount derived from the Ontario Child Support Guidelines, known as the table amount. The only factors that influence child support are the payor’s income, the number of children, and the province where the payor lives.

Making the Decision

Separating is not an easy decision and one that can't be taken lightly. Before you begin any formal divorce process, you will need to end the relationship with your spouse and determine that there is no possibility of reconciliation. This may mean the two of you going to marriage counseling.

In many cases, the one who initiates the decision to separate has been thinking about separation for months if not years whereas the non-initiating spouse may have just learned about it. If you are the initiating spouse, be aware that your soon to be ex may need some time to come to terms with the decision.

Divorce brings out all kinds of fears in people. Your spouse may need a bit of time to process what you have just told them.

Choose Your

When you prepare a Separation Agreement, you do not need to go to court to negotiate your personal matters. In the majority of situations, it will be significantly faster and way less expensive if you and your spouse can negotiate without involving the court. In fact, the average cost of a contested divorce in Ontario is nearly $27,000. If you decide that you are going to drag your spouse to trial you can expect that you are going to pay on average nearly $45,000.

Typically people consider one of 4 negotiation options to deal with their Separation Agreement:

1) Litigation Lawyers
2) Divorce Mediation
3) Collaborative Negotiations
4) DIY (Do It Yourself)

Divorce Fear #74

Homemade Separation Agreements

Do-It-Yourself Separation Agreements may seem like a cost-effective option, but a poorly prepared agreement can cost BIG TIME in the long run, trying to fix what was not prepared properly from the beginning.

Here's the thing most people don't get about those people who end up down at the Family Law Court. While some court cases involve couples who refuse to agree on anything, just as many are the result of bad homemade separation agreements that were thrown out of court and had to be re-litigated.

GENERATE YOUR SEPARATION ANALYSIS REPORT

Every couple faces unique challenges.
Understand how separation will affect you,
your children, your finances and your future.

DO NOT BEGIN NEGOTIATIONS UNTIL
Negotiate and Determine

The law views marriage as a partnership, which means that when you marry there is no such thing as “your income” and “my income”. There is only the combined and shared household income earned as a couple. The government has suggested high and low guidelines to help you calculate what the amount of support should be.

Spousal support should always be properly calculated and clearly understood by both you and your spouse. You have options as to how you would receive support, such as lump sum or monthly installments over a few years. Each has very different financial, legal, and emotional implications.

Always remember that spousal support can be a double-edged sword, as more is not necessarily better. There are tax, benefits, and mortgage implications attached to the amount of support that is paid or received. In fact, recent changes to lending rules have led some banks to refuse mortgages to individuals where spousal support makes up over 30% of their income.

Do I Really Need

One of the other main reasons Separation Agreements are thrown out by the court is that one or both spouses didn't understand the consequences of the agreement they signed. When each spouse receives independent legal advice (and remember that by law, a lawyer can only represent one spouse), the lawyer will explain all aspects of the agreement and how it will affect their lives moving forward. They will also point out any troubling or illegal clauses that would otherwise invalidate the agreement.

Negotiate how you will divide your assets and debts
You will need to decide how you will split all of your assets and debts that you have accumulated over the course of your relationship. Remember, there is no such thing as “your stuff” and “my stuff” when you are married. By getting married, you have chosen to combine your finances, which includes all of the possessions you shared in during marriage. The key to dividing assets is not worrying about who gets what, but is instead about protecting your money from excessive taxation.

The Matrimonial Home
In Ontario, if you are married, both spouses have the right to share in the equity of the matrimonial home that was incurred while you were married. No, it doesn’t matter whose name is on the deed, even if one of you owned the home before you were married. First thing you must figure out is whether you or your spouse will buy the other out, or if you will sell the home to a third-party. Whether you decide to sell the home or buy out your spouse, you will need to qualify for a new mortgage when you purchase the new home or refinance the matrimonial home. Working with a financial professional will ensure that you are set up to qualify for the new mortgage and won’t have to tear up your agreement if you realize you don’t.

Investments & Debts
All investments in your name, your spouse’s name, and jointly will be equalized between the two of you. This does not mean that you simply take everything and divide by two. There are very real financial and tax implications involved with the splitting assets and debts, especially when it comes to financial investments. You will want to take into consideration the differences between market value, book value, and cash value of an investment as well as the value after taxes. For many people, retaining a financial professional that specializes in divorce, who will assist you with the division of investment assets, is well worth the cost.  Similarly with debts, depending on whose name the debt is registered against, you may still be liable to repay a debt that is in your name even if your spouse has agreed to pay it, therefore they need to be dealt with properly and legally.

 

Apply for your Uncontested Divorce
Once you have dealt with all of the issues above and completed your Separation Agreement, you can apply to the court for an uncontested divorce. The court is the only institution that has the power to officially grant your divorce. You will need to have lived in Ontario for over one year, be separated from your spouse for at least one year, and must file at the court in the municipality where you or your spouse live.

Gail: The Separation Agreement is the most important document you will create, and your focus should be on that before you think about the formality of going through with a divorce. However, there are some reasons why you will want to get the divorced once that is completed. One of the more important reasons is that Ontario does not distinguish between “married” and “separated”, which means that until you are divorced you are still considered to be married to your spouse in the eyes of the law. One of the implications of this is that, regardless of what your Will states or the fact that you have separated, your spouse will be entitled to a portion of your estate. Another reason to consider divorce is that, in Ontario, you cannot re-marry until you have divorced. The last main reason is that, as their legal spouse, there is a possibility you may be liable for debts that they incur down the line.

What Do I Do First? What Do I Do Next?

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AGREEMENT
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The Divorce Process

Realistically, In Ontario, here is what you can expect from the various legal and divorce processes.  There are positives and negatives to each.  Your challenge is to find a divorce process that works best for you, keeping your children and your finances in mind.

Increasingly the norm divorce process in Ontario, for most people, Mediation is the best way to go.  In fact all courts in Ontario now require that every individual attend a mandatory information session that will explain mediation and other options to you, before you can attempt to litigate.  Typically the fastest and most cost effective divorce process, mediation provides a confidential, non-adversarial process through which divorcing spouses can negotiate their own settlement with the aid of an impartial third-party.  There are mediators that are lawyers and there are mediators that are non-lawyers, with huge arguments over which are better.  The skills that make on a good mediator are very different from the skills that make one a good lawyer….

  • COST: Good Family mediators will cost between $200 and $350 per hour.  Expect that most couples will require 12 to 25 hours to complete their Divorce Agreement.
  • TIME: Mediation is very dependent on you and your spouse.  As you are dealing with only one professional, often a mediator is able to move at a pace established by you.  Still realistically, plan that your mediation will take 2 to 5 months to complete (often simply because you are waiting for documents to arrive.)
  • POSITIVES: Without a doubt faster and cheaper than all of the other processes.  Mediation statistically has the highest stick factor, meaning that Agreements created in mediation tend to last more than the others, probably because this is an agreement that you and your spouse agreed to together.
  • NEGATIVES: Because people know that mediation is cheaper and faster, they try to stick unrealistic situations into mediation.  Mediation is not for everyone or every situation.  There are some divorce cases that require different approaches and yes those different approaches are not going to be cheaper and are not going to be faster. 
  • OTHER THINGS TO ASK ABOUT: Your mediator will be advising you to receive independent legal advice (ILA), which is NOT included in the price of most mediation packages. Make sure you ask how long it takes your mediator to draft your agreement.  Some mediators can draft this in an hour and others require many hours.  Being a good mediator does not mean that they are quick on the computer, and this drafting is billable hours that you will pay for. 

 A Collaborative divorce process is where you and your spouse work with a team of lawyers and other professionals as needed to keep your divorce negotiations on track and out of court.  Basically you and your sit at the same table with each of your lawyers and negotiate all of the issues together.  If you need special assistance with issues like your children, parenting plans or your finances, other professionals can be brought in to assist the negotiations.

  • COST: In Ontario most collaborative lawyers will charge somewhere between $275 and $550 per hour.  Expect that most couples will require 20 to 35 hours to complete their Divorce Agreement and that you will each pay for your own lawyer.
  • TIME: Collaboration is not as fast as mediation but certainly faster than litigation.  Typically the biggest challenge of collaborative law  is getting 4 busy people (you your spouse and your two lawyers) together in the same room at the same time.  Saying this, expect that competing your divorce process through a collaborative process will take about 6 to 8 months.
  • POSITIVES: Without a doubt faster and cheaper than litigation and court, collaboration works for individuals that have a lot of details to deal with or who’s acrimony level is getting up there.
  • NEGATIVES: Collaborative law is very trendy lately and a lot of litigation lawyers are seeing the business potential and taking 2 week courses to become “collaborative lawyers“.  But hanging a shiny, new title on the front door does not a collaborative lawyer make.  A true collaborative lawyer requires a very different set of skills and negotiation style from your typical rottweiler,  litigation lawyer.  Make sure your collaborative lawyer really is… well collaborative.
  • OTHER THINGS TO ASK ABOUT: Find out whether your lawyers will be signing a collaborative agreement.  Basically this means that your lawyers agree that going to court is not an option in this negotiation process and that should this file does go to court, both lawyers must resign in order to avoid any conflicts of interest.
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Bag Lady Syndrome
(syn) or 'Street Guy Syndrome'
NOUN - The fear that one will become financially destitute after a divorce.
Family Mediation with a Financial Twist
“For most people divorce is less about legalities and more about finances, tax implications and making smart money decisions. This is why we started The Common Sense Divorce." – Gail Vaz-Oxlade

a litigation divorce process means that you are hiring a litigation lawyer to represent you in your negotiations with your spouse. Your spouse will hire their own litigation lawyer and the two lawyers will negotiate back and forth.  When you hire a litagation lawyer, typically your lawyer will try to negotiate without going to court, but will approach the courts to deal with various issues along the way.  If you do go to court, typically the judge will send you and your spouse to a case conference meeting or a case settlement which is essentially a form of mediation or collaboration.  VERY rarely do people actually go to court as in go to trial, first because it is VERY expensive, takes months if not years to get there and is typically the most acrimonious of processes. 

  • COST: Litigation lawyers are the traditional norm that most people think of first when facing a divorce.  Established litigation lawyers in Ontario will charge somewhere between $275 and $600 per hour.  Expect that most couples will require 20 to 35 hours to complete their Divorce Agreement and that you will each pay for your own lawyer.  Your litigation lawyer will typically require an INITIAL RETAINER of about $3,000 to $5000 and you will likely refill this retainer 2 or 3 more times.
  • TIME: Plan 9 months to 2 years (more if you go to trial). Litigation law is without a doubt the slowest process, but for a number of reasons.  Because you have chosen to litigate, everything must be done according to a proper process.  This means that letters must be sent back and forth and everything tracked.  Each side will be afforded a number of weeks to respond.
  • POSITIVES: If your spouse is being completely unreasonable or you cannot get them to respond, litigation may be your only option.  Let’s face it nothing gets someone’s attention like a strongly worded letter from a lawyer, followed by a meeting with the court if necessary.
  • NEGATIVES: Without a doubt, if you want to waste money spanking your spouse, there are litigation lawyers that will gladly take your money… and a lot of it.  People often let their emotions run wild during divorce and like to use their lawyers like a baseball bat.  In reality most people run out of money in the midst of doing the legal due diligence process and it can seem like nothing was actually accomplished.
  • OTHER THINGS TO ASK ABOUT: Understand how they communicate.  If they are in court all day, they will not be answering your phone calls.  How do they bill?  Most lawyers bill everything at 6 minute increments which means that it you are paying them $400 per hour, reading your 2 line email, just cost you $40.  Lastly cheaper is not necessarily cheaper and more expensive is not necessarily better.  Lawyer rates go up with each year they are in business.  There are $500 an hour lawyers that can do more in one hour than a $275 lawyer can do in 3 hours.  Conversely you can be paying a $500 an hour for a lawyer to write things out on paper simply because they are old school and don’t know how to use a computer.

Do It Yourself (DIY) & Self-Represented Litigators

As the internet has grown so has the increase in individuals wanting to either create their own separation agreement or represent themselves in court.  You can now buy separation agreement templates online and in some Ontario courthouses, self-represented litigants make up as much as almost half of the court’s dockets.  Typically people are choosing a DIY divorce process for a number of reasons, ranging from trying to save money, to I dislike lawyers, to full fledged intentions to manipulate or cheat their spouse.

  • COST: Depending on what it is that you are attempting, there is a place to save money doing DIY.  For instance creating and filing your own Uncontested Divorce or other court documents can save you hundreds of dollars if you are willing to do the running around. Other DIY technologies are now helping people to prepare Parenting Plans and file their Financial Disclosures saving them numerous billable legal hours.  Still when it comes to preparing a separation agreement or litigating in court, the market remains buyer beware as research has confirmed that most DIY files end up spending more in the long run, and having to hire litigation lawyers to fix what was not done properly to begin with.
  • TIME: Seemingly DIY means that people can fly through their separation in weeks or months.  In realty DIY files have consistently proven to be the longest and most convoluted files when viewed in the big picture.
  • POSITIVES: If you and your spouse can work together there are a number of DIY processes that can drastically reduce the overall cost of your file.  Consider using DIY technologies to help you organize your financial disclosure and to manage your parenting arrangements.
  • NEGATIVES: You get what you pay for.
  • OTHER THINGS TO ASK ABOUT: Your Separation Agreement will likely be the most important document that you ever sign.  Ensure that it is prepared properly, legally and is enforceable going forward.  Remember that having a lawyer notarize your homemade agreement does not constitute independent legal advice and in reality means nothing.

What To Expect When You Call The Common Sense Divorce

Separation Agreement

Not everyone is ready to talk with someone in person.  You can call the Common Sense Divorce at anytime and hear a pre-recorded 2 min message about our services.

We will gladly take the time to speak with you about our services and the divorce process in Ontario.  The Common Sense Divorce offers a free 20 min telephone assessment and consultation.

We understand that this is a difficult time and calling us is a big step.  We are going to work hard to make this phone call easier, make you feel at ease and make sure that we respect your privacy.

We understand that you may be just researching and have not made any decisions.  We do not assume that because you are calling, that this means you are divorcing.

Do both parties have to use the Common Sense Divorce?
No it is not necessary for both parties to use the Common Sense Divorce, though it would be beneficial, make available the greater amount of options and be the most cost-effective for both individuals.  Where both parties are using the Common Sense Divorce, independent legal advice will be offered to each.

My partner and I are not amicable with each other, can we still use the Common Sense Divorce?  It is generally assumed that most partners facing divorce are not amicable with each other. Yet the Common Sense Divorce was designed to be just that… “Common Sense.”  Know that our professional team is trained to deal with conflict and to facilitate a resolution.

Does the Common Sense Divorce use lawyers? The Common Sense Divorce partners with expert mediators, lawyers, legal aids and counsellors that are committed to the Common Sense process.

Do I have to retain a Family Lawyer in order to divorce in Ontario?
No you are not required to use a lawyer in Ontario.  Still common sense says that legal advice is prudent.  The Common Sense Divorce includes expert legal services including, family lawyers, self facilitated legal services and  independent legal advice.

RESEARCHING?

Separation Agreements

Spousal Support

Family Mediation

Child Support

Divorce in Ontario

Amicable Divorce

The Matrimonial Home

Certified Divorce Financial Analyst

Same Sex Divorce

Divorce And Your Money

Pension Valuations

Divorce and Taxes

More Common Sense Divorce Locations:

North York

Mississauga

Scarborough

Toronto

Kitchener/Waterloo

Newmarket