Divorce now, while you can still can
November 20, 2009
Growing tired of your spouse, but worried about an expensive divorce settlement? Act now, while the economy is still in the dumps, local divorce lawyers advise. Economists say Canada is set for growth in the coming year – so lose your soulmate before your portfolio rebounds all the way back.
See, in Ontario, asset value is determined the date your marriage breaks down, not the date your divorce is finalized. So that means every day your RRSPs increase is another dollar you’re going to have to share, until you give notice you want out of your horrible, horrible mistake.
“Knowledge is a powerful thing,” said Toronto lawyer Lorne Wolfson. “If you don’t have the knowledge, the other spouse may be taking advantage of the law and you might not.”
Divorce rates tend to rise during the recession. But that’s related to financial strain on marriage, not strategic plots, said Jim Stoffman, a family lawyer in Winnipeg.
“I’ve only been doing this 34 years, so go ahead and call me a crazy kid with an idealistic dream,” he said. “But I don’t think most people think that way.”
Stoffman is likely right. But isn’t it fun to think Michael Jordan’s wife Juanita Vanoy knew about the pending subprime meltdown when the couple filed for divorce in 2006? Sure, the couple cited irreconcilable differences, but Vanoy could have cited ripe economic conditions.
After 17 years of sickness, health and Rayovac endorsements, Vanoy walked away with a reported $168 million (U.S.) in a 2007 settlement.
If they had waited another year or two, Michael Jordan’s mutual funds wouldn’t have been so hot in the midst of a crumbling U.S. economy.
If you’re inspired by the settlement, take note: some people, including former lawyer Brian Madigan, find the whole idea a “little abhorrent.”
“You mean, I have to phone my real estate agent to find if the timing is right?” the realtor said. “Like, ‘Oh my god the real estate market is going to go up in the spring, and February is the end of RRSP season, I should lock in the savings?’ ”
Divorce consultant Deborah Moskovitch regularly sees people dealing with differences in their assets between their separation and divorce.
One of her clients separated from his wife three years ago. He makes $150,000 annually and his retired wife makes $50,000.
Since the separation, his assets have increased by $50,000.
He’s just beginning the formal process, and is quite nervous about losing the money, Moskovitch said.
If the date of the marriage breakdown is contested (and it often is), it could mean thousands of dollars for the other party.
“It doesn’t matter if it’s big money or less money. He really wanted to protect his assets and be fair to his wife, but he didn’t want to be looking back saying, `I really didn’t take care of myself,'” Moskovitch said.
Carolyn Ellis, a Toronto divorce coach, went through the process eight years ago.
Ellis said that she and her former husband quickly agreed on a date of separation.
“It was a bit of a subtle point,” she said. “I had done some investigation and thought, this is really important because some of our assets were real estate and stock market.”
“You try to trade off with each other to get some conclusion. The bottom line is sticking to the valuation date is like sticking to the cost of having lawyers. If you want to live and die on every issue, you’re setting yourself up for a longer, more contentious process,” she said.
And not only that – the justice system is paying attention.
In a landmark decision this year, the Ontario Court of Appeal ruled judges can take dramatic changes into account when determining equalization payments, if the difference is “unconscionable.”
The reason for the decision was Harold Serra. He and his wife Barbara separated in 2000, but before their divorce was finalized, his textile company lost between $8 million to $9 million.
In 2007, a judge ruled that he still owed his ex $3.3 million, which was more than his net worth.
The Ontario Court of Appeal overruled that decision in February 2009, and ordered Serra to pay his ex-wife $900,000 in equalization payments.
Whether or not that ruling will apply to you, family lawyer Donald Baker says that strategically ending your marriage is a dangerous game.
“If I have clients in that kind of situation, you know, you just warn them and say, ‘This thing could backfire on you.’ If you have a business in trouble now, if you wait to settle six months from now, or a year from now, it could be in more trouble, and you’ll be stuck with a valuation on valuation day. It is a tricky game to play.