How to Divorce?????

Most people panic when they first divorce and their knee-jerk reaction is to hire a lawyer.  If you have never been through the divorce experience then talking to friends and searching the Internet become places for advice on where to turn.  Unfortunately, hiring your best friend's lawyer who you have heard is good because they are a real fighter may not be your best option.

In a time of overwhelming emotion it is sometimes hard to make a rational decision.  Racked with hurt, guilt or both can sometimes cloud judgement and enforce actions that you will later regret.  I think it is important to understand your choices so that you own your own process rather than meeting a lawyer who, for example, is litigious and finding that you are paying a lot of money for even more grief...grief that you could have avoided.  This may be especially important if you have to continue to co-parent in your post-divorce life.

Some clients prefer the 'per se' method, sometimes referred to as the 'kitchen table' method.  I encourage clients to do this if their conversations are open and honest and they can work together in an agreeable manner.  If they can figure out how to divide things up and they find it agreeable, that's great!  However, I always ask them to get Independent Legal Advice (ILA).  Remember those emotions that cloud one's thinking?  Giving away the house (literally) because you feel that you were responsible for your spouses hurt feelings will turn to regret once you start to work on your own.  ILA ensures that you are covered from a legal perspective and that you are not cheating yourself to what you are rightly due.  It also ensures that you are both signing a contract that you understand and that a professional has helped you to think about other alternatives.  I have had clients divorce using this approach and it works, in some circumstances.

Hiring that 'fighting' lawyer may be a good choice for someone who needs to be represented by a third person because there is an imbalance in the relationship or a huge sense of mistrust.  A litigious lawyer will under turn every possible scenario and fight with vigour....for many hours to represent their client's rights.  Although I am not sure that other alternatives would not work for couples who fit in this category.

Mediation is also a consideration.  Mediation is when a couple will sit with a mediator and place all the issues to be resolved on the table (custody, access and financial issues) and they will try to get the couple to do a little give and take to settle their separation agreement.  The clients come to their own resolve. Mediators can be lawyers but if they are they cannot give legal advice during mediation.  There are also many good mediators who are not lawyers.  My advice for clients who chose this method is to seek ILA once all the issues appear to be settled.

Arbitration is is similar in that the couple discuss their issues with a professional but the arbitrator will decide how to settle the issues.  My opinion is that this is dangerous as the clients do not take ownership in the decision making.  There is also a med/arb solution whereby the couple attempt to settle their difference and whatever they cannot settle is arbitrated for them.

Collaborative divorce is fairly new as it came to Toronto in about the year 2000.  Collaborative lawyers are trained to approach divorce differently than their litigious predecessors.  In a collaborative divorce each person hires a collaborative lawyer and all four meet to discuss the issues.  What is important to note is that all participants must sign a collaborative agreement stating that they will be respectful, honest and forthright.  Sounds civilized, right?  I think this is a great alternative if you are co-parenting after the divorce.  Litigation tends to be more of a shame/blame procedure, in my experience.  Collaboration does not promote hostility which is carried over in your life after the ink on the separation agreement is dry.  What's more is that the collaborative divorce process embraces the interdisciplinary.  Collaboratively trained professionals, other than your family law lawyer, can be involved in your process depending on your needs.  Family professionals can help develop an access plan commonly referred to as a parenting plan.  Financial professionals can help to forecast your financial future with your portion of the assets that are split.  Can you still afford to retire?  Can you afford to keep the house? 

I think it's important to understand that you have choices.  In hiring your best friend's lawyer you may get 'sucked' into a process that isn't really suitable for you.  I would urge you to 'interview' a few lawyers before you make a decision.  If you are looking for a recommendation for a someone to help you with your dispute resolution let me know and I can give you a few referrals.

Locked-In Retirement Accounts

Did you know that you may be able to 'unlock' your Locked-In Retirement Account (LIRA)?  Some people who have worked for a company for a period of time and left may have had a pension plan that they 'took with them' and deposited the funds into their own financial institution to manage on their own.  These funds are invested similar to RRSP's as clients must choose their own investment selections, including asset mix and geographical mix.  These LIRA's will eventually be transferred to Life Income Funds (LIF's) if you reside in Ontario (and some other provinces) to provide a stream of income at retirement with restrictions.  In. other words, you are restricted as to what you can take out annually.  However, if your LIRA is less than the Yearly Maximum Pensionable Earnings (YMPE) then you are able to take the funds out of your LIRA and transfer them to your RRSP.  YMPE for 2010 is $47,200.  Some clients have small LIRA's so moving them to your RRSP's means that you have no restriction as to how much you can take out at retirement!!!

Really want to help your kids understand how it all works?

OK, so you're getting closer and closer to retirement and maybe it's a fleeting thought or maybe it's outright panic but....have you saved enough?  Thinking that most of us do not want to be living in our children's basements at retirement perhaps we can also help our kids to have the answers earlier in life, rather than have history repeat itself.  The moment your young one comes home and says they have a job take 18% of their income from them in a form of savings.  Open a RRSP for them and make a contribution, annually or monthly if there is enought to work with.  There is no age limit to RRSP contributors.  There may be limits on what types of accounts they have in that they cannot 'trade' in the market until they reach the age of majority but they can have a deposit type RRSP at your local bank as long as they have earned income. 

Effective parenting comes from two different directions.  One, you are 'forcing' your children to take an interest in learning about investments.  Believe me, if it's their own money they will soon be asking about mutual funds, stocks, bonds and the like.  The biggest effect, however, is their savings at retirement.  OK, so what 17 year old is thinking about saving for life after 65 especially when there are so many things a young person wants to do NOW!  If you save earlier it is much better than starting later.  For example, a person age 25 saving $5,000 per year will have $1,000,000 at age 65 compared to a 45 year old saving double the amount ($10,000) which will end up with $400,000 at the same age (both based on a consistant 7% return).  That's a valuable difference.  But wait...there's more.  Because your impressionable youngster does not have a big marginal tax rate you needn't deduct the RRSP contribution amount until they start working full-time in their future careers.  You can carry-forward the contribution so that once they start working they can use all or some of all the accumulated contributions when they will receive more of a return for their money.  Also, it may motivate your youngster to contribute to their own RRSP's if they are aware that they can use those funds towards a down payment for their new house.

Now wouldn't that be kinda cool?   Down payment for their new house???? A RRSP account and a learning lesson about how to invest..........???   I think so.......