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How To Prepare For Divorce in British Columbia

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When you prepare for divorce in advance you are well ahead of the game. You are not only saving time and money but understanding exactly your financial position and how things will stand once the separation and divorce proceedings are completed.

Clarity is key to your pre divorce preparation and will lead to you being empowered to make the right decisions. Doing a little background work to understand and protect your finances is important. There is no shame in it. However, I know that otherwise intelligent, well-educated clients of mine will often have no idea about their financial circumstances. It leaves them vulnerable and can be very costly.

Foundational preparation is the key to having you gain clarity for your path forward.

Despite this, I am constantly amazed that so many people have done little or no preparation when initially consulting with me. Initial preparation with a divorce financial checklist saves you and your lawyer oodles of time thus significantly reducing the amount of your investment in legal fees.

Regardless of whether or not you retain a lawyer, foundational preparation is the key to having you gain clarity for your path forward.

Because this is likely your first separation or divorce, you probably have only an inkling of an idea as to what you need to do to prepare.

To support your journey as you prepare for divorce, I have created the checklist below so you can prepare with some level of confidence as to where you stand.

This list is not exhaustive, does not have to be followed in any order, and not everything in it will apply to you. But it will give you a great start t confidently move forward.

Preparation is key. Jump to the divorce financial checklist or watch the video below.

Gather, PDF, copy, and get the originals as much as possible

VIDEO: GETTING PREPARED FOR DIVORCE IN BC

Prepare for divorce with this pre divorce consultation checklist

As soon as you can, start changing passwords. Protect your privacy.

#1; Open your own bank account and have your pay deposited to that account

If you and your spouse have a joint account for joint household expenses, that is fine. You can transfer funds to your joint account once deposited. The point is that you need your own money and you should have the ability tocontrol the flow.

Like it or not, money is what will give you access to the resources and support you need as you go through the separation and divorce process.

Checklist For Divorce: Case Study; Paige's one mistake and how it ended her marriage

Paige is in her mid-thirties. She is not yet a parent. She is university educated and holds a great position at Canada Revenue Agency (the same idea as the IRS for Canadians). What I am saying is that she is no dummy.

Paige also happens to be somewhat naive. Despite her intelligence, great job and understanding of Canadian tax legislation and procedure, she did not have her own bank account, personal savings, or access to credit.

Paige married relatively young to a very sweet and kind man. They had a nice home with a mortgage being paid off quickly because she and her husband had well-paying jobs. She was earning a great pension as part of her employment. The point is that Paige had little concern over her finances.

However, Paige's life wasn't perfect. She had a one-night affair and her husband ultimately found out.

Because of his own hurt and despair, he reacted very strongly. Without a minute of notice, her husband canceled Paige's spousal credit card, removed all funds from their joint account, and demanded she leave the family home immediately.

The good news is that Paige was not out on the street because she had family support. Her sister lent her some funds, she did an initial consultation with a lawyer to understand her rights and obligations, opened up her own bank account, applied for and obtained her own credit card, and some friends invited here to stay with them on a temporary basis.

The whole point of me telling you this is whether or not your marriage is stable, you also have to understand and care for your financial affairs. Even if “ money ” is not your thing, it is too important to ignore.

Don't leave yourself vulnerable. Make sure you have access to your own funds.

#2; Get your own credit card

Don't expose yourself financially.

I have some clients that hold a credit card that their spouse knows nothing about. This allows them to access resources, such as an initial lawyer consultation. They can also order helpful books and other resources online because of the convenience of having their own card.

Face it, some spouses are controlling. They might review each of your expenses on a monthly basis. Maybe you are not ready for them to know you have sought some initial legal advice, for example, or that you are seeing a counsellor on a regular basis.

Having your own card gives you access to resources that you might not otherwise have.

#3; Establish and protect your own credit rating

If you have a mortgage, you have a credit rating  and you may find it easy to get a credit card. However, that might not be you. Credit cards, loans, and mortgages help you establish your own credit score.

Establishing your own credit score is very important, even if you are not the type of person who likes to carry any kind of debt.

If you already have an established credit score, you want to protect it because a good credit score can save you countless thousands of dollars.

Good credit scores get the best deals on mortgages and large loans so, if you wish to buy a different home this will be important. A great credit score also allows you to negotiate better terms on short and long-term loans.

When you have a great credit score, you also have access to the most rewarding credit cards on the market (I have traveled a lot of different places, flying business class always, solely because of the points I have earned on my credit cards, for example).

There are lots of other advantages too.

So, although your separation will not impact your credit score, your credit score could be negatively impacted because of late or missed payments if there is some sort of dispute or other problem that is partially out of your control.

Separating can be a very stressful time. If you live in a community property state, province, or country, you and your spouse will be equally responsible for the debts acquired during your marriage.

If you are on a joint mortgage and your spouse says they will take over the mortgage payments on an interim basis that is good but remember if they miss a payment, it affects your credit too.

As you prepare for divorce, keep an eye on the accounts and make sure all bills, loans, credit cards, and mortgage payments are made on time.

#4; Once you have an agreement, close all joint accounts, lines of credit and cards

I am compelled to mention this here, even though we are discussing your preparation for divorce or  separation. There are some things that a divorce financial checklist just doesn't cover unless you have some real-life examples.

You want to always look to the future, and your legally binding final separation agreement is closer than you think. You want to ensure that any joint mortgages, lines of credit, credit cards, and loans are closed or that there is a process and agreement to get them closed.

Checklist For Divorce: Case Study; Brad and his ex-spouse, Stephanie

I am reminded of someone I will call Brad.

Brad and his ex-spouse, Stephanie had a legally binding separation agreement. They were pretty amicable and came up with the agreement themselves. They also pulled an agreement off the internet and wrote it up together.

Sounds great right? Well, Brad missed a very important thing. Stephanie did not.

Brad and Stephanie were a relatively young couple. They agreed to sell their house, pay off their mortgage and credit card debt, and divide the remaining proceeds.

As part of their agreement, their joint credit card with an outstanding balance of $2,300 was paid off. Brad did not think of cancelling the card.

The credit card had available credit of $35,000. Stephanie remembered that the card had available credit and started using it. In fact, she used the joint credit card to pay lawyer’s fees to litigate against Brad regarding a parenting issue (they became less amicable over time but that is another story . . . ).

After Stephanie used up all the available credit on the joint credit card, she went bankrupt, thus leaving Brad as the sole remaining responsible person for the credit card debt.

The credit card company went after Brad to pay the balance. The credit card company did not have to care about or consider that Brad and Stephanie had separated and had a final separation agreement. They also did not have to consider that Stephanie and not Brad, had racked up the debt.

Brad effectively paid for Stephanie’s legal fees to fight a parenting issue that should not have gone to court!

The end result is that Brad ended up paying the $35,000 as he was the only remaining “debtor” after Stephanie declared bankruptcy. It was a bitter pill to swallow considering that the debt was incurred due to Stephanie litigating against him.

Brad effectively paid for Stephanie’s legal fees to fight a parenting issue that never should have gone to court in the first place. Ouch!

The lesson here is that you want to make sure you have no loose ends. That is, open lines of credit, loans, mortgages, and the like where you are jointly responsible unless you have a specific agreement otherwise.

#5; Print/Record/Copy all statements

As you prepare for divorce with this checklist, are you concerned about your ex being dishonest about the finances?

For some people, their finances are easy. They each have a regular employment-type of job with a regular pay cheque. They have little concern that the other party has assets they do not know about.

Most of the clients I have acted for over the years are just that. They each have a job, they have a house, they have a mortgage, a car loan or two, and some credit card debt. There is nothing to worry about regarding someone being dishonest about the finances.

However, there are those other cases. Although I tend to attract honest, caring, and decent clients, it is not always the case.

Checklist For Divorce: Case Study; Barry and his withheld finances

When Barry retained me to help him with his divorce mediation, I was happy to assist him and get him through the separation and divorce process.

As part of that process, each party exchanged sworn affidavits containing financial statements outlining their assets and liabilities. When Barry advised me of his assets and liabilities, I believed him. He affirmed he was telling the truth when I witnessed his signature on the legally sworn affidavit setting out his finances.

At mediation, I soon discovered that Barry had not been telling the truth.

Barry was self-employed and although that did not originally concern me, I became concerned when his wife disclosed bank accounts and other investments that Barry had failed to disclose in his affidavit. He had hundreds of thousands of dollars that he had no intention of disclosing or sharing with his wife!

This was a second marriage for both Barry and his wife. Because Barry always seemed so secretive about finances, his wife became suspicious.

Before their separation, his wife took great pains to photograph bank statements and investment statements if Barry ever left them lying about the house. Sure, we could say this kind of sneaky on her part, but it ended up being great insurance when Barry failed to disclose many of his assets.

If you doubtful whether your spouse will be honest, arm yourself with the information you need. If possible, gather documents for at least three years, or even longer.

#6; Gather and organise your own financial paperwork

Knowledge and clarity are the best-paved roads to your future.

If you are like me, you might find this stuff tedious and boring. Yet, knowing where you stand is also important. Gather the information and know your numbers. If you can’t STAND this stuff, spend 10 minutes (just ten!) a day gathering up what you need.

Here are the suggestions of what you need to gather up, copy and list:

  • Bank accounts
  • Investment accounts
  • Lines of credit
  • Pension documents
  • Retirement plan documents (RRSP in Canada, 401k for U.S.)
  • Loans
  • Insurance documents (auto, life, disability)
  • Tax returns (3 most recent)
  • If you have a business, your corporate financial statements and tax returns (at least 3 most recent)
  • If you have a business, your year to date profit and loss statement
  • Year-to-date pay stub    
  • Property assessment/appraisals
  • Business financials
  • Up-to-date mortgage statement
  • Cash on hand
  • bullion (Gold, Silver, Crypto currencies etc.)
  • Loans to family members
  • Airline points 
  • Prepare a financial statement/summary:
         ‣  List assets both corporate and personal
         ‣  List outstanding debt b valances
         ‣  Summary of expenses (daycare, travel, Uber, mortgage, car payments)

#7; Honestly, gather and organise all other important documents

When negotiating you need to have the correct information in front of you and organised. If you have a lawyer, they must have the right factual information and be aware of and have had the opportunity to review significant documents including agreements.

You  MUST be completely honest with the information and documents. Don't be like Brian... (see the case study below.)

Here is a list of what you may want to gather

  • Real estate deeds/titles
  • Powers of attorney
  • Wills
  • Marriage certificate/license
  • Prenuptial/marriage/cohabitation agreements 
  • List personal items that are important to you.

Checklist For Divorce: Case Study; Brian and the insignificant document

Don’t damage your chances like the person I will call Brian.

Brian came to me because he was separating from his partner of 18 years. They had two children who were teens. We were proceeding to mediation to divide the property. The opposing lawyer said he was not entitled to anything. I thought that was ridiculous. The problem was, unbeknownst to me, I did not have all of the facts. 

Although the house was in his spouse’s name (again, don’t forget to check the law specific to your jurisdiction and get advice related to your family’s unique circumstances), he had contributed to the cost, maintenance, and upkeep of the house. His partner also had substantial savings, and he did not. He was a hands-on great Dad. He loved his daughters and put everything back into the family, including his earnings.

He did mention once (only in passing by the way) that once a lot of years ago, he had signed what he called "a ridiculous piece of paper".

He said she forced him to sign, he said, without allowing him to talk to a lawyer or get legal advice. The agreement said that if they separated, he would not get anything in terms of assets. He also said that when he signed the "ridiculous piece of paper", he wrote on it “signed under DURESS!”

I asked him if he could show me the ridiculous piece of paper. He said he had lost it years ago and didn’t have it anymore. As a result of what he told me, I did not feel there was any cause to be concerned.

I was wrong.

Jump forward to the date of the mediation. The parties had exchanged financial statements, and I had done the steps to prepare for mediation with my client. I was confident that we were well-prepared to negotiate a reasonable settlement.

Then, to my surprise, the opposing lawyer pulled out the “ridiculous piece of paper” my client had previously mentioned.

It was not a ridiculous piece of paper at all but a legally binding agreement that my client had signed in front of a lawyer.

He had received independent legal advice before signing it. As it turned out, his spouse had asked for him to agree because he had, more than once, taken all of the family’s funds out of accounts and went gambling, thus losing the money. I am not saying my client was lying, I am saying that he forgot the real facts. That kind of thing happens.

The point is this: If I had seen the agreement in advance of our mediation, I would have advised him differently. Let’s just say I had to manage his expectations and significantly reduce what he was expecting.

Bottom line? If you are going into a negotiation or instructing a lawyer, make sure you have seen and reviewed all the relevant documents.