How to Protect Yourself Financially During Divorce

Divorce is emotional, and financial protection may not always be top of mind. But being cautious and prepared early on can help prevent financial stress later down the line. If you’re amidst a divorce or considering the process, keep these seven tips in mind.

Tip #1: Understand Your Net Family Property

Every couple handles their joint finances differently. Some choose to split responsibilities evenly, some may involve each other in all financial aspects or, in some cases, only one person may be dedicated to handling all financial responsibilities.

But when it comes to divorce, you’ll want to familiarize yourself with your family’s finances, especially if you weren’t as involved with them before. Because nearly every financial aspect of your life is scrutinized and addressed during a divorce, having a good understanding of what your net family property is (including all assets and debts) can make a huge difference later on.

Educate yourself on all aspects of your finances including:

• All assets and how they’re titled (houses, cars and boats for example)
• Debt (mortgages, car loans, personal loans, credit card debt, student loan debt)
• Income (your family’s total combined income)
• Investments

Tip #2: Close Joint Accounts (Carefully)

If you and your spouse share a joint credit card, you’ll want to close the account as soon as possible. Neglecting to close the account could make you liable for paying any charges your spouse accrues on the card. With a divorce underway, you want to avoid accruing any additional joint debt including credit card debt.

If you have a joint bank account, this may be trickier to handle. You’ll want to close the account as soon as possible, but there may be some logistical reasons why it could make sense to leave it open. For example, your utilities and mortgage payments may be automatically withdrawn from the account. When it comes to closing or keeping an account open, both parties should determine how withdrawals or deposits within the account will be handled moving forward.

Tip #3: Update Beneficiary Designations

It’s likely your spouse is listed as the beneficiary for various accounts, policies and assets. If you’d like to change your beneficiary designations, you’ll need to do so for every individual instance in which they are listed. Simply updating one item or rewriting your will does not guarantee all assets are updated.

Possible beneficiary designations to update include:¹  

• CPP/QPP
• Employer-sponsored pensions
• RRSPs
• Registered Retirement Income Funds (RRIF)
• Pooled Registered Pension Plans (PRPP)
• TFSAs
• Insurance policies
• Annuities

Tip #4: Build Your Team of Professionals

Working with professionals can be a crucial step in protecting your assets and financial wellbeing during a divorce. Most people start by hiring an attorney, but there are others who may be of importance as well.

Possible professionals to speak to include:

• Financial planner: A financial professional can help bring to light all financial assets between you and your spouse, while working to help preserve your financial wellness during and after the divorce.
• CPA: An accountant is another financial professional who can help gather and sort through the financial assets accumulated throughout your marriage.
• Appraiser: You may need to work with an appraiser to assess an accurate and fair value for all important property - antique furniture, art, collectibles, etc.
• Family Mediator: Negotiating child custody is no easy feat, and having an unbiased third party to lead the discussion is sometimes necessary.

Tip #5: Gather & Protect Important Paperwork

When going through the process of divorce, you’ll be faced with what feels like a million small details to consider. Do yourself a favor and set aside time to gather up all important paperwork. Not only will you likely need some of it throughout the divorce proceedings, but you’ll want to keep your documents protected as well.

Possible paperwork includes:

• Birth certificate & SIN card
• Passport
• Diplomas & certificates
• Previous tax returns
• Current tax paperwork (T4 slip, bank statements, etc.)
• Deeds

If some of the paperwork is applicable to both you and your spouse, make sure to make a copy for you and a copy for them.

Tip #6: Inventory Your Home

Doing an inventory of your home with your spouse (if possible) early in the process can be an effective way to prevent headache and stress later on. Through photos or video, document all items of value in your home and the condition they’re in. Document the date of the video or photos and any pertinent details about furniture or other important items. This can be helpful in putting both parties on the same page in regards to what assets you both own and what condition they’re in.

Should an item of value go missing during the process, you have proof of what it was, when it was last in the house or on your property and the type of condition it was in.

Tip #7: Reevaluate Your Budget

The reality is, divorce isn’t cheap. An uncontested divorce costs between $600 and $1,600 on average in lawyer fees, while a contested divorce could put you back upwards of $15,000.² Once the divorce is finalized, you may need to readjust your expectations for saving and spending - especially if you’re transitioning from living on two incomes to one. A financial planner can help you through the process of determining what your current financial needs are as well as how divorce may affect your plans for retirement.

Divorce is painful, often messy and almost always emotionally exhausting. While there’s no getting around it, there are things you can do to help make it easier on yourself. If this is something you are working through, reach out to a financial professional who can help keep your best interest at the forefront of the process moving forward.