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7 Ways to Help Minimize the Financial Impact of Divorce

By Amanda Reaume

Published July 19, 2023 • 4 Min Read

Divorce is an unfortunate reality for many Canadians, which can take an emotional and financial toll, especially when lawyers and court dates become the way forward. If you can work together upfront to understand what each partner is asking for and identify any gaps that may exist, the easier — and less costly — the resolution may be.

Some things to think about as you begin your divorce process:

1. Prioritize logic and facts over emotions

You are likely processing many different emotions as you accept your new reality. However, when the emotional aspects of separation and divorce take over, it may become difficult to navigate the financial aspects of divorce effectively. As you begin discussions and negotiations, try to set your emotions aside, just temporarily, and try to approach every decision with facts and logic to help move you through to a fair and equitable division of assets.

2. Reframe

The decision to end a marriage is not always mutual. Feelings may be bruised, you may feel shame or anger, impeding your ability to think clearly. Reframing how you think about divorce and how you communicate may help you stay productive throughout.

  • It’s not a competition: Divorce is a transition, and nobody really ‘wins’ or ‘loses.’ There may be a time and a place to engage a lawyer to help smooth any disputes but try to keep your negotiations friendly.

  • Focus on resolution: Focus on getting the two of you over the finish line as fairly as possible. The quicker you do, the quicker you can start the next phase of your life.

  • Keep the peace: The marriage may have ended, but you may still have a lifetime of co-parenting ahead of you. Navigating child care, schedules and parenting issues as a couple can be hard enough, but divorce adds additional complexity for both partners. When something doesn’t go as planned, try focusing on communicating clearly as to why something does or does not work for you instead of blaming.

3. Work with your spouse

If possible, sitting down with your ex-spouse to gain agreement on topics such as separation of assets, child custody and support, and property division may be one of the most effective and efficient ways to tackle your separation. Through open and honest conversations as a team, you can help understand each others’ wants and close any gaps.

4. Prioritize, then compromise

Before the two of you sit down, take the time to reflect upon what is important to you. What you came into the marriage with, and what you feel is a fair settlement. Prioritize your wants, so you know where you may be willing to compromise. This may help speed up the process and avoid taking each other to court.

5. Take the pen where possible

Instead of handing the reigns over to a third party, try to put in writing what you both agree on; this could include child custody, how to split holidays, school breaks, and extra-curricular activities. What school will they attend? Whose neighbourhood? Will child support be paid? What about Spousal Support? Is each partner responsible for securing life insurance in the event of a tragedy? The more elements you can document on your own, the less expensive your divorce may be.

6. Mediation over litigation

Dissolving a marriage can be financially difficult when things become litigious. The separation of assets, legal fees and court expenses can add up quickly. If you can’t work through certain elements of your separation as a team, alternative dispute resolution methods such as mediation or collaborative divorce are a great option to help reduce conflict and save money. If you need to engage a lawyer to help reduce billable hours, make sure to have all your required paperwork in order, including tax returns, income and investment statements.

7. Tax implications

As you work through the various elements of your separation and divorce agreement, it’s important to be aware that there are elements of divorce that can have significant tax implications. For example, in Canada, child support received is not taxable; however, spousal support is taxable. Keep this in mind as you negotiate your settlement, and make sure to set aside money to cover any future taxes owing if you do receive spousal support.

Nobody enters a marriage expecting it to fail — but if it does, it’s important to try to resolve your divorce as efficiently and inexpensively as possible. Through cooperation, strong communication and mediation — if required — you may help minimize your legal fees and court costs, putting money back in your own respective pockets.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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