Colleen and Bill bought a home recently for $800,000. They lived in marital bliss for a few months, but then disaster struck — their marriage exploded and they ended up getting a divorce. They couldn’t bear to retain their home, or anything else they owned together. Colleen and Bill sold their house at the end of 2017 for $660,000. They ate $140,000 in losses on the value of their home alone, in addition to marital debt they carried.
Joint finances and assets are a big reason why many people stay in unhappy marriages. Having a plan to manage the financial impact of a divorce, especially if you have debt in your name and insufficient stand-alone income, is paramount.
If you’re considering getting a divorce, but worried about the cost of divorce — including that in an uncertain Canada real estate market — there are several items you may want to consider.
- Tax Implications
Getting a divorce can mean different tax deductions and debts when the CRA income tax deadline comes around. Consulting a financial advisor, particularly if you’re worried you will owe a tax debt, can help you navigate changes.
- Joint Accounts and Joint Debts
Joint financial debts — including a mortgage — can be a huge cost of divorce. You’ll need a plan to look at how much debt you can carry individually, plus how much you can take on as part of the divorce. A financial advisor can show you the options you have available and take steps to pay down your debt, leaving you in a secure financial position.
- Watch Additional Debt After Divorce
Getting a divorce can have financial implications in a lot of ways. First, there are the costs associated with lawyers’ fees and the like. But further to that, there are fees that come into play with smaller items. If you do decide to sell the house, for example, there may be a loss of profit. Even if you don’t sell, but decide to move out, you might have to buy new furniture, buy a new car, get your own credit cards, etc. It’s paramount you have a plan to deal with all of these expenses, especially if you don’t have your own sufficient source of income.
If you’re considering getting a divorce, Spergel’s Licensed Insolvency Trustees can help you develop a financial strategy and understand your debt relief options. Call us today for a free consultation: 310-4321.