Alberta Divorce Guide, Part 3: Money Matters

In our previous posts, we explored the fundamental aspects of divorce in Alberta and the essential preparatory steps. Now, we turn our attention to the intricate financial considerations that often accompany the dissolution of a marriage.

Property Division: A Fair and Equitable Split

One of the most complex and contentious issues in a divorce is the division of property. In Alberta, the Family Property Act governs the division of assets and debts acquired during the marriage. This Act generally mandates an equitable division of property, which means that assets and debts accumulated during the marriage are divided equally. However, the court can consider certain factors to adjust the shares each spouse or common-law partner will receive after they separate.

The contributions of each spouse to the marriage are a crucial factor. This includes not only financial contributions but also contributions as a homemaker, caregiver, or in other ways that have contributed to the family’s well-being. The court will also assess the property’s value, considering its current market value and any potential future appreciation.

In some cases, the needs of each spouse will be another essential consideration. The court will assess factors such as age, health, and future earning capacity to determine how the property should be divided to ensure a fair and equitable outcome. The length of the marriage is also a relevant factor, with longer marriages often leading to a more equal division of property.

The Matrimonial Home: A Special Consideration

The division of the matrimonial home is a particularly sensitive issue, often requiring careful consideration of the needs of any children and the financial circumstances of both spouses. The court may prioritize the needs of children, especially if they are young or have special needs.

The court will also consider each spouse’s financial circumstances, including their ability to maintain housing and future earning capacity. The contributions of each spouse to the acquisition and maintenance of the home, both financial and non-financial, are also relevant factors.

Equalization Payments: Balancing the Scales

Equalization payments are a mechanism used to ensure a fair division of property. If there’s a significant disparity in the value of assets acquired during the marriage, the spouse with the lesser value may be entitled to receive an equalization payment from the other. The court will calculate each spouse’s net family property and determine if an equalization payment is necessary to achieve a fair division.

Spousal and Child Support: Meeting Financial Needs

Spousal Support

Spousal support is designed to help one spouse maintain a reasonable standard of living after the divorce. The court considers various factors in determining the amount and duration of spousal support. Courts often consult the federal Spousal Support Advisory Guidelines, although they are not binding.

The income disparity between the spouses is a significant factor. If there is a substantial difference in income, the lower-income spouse may be entitled to spousal support to help them maintain a comparable standard of living. The duration of the marriage is also relevant, with longer marriages often leading to longer-term support.

Another important consideration is the impact of childcare responsibilities on earning capacity. If one spouse has primary responsibility for childcare, their earning capacity may be limited, and they may be entitled to spousal support. The court will also consider the standard of living that the spouses enjoyed during the marriage and strive to maintain a similar standard of living for both spouses as much as possible.

Child Support

Child support is a legal obligation to support minor children after a separation or divorce financially. The Federal Child Support Guidelines provide a formula for calculating child support based on income and the number of children.

In addition to regular child support, parents may be responsible for “special expenses,” such as childcare, medical, and educational expenses. The parents typically share these expenses based on their income and the child’s specific needs.

Financial Disclosure: Transparency is Key

Full and accurate financial disclosure is a cornerstone of a fair and equitable divorce in Alberta. Both parties must provide a complete and honest picture of their financial circumstances, including assets, debts, and income. This transparency is essential for the court to make informed decisions regarding the couple’s ongoing financial obligations to each other.

The Importance of Financial Disclosure

Financial disclosure ensures that both parties clearly understand each other’s economic situation. This transparency allows for:

• Fair Property Division: The court can make equitable decisions about the division of assets, such as real estate, investments, and retirement savings.
• Appropriate Spousal Support Orders: The court can determine the proper amount and duration of spousal support based on each spouse’s financial needs and abilities.
• Accurate Child Support Calculations: Accurate income information is crucial for calculating child support payments under the Federal Child Support Guidelines.

What to Disclose

A comprehensive financial disclosure typically includes the following:

• Income: This includes salary, wages, bonuses, commissions, rental income, and any other sources of income.
• Assets: This includes real estate, vehicles, bank accounts, investment accounts, retirement savings, and business interests.
• Debts: This includes mortgages, credit card debt, loans, and other outstanding debts.
• Tax Returns: Recent tax returns provide a detailed overview of income, expenses, and deductions.
• Financial Statements: Financial statements from banks, investment firms, and other financial institutions can provide a snapshot of financial holdings.

Uncovering Hidden Assets

Unfortunately, some individuals may attempt to conceal assets to avoid equitable division. This can involve various tactics, such as transferring assets to third parties, hiding income, or underreporting income.

Consider hiring a forensic accountant to investigate potential hidden assets to protect your rights. This professional can analyze financial records, identify inconsistencies, and uncover hidden income or assets.

Family Businesses: A Complex Division

Dividing a family business can be a particularly challenging aspect of divorce. The court will consider various factors, including:

• Ownership interests: The court will determine the ownership interests of each spouse in the business.
• Contributions of each spouse: The court will assess the contributions of each spouse to the business, both financial and non-financial.
• Future earning potential of the business: The court will consider its future profitability and how it may impact the division of assets.
• The impact of the division on the business’s viability: The court will strive to minimize the impact of divorce on the business’s operations and employees’ jobs.
• The needs of employees or creditors: The court will consider the interests of employees and creditors when dividing the business.

Tax Implications: A Hidden Cost of Divorce

Divorce can have significant tax implications, including:

• Capital gains tax: When assets are divided, capital gains tax may be triggered.
• Tax consequences of spousal and child support payments: These payments may be tax-deductible for the payer and taxable for the recipient.
• Division of RRSPs: The tax implications of splitting RRSPs can be complex.

It’s crucial to consult with a tax professional to understand the potential tax implications of your divorce and to implement strategies to minimize your tax burden.

Marriage Contracts and Divorce

Existing marriage contracts, or prenuptial agreements, can significantly impact the division of property and support obligations. While these contracts are often designed to protect assets and income in the event of divorce, they may also contain provisions related to spousal and child support.

It’s crucial to review any existing marriage contracts with a family law lawyer to understand how they may affect the financial aspects of your divorce.

The Road Ahead: Decision-Making Responsibility and Parenting Time

Financial considerations are critical in divorce. It is vital to seek legal advice to ensure your rights are protected and that you receive a fair division of assets and debts.

In our next blog post, we’ll delve into the crucial issues of decision-making responsibility and parenting time. Understanding these concepts is essential for navigating the complexities of co-parenting after divorce.

Mincher Koeman: Providing Comprehensive Property Division, Child Support and Spousal Support Advice in Calgary and Canmore

At Mincher Koeman, we understand navigating the divorce process can be overwhelming. Our knowledgeable family lawyers are committed to providing personalized advice and efficient solutions tailored to your needs. Whether you’re facing a simple or complex property division or support obligations, we’re equipped to handle it all. We’ll work closely with you to understand your situation and develop a strategy that minimizes stress and maximizes your results.

Mincher Koeman has offices in Calgary and Canmore and serves clients throughout Alberta. To schedule a confidential consultation, please call 403-910-3000 or contact us online.