Libby Wildman, John O’Connell and I enjoyed participating in our recent live Money Show about divorce.
We’ve received a lot of positive feedback about what we think was an important and thought-provoking show loaded with invaluable insight.
Libby, Head of Wealth Advisory at Davis Rea Investment Counsel, is very open about having been divorced twice and delivers step-by-step financial advice and anecdotes based on her years of professional and personal experience.
John O’Connell has also been through the often stressful and emotional aspects of divorce and, like Libby, has guided many clients through the process over his 11 years as Chairman & CEO of Davis Rea.
Whether you’re contemplating divorce, going through one, or post-divorce, listen to the full show and/or read the full transcript to take advantage of two pros dispensing real world and actionable advice.
Please click here if you’d like a complimentary financial planning or portfolio consultation with Libby Wildman or John O’Connell.
Or call 416 324-2200
Click here to listen to the full show.
Scroll down for the full show transcript.
Mark Bunting: Thank you very much, Marc, for the introduction and thank you for joining us today. Divorce, that’s the topic, 10 financial steps to navigate your big life change. Maybe you’re contemplating a divorce, maybe you’re going through one, maybe you’re post divorce. [00:01:00] We’re going to give you some insight, some anecdotes, and we hope some actionable information as to how to handle this part of your life. Now we’re going to get to our guests in just a moment. Before we do that, let me tell you very briefly about Uncommon Sense Investor. We have a free investment newsletter. It comes out three times a week, Wednesday mornings, Saturday mornings and Sunday mornings. If you’re interested in seeing our latest videos, curated research articles, all sorts [00:01:30] of insight about investing, all you have to do is go to our website, uncommonsenseinvestor.com, click on subscribe and put in your details and you’re good to go. And the emails go straight to your inbox.
As far as Davis Rea Investment Counsel, would you like a second opinion about your portfolio? Would you like to talk about financial planning? Well, Libby Wildman and John O’Connell would be more than happy to do that. All you have to do is go to [email protected], again, put in your details [00:02:00] and someone will be happy to get back to you and you can have a complimentary consultation on financial planning or on your portfolio. Speaking of Libby and John, they’re right here. Libby Wildman, in front of me, how are you?
Libby Wildman: I am so good.
Mark Bunting: Very good. Libby is the Head of Wealth Advisory at Davis Rea Investment Counsel. We’ve got the big kahuna here as well as usual, John O’Connell, Chairman and CEO. Good to see you.
John O’Connell: Nice to see you again, Mark. And it’s always nice to be called the big kahuna, right?
Mark Bunting: Absolutely. All right. So [00:02:30] as I mentioned off the top, this is an interesting topic, it’s a difficult topic. It can be challenging and overwhelming for people. There is stigma attached to it. A lot of people don’t want to discuss it. But let’s start by putting our cards on the table, without going into too much detail, but all three of us have been through some sort of divorce or separation where children are involved. And so, we are coming at it from a position of experience. With you especially Libby, from a professional standpoint, but also from a personal standpoint. [00:03:00] So what is your general overview about divorce and the clients that you deal with, and the topics that continually come up and how they approach it?
Libby Wildman: Mark, I’ve actually been divorced twice and I have three kids, so I actually know all too well what this is about. I should have got smart the first time. Divorce is one of the most stressful things. People say that divorce is more stressful than death. I’m not going to debate that, except that [00:03:30] the other person is still here. And so there’s a lot of negotiation that goes on and sometimes doesn’t go that well. So, it’s a stressful time and money is just one part of it. But I think money is often a big part of it because there is usually one person in the couple that is maybe not so in the know, because often with couples, one person is given the money part to look after because life is busy.
Mark Bunting: And John, is that something you see with some of your clients [00:04:00] as well, where one of the spouses suddenly, who has not been handling the finances, is forced to learn all this stuff.
John O’Connell: 100%, Mark. So, divorce and death, quite frankly, are major life-changing events for people, the survivors or the broken up party. And I think actually, with Libby and I both having been through this experience ourselves, it really does make us a little bit more sensitive to the life-changing events and the stresses that it can put on [00:04:30] people. And it allows us to be not only sympathetic, but informed from an emotional perspective, because we’re going through a very emotional period of time. We’re also going through a period of growth where people are having to learn new things. So it’s not all bad, it’s a positive experience as well, but it is stressful. And I think this show actually, hopefully will be valuable for some people out there. Think about it, because we do know that one of the most popular times to get divorced is right after Christmas.
Mark Bunting: Right. And [00:05:00] Libby, before we get to the 10 topics we’re going to go through today, is there one common scenario that you see over and over again? What is the most common thing in terms of how people think about divorce, do they feel shame, do they feel a stigma or what’s the common emotion?
Libby Wildman: Yeah, for sure there’s a stigma. I think part of it is failure and who likes to admit failure? So I think it’s probably [00:05:30] one of the most difficult things to also tell your children, if you have children involved. So I think that’s a really, really big thing. And there’s also a lack of trust. Something that used to be a marriage is now a partnership, but you’re not sure you trust that partner anymore. And so I think not only is there stigma, but there is this massive shift in this relationship with somebody that you were used to sharing everything with. So who do you share it with now?
Mark Bunting: All right, let’s get to these 10 financial steps that you have tuned in for. These are not [00:06:00] necessarily one to 10 in order, but we tried to structure it so it was sort of in a logical order. And we’re going to start with, forming an advisory team. This could be a lawyer, an accountant, any other type of professional that you may need. So Libby, forming an advisory team. Let’s say somebody, they’re getting divorced, what’s the approach? How do you go about it?
Libby Wildman: Every divorce is somewhat unique, but there’s going to be some commonality. So if you’re a business owner, you’re going to have the added burden of having [00:06:30] your business valuated. And a business is often like a child, it’s your baby, you’ve built it up. And you now live in fear of this business being affected by an emotional decision you made, which is, you’re no longer going to be married. So you need a valuator, you will need somebody to help you redraw your wills, you’re going to need somebody to help you draw up a financial agreement. You may need somebody too like a social worker, to help you with what you’re going to do with the children. Then you’ve got someone like John and I who are dealing with [00:07:00] investments, financial planning, because all of that’s going to change. So I would get together and interview an advisory team and include on that a doctor, people who are going to be your support for you, your children in all of the different financial arms of that.
One of the reasons I joined Davis Rea five years ago is so that we can actually do that in-house. We can look after you in totality, other than the emotional and physicality of the stress that people [00:07:30] go through with divorce, that we can deal with the legalities, the rewriting of the financial agreements. Not that we’re going to write them, but we can help you get prepared for dealing with the lawyers.
Mark Bunting: So, John, could some of these people on your advisory team be people you know, people who are friends or do you recommend that it’s a professional that you do not know so there’s no potential for any kind of conflict.
John O’Connell: I think that’s a really good question. It’s a very nuanced answer. There’s no one right answer that’s going to work for every person. [00:08:00] But one of the things you’ll learn when you go through this process is that all of a sudden the people who were your friends, sometimes they’re no longer. They’re uncomfortable, they don’t want to take sides or they do want to take sides. So I think it’s really valuable to be thoughtful about how you build that team. I think the team is really the important aspect of it. You want this group of people to understand your sensibilities and what the outcomes are that you want. It can be a very expensive process. You want to have those team [00:08:30] members as cohesive and communicating as well as possible. So I don’t think there’s one right answer, but I do think from a practical perspective, one of the times when money is in motion the most is during divorce or death. And that tells me that more often than not, people are changing teams not just their partners, but they’re also changing their financial advisors. So I think it’s more likely than not you’re going to actually go through a change.
Mark Bunting: Okay, so form an advisory team. Moving [00:09:00] along to the next topic, get insurance and your will organized. So the importance of that, Libby, is that something that people often overlook?
Libby Wildman: Absolutely. In fact, we were sort of joking earlier that when people will come in and talk to me and all of a sudden they’re in fantastic shape, I usually say to them, “How’s your marriage?” And then the next thing is they say to me, “I want to change the beneficiary on my insurance.” So yeah, some people are on the ball and they immediately change their wills. They immediately [00:09:30] change the beneficiary on their insurance, which quite frankly, once they have a separation agreement in place, they may have to change back because often insurance is needed to support the financial arrangement of spousal support and child support.
But we had a friend who unfortunately died at age 58. He’d been going through a separation for seven years and it was so acrimonious, nothing was ever down in paper. And he died, and one week later his ex-spouse, who had no custody over their child, was living [00:10:00] in his house, had all of his money. And the child is actually living with a relative, and the whole family’s just in shock. So it’s really, really important that we gather these documents together. Or if they’re not done, then for goodness sakes, get them done now.
John O’Connell: And I think it’s also important, Mark, oftentimes when you go through a divorce, life insurance is involved to ensure that one party can continue to pay maybe equalization [00:10:30] payments or support payments for a certain period of time. And like insurance, in all cases most of the time, you only really need it when something happens. But in the case of divorce, that often happens later in life. Buying insurance can be very expensive later in life. And so, you may not think you need insurance for life purposes, but you never know what that insurance is going to… the purpose it’s actually going to [00:11:00] form. So it’s something to think about when you’re having a conversation with financial advisors about getting life insurance. It may be a lot… It’s not just necessarily about ensuring your death, it may also be about ensuring your divorce. And it may be a lot cheaper to sort of do that pre-planning, and not because you’re thinking about getting divorced, but because there’s many different roles that insurance can play in your life.
Mark Bunting: Anything else to add to that topic, Libby?
Libby Wildman: I was just going to say in the simplest of forms, whether it’s disability insurance [00:11:30] or critical illness insurance or life insurance, insurance is just the delivery of a dollar in the future, right, to solve the problems that your death through your disability is going to create. And that reason for that dollar changes all the time. But particularly at a time like divorce, that delivery of the dollar is more and more important because you used to be a pie and now you’re half a pie. So it’s really important to have the financial resources for all [00:12:00] those things that you wanted to make sure, to ensure would happened those things that you wanted to make sure to ensure would happen?
John O’Connell: When you’re insuring two people, you get a lower age, so it costs you less insurance. But when you’re insuring one person, they’re now thinking about your mortality, so it’s more expensive.
Mark Bunting: That’s good to remember. All right, so we formed an advisory team. We’re getting our insurance and our wills organized. Now we want to create you a budget. A lot of people are good with this, a lot of people are not. You’re shaking your head, Libby. So what’s the best approach here and how do you [00:12:30] convince somebody who’s not great with it? How do you guide them through that process?
Libby Wildman: Well, first of all, a budget is not about me saying to you, “No more dinners, no more Starbucks.” A budget is what do you need to live within, and what are your goals? And I would suggest that you’re going to have numerous budgets during this period of time. You’re going to have the budget that you’re living in now, while you’re negotiating your separation agreement. Then, you’re going to have your budget once you know, let’s say you are a non-working spouse, are you [00:13:00] getting a lump sum? Are you income for life? Are you getting income until the kids are 18? And as some people may know, child support is not tax deductible to the spouse giving the money, but spousal support is. So we’ve got the during the agreement budget, after you know what the agreement is going to be, and then you’ve got your own personal budget towards how are you going to save when some of these support payments are [00:13:30] cut off? So it’s an ongoing thing. It’s not like one and done.
John O’Connell: Right. I think the other important aspect of it is particularly on the after you finalized and you actually are divorced, is you need to have that budget because that informs what kinds of investment return you need to earn and the way you allocate the various different asset classes. So you want to have a budget that informs how much you need to earn, that sort of informs how you want to actually invest your money, which is important, obviously.
Mark Bunting: In terms of [00:14:00] creating a budget, is there a program you recommend, or what’s the best approach that way?
Libby Wildman: It really depends on the complexities, whether people have trusts businesses, multiple real estate buildings involved and things like that. So we have numerous different programs and softwares to give us the outcome that we’re looking for, for that particular client.
Mark Bunting: And that speaks to financial planning as well, doesn’t it?
John O’Connell: I mean, really, when you’re doing budgeting, that’s the basic collection of data in terms of what do you spend? What do you need? There’s [00:14:30] a lot more planning on top of that perhaps, particularly if you have a very complicated divorce where you have maybe trusts for children set up, there’s all kinds of different things you could do. So there can be very detailed components of a financial plan. Budgeting is actually just one part of that.
Mark Bunting: And not to turn this into a commercial, but that’s something that Davis Rae has worked toward to be a one-stop shop since you’ve owned it the last 10, 11 years.
John O’Connell: No, commercials are good. We encourage commercials.
Mark Bunting: All right.
John O’Connell: Davis Rea is [00:15:00] the kind of place that is that one-stop shop. And that goes back to that, making sure that you have multiple different people on your team communicating with each other. So the more that you can integrate those things, the better.
Mark Bunting: Okay. Here’s a topic that maybe we don’t think about, self-care. So taking a step back, you’ve mentioned divorce can be very stressful. So take a step back, reflect, take a breath. How am I doing myself? How am I doing mentally, emotionally, spiritually, if you’re inclined that way? So what’s the importance [00:15:30] of that reflection and making sure that you’re okay, and not just taking care of everything else?
Libby Wildman: I actually spend a lot of time talking with our clients about this, and also with their children. So are there people that their children should be seeing? Are there family counsellors they should be seeing? Should you be joining the gym and going to yoga? I often refer people to different types of coaches, because not that psychologists aren’t necessarily the right answer, but sometimes it’s not that we need to delve the past, [00:16:00] it’s more, here’s my new life, where do I want to go? So I think it’s super important.
I actually started a business called Liminal Escapes and it’s all about self-connection. And we’re working with people who have been widowed and divorced, or just at a stage in life where they need to make changes. And so if you can, through physical exercise, getting involved with meditation, there’s a new book called Breath, that teaches you mindfulness [00:16:30] and how to breathe, to reduce your stress. If you can go to retreats, like the one that we’re offering in Jamaica, in January, anything to help you get back in touch with who you are, what your goals are, what your values are, abundance and attracting positive people in your life will come from all of that. So it’s super, super important.
John O’Connell: Just one last quick point. People will spend money on trainers. I think that very few people, or not enough people, particularly in circumstances like [00:17:00] this, spend enough money on coaches. And I think when you’re going through this, it’s almost like a rebirth, and I think having an opportunity to speak to somebody is really, really important
Mark Bunting: And a good glass of red wine doesn’t hurt.
John O’Connell: Just not too much.
Mark Bunting: In moderation.
John O’Connell: In moderation. It’s good for you.
Mark Bunting: Right. Very good. Okay.
Libby Wildman: Don’t call your ex-spouse when you’ve had too much wine.
Mark Bunting: Well, yes, yes.
John O’Connell: This is true. Yeah.
Mark Bunting: Yes. Very good advice. Okay. Just a little run through here. We formed an advisory team [00:17:30] throughout this divorce process. We’ve got our insurance and will organized. We’re creating a budget. We’re taking care of ourselves. Next up and Libby touched on this, this is determining custody of and access to the children. And obviously, you want to be fair and reasonable with your spouse. We know it doesn’t always wind up that way. It gets acrimonious and the kids get involved, and they often get scarred for years because of it. So how do you avoid that?
Libby Wildman: I think it’s really important people understand that custody is about the [00:18:00] important decisions in your children’s lives, their health, their religion, where they go to school, where they’re going to live. Access is about spending time with them. And those two things often get mixed up.
I’m actually a huge believer in collaborative law because collaborative law is not about being nicey-nice, but the language and the training behind it is that you can both end up at your child’s hockey game, you can both end up at their bar mitzvah, or their wedding, or whatever it is. And litigation sometimes can really be like showing [00:18:30] up at the door with the gun before you even knew there was something wrong. So in defining custody and access, there might be social workers and a number of people involved, but it is probably the trickiest part if children are involved for people to deal with.
John O’Connell: I think also the other thing that people should sort of try to differentiate is, is that negotiating your separation and then your divorce, which is actually the easy part, the separation is the hard part, that’s the hard negotiation, [00:19:00] try as best you can to separate the negotiation, that hard negotiation from the way you’re going to live your life with these other people that are still all going to be part of your life in the future after the negotiation is over. Try to leave the baggage of the negotiation behind and go forward with your life, and reflective of the fact you have these children, they’re going to judge you by the way you behave to the other person in the afterlife.
Mark Bunting: When you say collaborative, does that primarily mean mediation?
Libby Wildman: No, not at all. Mediation can be part of collaboration. If you engage with a collaborative lawyer, your spouse must also have a collaborative lawyer, and they will not go to court. So there is a very, very specific training by the lawyers involved. And some lawyers [00:20:00] will be litigative and collaborative. I have just found in my experience, because I’ve been through it twice and I’ve referred a lot of my clients to lawyers, that there is a better outcome and opportunity to potentially become and remain friends after the separation and the divorce. But there has to be a level of trust to be able to go through collaborative. So it’s not for everybody, but I would encourage people to look into it.
Mark Bunting: Okay. We’ve [00:20:30] run through 5 of the 10 financial steps, navigating your big life change, that is divorce. We’re going to run through the next five. We have Q&A at the other end of that, so get your questions in the queue and Marc will be asking them and choose the best ones. So let’s keep it going here. So this one is interesting. Don’t get emotionally attached to your assets. That could be a house, a cottage, a boat, a car, family heirlooms. And so this speaks to someone [00:21:00] maybe having to make the decision, “I love this object, but I have to let it go for the good of this situation,” correct?
Libby Wildman: YI’m just going to inject something that happened to me that I think people going through this situation also have to understand that the lawyers work for you. You don’t work for them. And in my first marriage, I owned a cottage with my husband and the cottage was in my name because there was a family business involved. And when I first went to a litigative lawyer, they were trying to say that that cottage was [00:21:30] in trust for me, and that my ex-husband to had nothing to do with the cottage. That was not my personality. I fully knew why we had done that. So I got a hold of the situation and I corrected the lawyer. And I said, “No, that’s not the intention here.” So I just think people need to really, really ground themselves and understand that your lawyer’s not your psychologist and that they’re working for you, and you need to inject your personality, your value system as to how this is going to go.
And yeah, [00:22:00] divorce sucks. So let’s be realistic, it is highly unlikely you are going to remain living in the same house and have all of the same assets that you had before. And I would encourage people again, to step back so that they actually like themselves at the end of this. And if there’s a family heirloom like a place in Florida, or a place in Collingwood, or a cottage, and if you know that’s been in your spouse’s family forever, is it really going to behoove you and your relationship with your children to make a muck-a- [00:22:30] muck of that?
John O’Connell: I think the other thing to give some consideration to is, first from the investment perspective, investing in storage businesses has been a very, very profitable business and those are great businesses. And the reason is because stuff stays in storage forever.
John O’Connell: And I stored stuff for 10 years before I finally said, “I’m just going to stop paying for it,” and got rid of it. But I also learned a valuable lesson which is even though I wasn’t really attached to it, I was [00:23:00] keeping it because maybe i was going to need it someday or something else. It costs you money to hold onto things. But also when you do finally get rid of your stuff, it also really brings home the whole concept that other people are attached to certain things, and it’s not always just you or your or spouse, it could be your children too. And so I think you have to be, don’t be attached, but be aware that it has value, not monetary, but it has maybe sentimental value. I think adults [00:23:30] getting divorced don’t consider the fact that the children may be attached to certain things. And it’s not a value thing always. Sometimes it’s more of an emotional attachment.
Mark Bunting: Right. That’s a good point. So did you feel relieved, and you took a weight off when you got rid of that storage?
John O’Connell: I was paying $200 a month for 10 years and I didn’t get rid of it because I thought, “Oh, I’m going to use it.” And you try and sell furniture, you get nothing for it. And so you go, “Oh, I’m going to put it in storage, and [00:24:00] then 10 years later, or three or four years later, you go, “I don’t want it” or the person that maybe you’re living with now says, “I don’t like your stuff.” All of a sudden you should have taken the no bid for your furniture, or whatever it is. But sometimes it’s the little things that were in storage that had the most meaning, and they get buried and lost. Maybe you don’t remember what’s in there, but your kids might. That’s something to be very, very thoughtful about.
Mark Bunting: Yes, and you want to check with them. Okay, so still with assets, you [00:24:30] need to value all of your assets. Again, the house, the cottage, the car, RRSPs. Take us through that.
Libby Wildman: It’s difficult because we find a lot of our clients have assets that aren’t liquid. So if your assets are a business, let’s say, and your spouse is entitled to 50% of the value of your business, where are you going to come up with that cash and that liquidity?
So this can be a really particularly painful [00:25:00] thing for business owners. And even a cottage. How do you give somebody half the value of a cottage if you get to the point where the other person says, “Yes, I don’t want it”?
So those kinds of things really require a lot of help and discussion. John and I have had these things with our clients a lot. The thing with RRSPs that’s interesting, the tax law does allow you to roll over an RRSP to a divorce spouse tax-free as part [00:25:30] of a settlement agreement. So if I had $500,000 in my RRSP and I needed to give $250,000 to my spouse as part of an equalization payment, I can actually do that tax-free. But, remember, when you take that money out in retirement, it’s taxable.
So there’s a lot of nuances to look at each bucket that somebody owns. Like for instance, the cash value in a life insurance is an asset that, from a value point of view, is split. But if you take [00:26:00] the money out of that life insurance policy, part of it might be taxable.
So my point, I guess, Mark, is really make sure you have people on your team that understand all the nuances and the different taxations of the different buckets and the long-term consequences of those things.
John O’Connell: I think it’s also important to consider, going back to that budgeting and the planning and part of your team, the lawyers might look at it and say, “Well, it’s 50-50.” Fine, that’s fine. But your objectives … You might be older. And [00:26:30] so, you don’t necessarily want to take the money in the RRSP because it’s going to be coming out to you faster. And so, it’ll be attracting more taxes quicker.
So you want to really do some very sophisticated planning or thought or getting some advice from professionals that match your objectives with the way you parse these assets up between the different people.
Mark Bunting: Okay. So onto another topic, similar territory, and you’ve touched on this, Libby, about a house. So chances are, if you’re living in a house, [00:27:00] you may have to leave it or you stay there. Do you sell it? Do you not? Do you have to find a house? So there’s a lot that goes on in terms of people’s residency.
Libby Wildman: So just a follow up to that point, if you were to get a $2 million house in your agreement, in your separation agreement, and your spouse was to get $2 million in RRSPs, well, your principal residence grows tax-free. The RRSPs grow tax-free, but they come out taxable in retirement.
So you really have to look [00:27:30] at what’s your future capability of saving money and creating income for yourself and which asset have you been given? So, again, it speaks to all of this.
Houses, again, are difficult because if you have children, you might want to remain in the same area so that they can belong to the same hockey club. They can go to the same school. They can hang out with the same friends.
I like collaboration because often then there can be a discussion about having both spouses in the same neighbourhood. I try to get couples [00:28:00] to chill off for a year. So potentially one spouse is willing to go rent in the same neighbourhood while you stay living in the family home, just to give everybody some time to get used to what the new situation might look like. But it’s a big thing. Can you afford the same size of home? This was where all these conversations around budgeting come along.
Mark Bunting: Right. John, have you run into situations with clients whereby it does become acrimonious and let’s say one spouse says, ” [00:28:30] No, I’m not leaving. I’m staying in the house”?
John O’Connell: It happens and there’s an argument in terms of who gets to stay. We do know one couple that did live in the same house for a number of years, but that really also stops people from being able to move on in their lives. It can be potentially very problematic for your children as well.
You have to remember, divorce isn’t just about you and your spouse. It’s what other people that are in your family [00:29:00] as well and the impacts that it has on them.
So I don’t think it works. I think you have to be thinking about who’s best in the house if someone’s going to stay there in terms of going back to Libby’s point about children, location, schools, kids, relationships. Those are the intangibles in the valuing of a house.
Mark Bunting: Okay. Two more topics here and then we’ll get to your Q&A. Just put your questions in the queue there and Mark will ask them. So create [00:29:30] a detailed agreement. We’ve run through all these topics and now you get to the point where you need to think of everything and dot every I and cross every T, correct?
Libby Wildman: Again, this will go back to the trust, I think, between the people who are separating. But the more that you can put in there, the less you have to reopen up conversations down the road. So if somebody wants to move down the road, are they allowed to? Will the kids continue going to camp? Do they continue going to private school? Who’s going to pay [00:30:00] for what if somebody’s income goes up or if somebody wants to stop working early?
Hopefully your lawyers are going to be good at this, but I wouldn’t, again, leave everything up to the lawyers. This is your life. Put your stamp on it. Hurry it up when you want it to hurry up, but slow it down when you need to maybe reach out to social workers, psychiatrists, friends, other people who’ve gone through it.
Mark Bunting: And so, you have to think of every and any scenario [00:30:30] that may come down the road.
John O’Connell: I think so. You really have to … If you can get into a collaborative environment where the lawyers aren’t fighting, just trying to get everything, they’re thinking creatively, the team is thinking creatively, trying to get people to think about the different optionality that exists, I think, is really important. [00:31:00] It’s hard to do.
The second thing is a piece that my father gave me a long time ago, which was … And it’s not a negotiating tactic, but it’s a thought process, is when people want you to go fast, go slow. When people want you to go slow, go fast. But always do that with a purity of heart, which is very hard to do sometimes when you’re in the thick of a negotiation.
Mark Bunting: I like the idea of not feeling like you need to go at somebody’s pace. If you’re not feeling comfortable with [00:31:30] it, just slow it down.
John O’Connell: But be careful of the lawyers, because the lawyers are … There’s an interest there. They get paid to have you argue. They will negotiate every comma. So to Libby’s point, be disciplined about … They work for you, not vice-versa. Take their advice, but don’t be afraid to tell them, “Okay, we’re going to move on here.”
Mark Bunting: Okay, last point before Q&A. Hypothetically, this hypothetical person, this avatar we’ve been talking [00:32:00] about, is now divorced and they want to create a post-divorce plan. What does that look like?
Libby Wildman: Well, that part is actually, I think, exciting. I mean I had a coach and I’ll never forget when I was bemoaning my situation, because, believe me, when you get divorced once, you’re cut in half, when you get divorced, you’re quartered. He just looked at at me and he said, “Libby, look, not everybody gets to hit the reset button, but you do. So what do you want it to look like?”
I actually love talking to clients about that. [00:32:30] Within the pie that you have, you no longer have somebody that you’re not getting along with ruling your life. What do you want it to look like and feel like?
I truly believe if you love your children, that whatever decisions you make that are good for you will in fact also be good for them. And so, I think when you finally get that dark cloud over your head of agreeing to this agreement, to enjoy the process of recreating your new life.
Mark Bunting: Final thought [00:33:00] on that?
John O’Connell: I think Libby … And this isn’t a commercial. It’s the truth. I said it earlier, get a coach. I’ve seen Libby do these retreats, not just because people have gone through divorce but her Liminal Escapes trips are in a really valuable way to get people to start thinking in a very protected, safe place to think about how they want to live their life in the future.
So [00:33:30] get a coach, spend some time, work at it. It’s the rest of your life. You’ve gone through a really lousy period. This is an opportunity just, as Libby said, to hit the reset button. Put some real effort into it. You spent a lot of money ending this thing. Put a little bit into starting a new one.
Mark Bunting: All right. I like it. Okay, let’s go back to Marc [00:33:53], who presumably has a few questions for us. Marc? (Moderator)
Marc: All right. Mark and panel, thank you so much for that fantastic presentation. Great feedback [00:34:00] from the audience. We had a few people who were really wanting to hear more on special advice for divorce happening after retirement. What are the steps? Another viewer was wondering if kids are involved even after retirement and already grown.
John O’Connell: Well, it complicates things in some respects because, post-retirement, there’s no money coming in. [00:34:30] It’s all going out and you’re living off your resources. In some respects, it makes it a lot easier because usually when you’re doing post-retirement, there’s no spousal support. There’s usually lump sum payments because you only have so much and you want to separate the two assets, the two values or the two chunks of money, so that both people can do what they want to do with it within their own constraints.
So I think that it’s not really different other than the fact that spousal [00:35:00] support and child support probably go away. But it complicates things and makes it riskier in some respects. Not that that should stop you from getting a divorce because you’ve lost probably maybe half your wealth, or if you have a spousal agreement or a prenuptial agreement, which we didn’t really get into, unfortunately. We probably should have. But it’s one of those issues that I think you really need to, [00:35:30] if you’re thinking about it, get some advice before you do it and know where you’re likely going to end up.
I remember when I went through it, I asked somebody where I’m actually going to end up. We ended up pretty close to that. So getting that to that allows you to do your planning.
Libby Wildman: I actually think it’s an interesting time because there’s a lot of flexibility. If you’re retired, you can potentially take, let’s say you lived in Toronto, that house that’s gone up hugely in value. [00:36:00] Maybe you both go and live in a town where real estate is less expensive and so you can still maintain living in a decent sized home. I actually know couples where they have got a financial agreement together, but they are not going to go down the final divorce path because they have decided they would still like to both see the kids at Christmas and actually even both share some assets together. You’re older and you’re wiser and maybe less angry because you’re not dealing with little, little kids. I totally [00:36:30] respect what you said, John. But in my experience dealing with people in retirement, there’s actually sometimes some easier paths to go down.
I mean, I’ll tell you, my dad has a place in Siesta Key, Florida and there are certain people we see down there every year. They have their new girlfriend and their wife’s back home, but the wife’s totally fine with it because they have formally separated, but they’re not selling assets so that they can both enjoy them. The tax play is important. And when you get divorced, you [00:37:00] do have access to or you do have the right to half of somebody’s CPP and half of somebody’s old age security, if you don’t have your own. Again, get those people on your side that understand the stage of the game that you’re at and the assets that you’re dealing with.
Mark Bunting: And just briefly, the second part of that question was, what if adult kids are involved?
Libby Wildman: That’s tricky, right? Because you’re so much more aware when there are adult kids. And often again, adult kids may not like the new boyfriend or the new girlfriend. [00:37:30] I would say communication is really key. I actually love talking to families through this because I’ve been through it myself, and I think people can pick up on that feeling. It can be trickier. But again, it can also be easier because you’re dealing with people who are not six and seven and confused about mommy and daddy living separately.
John O’Connell: Right. I think the children involved post retirement is a big deal, because the children look at it as there’s a finite [00:38:00] resource there. Even though they might want you to still be alive, they’re also aware that’s a dwindling resource and it’s now no longer as much. And if you do get remarried, what’s going to happen to my money? Is the girlfriend or the new wife going to get the money? There is an elephant in the room. It’s natural. Even if your kids don’t discuss it, it’s there. I think the elephant is in the room, you may as well address it. You’re going to have these difficult conversations because it’s going [00:38:30] to happen.
Libby Wildman: One of the things, Mark, that I often use in these scenarios is you can use a life insurance policy. With my children, I don’t want them to have to wait until I have died and my future spouse has died. I have an insurance policy that will go to my children when I die, so they get a gift from my mom. And then any assets with my new spouse, I obviously have to share them with him because he may need them if he outlives me, or I don’t want him to have to leave the house [00:39:00] that we now own together. An insurance is actually a really easy way to solve that problem.
Mark Bunting: Okay. Good advice. Marc, back to you.
Marc: All right. Thank you so much. We have another question here. They’re wondering, as far as… They said they’re separated, but one spouse is in Canada. They’re getting an amicable divorce. Is there a way to do that online, or does the paperwork have to be hard [00:39:30] copied, mailed?
Libby Wildman: Yeah, that has to be… Each person needs to have independent legal advice. You have to have some sort of lawyer involved. I would actually totally suggest that you do. It’s also tricky between the US and Canada, because there are cross border taxation issues. TFSAs are not recognized in the US. RRSPs are a trickier issue. There could be double taxation going on.
John O’Connell: There’ll be residency issues.
Libby Wildman: Don’t [00:40:00] cut corners that fast. It’ll end up coming back to bite you. Get appropriate legal advice and paper it. Because I’ll tell you, somebody will eventually meet somebody else that they want to spend time with, and that is not a good time to go back to your spouse and say, “Oh, now I need it all papered up because I’m going to move in with someone.” And if there’s not enough time before we end, I really want everybody listening to promise me that if you do get into a new relationship, either have a prenup or make sure you have a living agreement arrangement with that new [00:40:30] person.
Mark Bunting: Okay. Marc?
Marc: Excellent. Another interesting question came in. They’re wondering, does common law cohabitation follow the same rules as standard marriages when splitting assets?
Libby Wildman: No, not at all. They’re completely different. Common law does not split assets. Marriage does. With a marriage, you are entitled to 50% of an increase in value. Common law is more about a lifestyle thing, and particularly if children [00:41:00] are involved.
John O’Connell: She’s the expert.
Mark Bunting: Libby’s the expert.
Mark Bunting: I think we’re almost done here. Libby’s having a bit of an episode. I was hoping I wouldn’t. I think she’s okay. Okay, Marc, go ahead.
Marc: All right. Another viewer here, they’re wondering, in reference to settlement of home and assets, the six year rule for that settlement, is that written in stone or can that be extended?
Libby Wildman: That’s I believe a provincial [00:41:30] rule. Those are things that we can’t weigh in on. That’s really going to be dependent on where you live, what stage of the game you’re at. I don’t want to comment on that because it’s not going to necessarily be accurate.
Mark Bunting: Right. All right. Fair enough. Another one, Mark?
Marc: We had another viewer here. They said that they were married in Toronto. However, they were divorced in Mexico City. Do they have to file anything back with Toronto?
Libby Wildman: [00:42:00] Well, my brother got married in Greece, and I know he had to come back to Toronto and sign the formal paperwork here. That’s going to be the same thing. Everything’s nice until it’s not, so I would not assume that that is legal whatsoever. You’re going to want to make sure it’s papered here. You don’t want somebody opening things up 10 years from now, and then you find out that you didn’t do things properly.
Mark Bunting: You have to do it in your jurisdiction no matter what.
Libby Wildman: It’s the same thing with [00:42:30] a will. Depending on where you live, you must have a will drawn with regards to where you were domiciled and those rules. The family law is different province to province. It’s different country to country. And you also need things witnessed. Don’t be thinking that you can just sign something. It’s really important to get these things papered properly.
John O’Connell: I think that you have to go on the assumption that the government is going to be suspicious if you’ve changed your status, and the government’s [00:43:00] still involved in your life from a tax position. When you get divorced, the government is going to want to see your divorce agreement or your separation agreement. And if you change it, you’re going to have to prove to the government that it actually has changed. If you got married in Canada and you still have some kind of economic relationship with Canada, then I think you better, to point number nine, create a detailed agreement and make sure they cover off all your bases.
Libby Wildman: One of the things that happened to me, Mark, when I was separated, but didn’t [00:43:30] have a formal agreement and I was moving, when I went to the bank, because I didn’t have a formal separation agreement, they didn’t want to give me a loan, because they were worried that my ex-husband would come after the new house as part of our settlement again. At the last minute, I had to have my father cosign for me, which was mortifying, but also really stressful. Proper advisors and supporters and coaches should be able to pre walk you through all of this, so that you’re not deer [00:44:00] in the headlights like I was when that happened.
Mark Bunting: Now, that goes back to point one, put together an advisory team. Marc, go ahead.
Marc: All right. It looks like we just have time for one last question here. A question rolled in, we’re wondering, how is the remaining contribution room of a child’s RESP shared if no stipulation was made in the separation agreement?
Libby Wildman: Well, the limit that you can put into the RESP doesn’t change. And if you have more than one child, I would suggest that they’re all beneficiaries [00:44:30] of the same RESP, because there’s no guarantee that all your children will go to post-secondary. But the agreement would be more around who’s going to fund it. Look, let’s be honest, if your spouse is supposed to fund it and he’s not, why wait 10 years and you’re still arguing about it? If you have the ability to do it, fund it because that money is for your children and your children are the named beneficiaries. You can have co-ownership on it, but it’s your children who are the beneficiaries. It’s not really an asset that I would worry about [00:45:00] getting mucked up.
Mark Bunting: Okay, Marc, we’ll wrap it up there. I’m just going to do a couple more promos here just to remind people about the Uncommon Sense Investor newsletter. It’s free three times a week. Go to the website uncommonsenseinvestor.com. Click subscribe. Put in your details and you’ll get it straight to your inbox. All sorts of investment advice and stock ideas. But more pertinent to this conversation, Davis Rea Investment Counsel. You hear how smart and professional [00:45:30] and informed Libby and John are about this topic and many other topics having to do with financial planning.
If you’re interested in a consultation on financial planning, if you want to talk about your stock portfolio and investments, you can get a free consultation. It’s complimentary. [email protected] is where you go. Put in your information and someone will be happy to get back to you. Thanks, Libby, that was great. Really enjoyed that. I learned a lot.
John O’Connell: I learned a lot.
Mark Bunting: Thanks, John. Thanks [00:46:00] a lot for joining us. We really appreciate it. And thanks for your help today, Marc.
Marc: Absolutely. Thanks so much to Mark Bunting, John O’Connell, Libby Wildman. This is a topic that people are sometimes a little shy to talk about. It’s great that you’re getting this content out there and great questions from our audience as well. Thank you so much for being here.
The Illumination Minute: Setting Financial Goals
The Illumination Minute: Time & the Beauty of Compound Interest
Getting Started: Why Financial Planning is Not An F-Word
The Trillion Dollar Wealth Transfer to Women