Divorce Mediation – An Alternative to Divorce Lawyers
Division of Net Family Property
Maximizing Wealth ∙ Minimizing Tax ∙ Creative Division
Under Family Law in Ontario, Net Family property is considered everything a couple owns jointly or individually at date of separation (otherwise known as the valuation date) and acquired during the marriage, including the family home, contents, RRSP’s, investments, bank accounts, insurance policies, pensions and many other assets less indebtedness. If you were legally married, you are usually entitled to half of all the net property, although there may be some exceptions to the rule. People spend lives gathering and saving assets for their retirement and education for their kids which now may be divided not only between the spouses, but their divorce lawyers, experts and Canada Revenue Agency.
At PRM Mediation our objective is to create a strategy to maximize net worth before division even begins. As a Chartered Professional Accountant and professional negotiator, Mary Krauel has the expertise to prepare financial statements and gather disclosure once for both parties avoiding the cost of duplication under the legal system where each party does their own with their lawyers. With an audit background Mary can give guidance on: source documents to use, valuation options for complex assets, understanding the underlying tax liabilities, tax consequences of asset transfers before and after divorce, debt consolidation, determining what assets to keep or liquidate and even a creative approach to swap or divide assets. Most mediators or lawyers do not have a financial background to be able to advise clients on how to protect assets and may require the use of financial experts to assist their clients.
Child Support and Extraordinary Expenses
Making it About the Kids Not Money
Child support is legislated by law in Ontario and both parents are legally responsible for financially supporting their child. Child support is money paid for the benefit of the child. The support is not paid to benefit the parent with whom the children mostly live. It is intended to defray the extra costs that a parent incurs because of the children being in their primary care.
However, this is often over-simplified as being just a look up table based on employment income. So why is it that many parents still find themselves in court to determine child support? And what are those extra costs?
Although a legislated table is used to derive the amount of child support, the two factor table based on number of children and income has several considerations that parents are unaware of or overlook. Income is subject to interpretation and there are many legislated add backs and deductions in determining income particularly for those who have fluctuating variable incomes or who have their own businesses. Not all income used to determine child or spousal support is reported on personal tax returns and may even be imputed to one or both parties. Mary Krauel as a subject matter expert on income determination for support was a keynote speaker at the Las Vegas convention for the Institute of Divorce Financial Analysts. She reviews with parents those factors that give rise to changes in income and therefore support.
Who pays child support, and how much, also depends upon the children’s residential arrangements and is not necessarily restricted to the biological parent. Parents may be tempted to choose custody and residential arrangements that reduce child support but are not in the best interests of the children.
At PRM Mediation we guide parents to make choices that are best for their children and reflect their work and parenting history and commitments. Open and frank guided discussions provide parents with the ability to develop a future-based plan that allows them to make decisions around discretionary extraordinary expenditures (known as Section 7 Expenditures) now as well as anticipate future expenses as the child grows relating to things like child care, post-secondary education, extracurricular activities etc. including the respective cost sharing. Protecting the payment stream is as important as determining the amount. We assist clients in making provisions in mitigating this risk.
As income levels change or when a change in circumstance occurs, child support may be varied. We help parents efficiently recalculate support and amend agreements.
Honouring Past Marital Decisions and the Need for a Clean Break
Unlike child support, spousal support is not legislated in Ontario and instead Spousal Support Advisory Guidelines (SSAG) have been created leaving it subject to interpretation. Guidelines provide a range of support and a range of duration. As in child support, income determination is subject to interpretation and adjustment. What makes spousal support more challenging is that entitlement is not guaranteed and based solely on variance of income between the parties. Where becoming economically independent is not automatic after separation; where age, length of cohabitation and parenting decisions made during the marriage become significant factors of consideration. It is by far the most complicated and highly emotional subject in separation and divorce, where case law swings from one extreme to the other.
This is where mediation is best served as couples can themselves assess what is fair given all these considerations. It is about honouring decisions that had been jointly made during the marriage or cohabitation, while at the same time respecting the need for both parties to start new beginnings with a clean break. Our legal seminar provided by a Family Law Lawyer addresses all of these factors, including reviewing leading cases relied upon by judges, in helping provide the legal information couples need to make informed decisions. Therefore they can leave the dice at home rather than take their chances in court. PRM Mediation creates support options that address: cash flow needs; re-training, getting settled and established; impact on continued care of minor children; and re-entering the work force. We also explore periodic payments versus lump sums to meet each couples financial budget and desire for a clean break. We also take into consideration the tax implications of support.
Comprehensive ∙ Flexible ∙ Inclusive of Mom and Dad
Co-parenting is a complex and emotional matter which needs to be handled with great empathy, respecting the rights of both parents and the developmental needs of the children. In our view children need both mom and dad as an active and integral part of their lives. A parenting plan needs to stipulate how children will be raised and cared for and by whom and what and how decisions regarding their care will be made by the parents. Too often separation agreements do not have specific parenting plans and address basic issues such as schedules, custody and support. What lands parents in court is that agreements or Parenting Plans are general and vague and do not clearly stipulate the intentions of the parties; are constrictive and rigid rather than allow for flexibility; are silent on issues; do not indicate how decisions will be made; does not give a voice to the children; and do not provide a mechanism for respectful communication between the parties or to make changes to the parenting plan without having to go to mediation or lawyers.
Mary Krauel has many years of experience in creating parenting plans and begins the discussion by identifying the common core values and beliefs of the parents that brought them together in marriage in the first place, 80% of which they still share post separation. PRM Mediation offers a parenting seminar presented by a child psychologist to help parents understand the impact of separation and divorce on children at various ages, their development needs, rights of the children, when and how best to introduce new partners to children and the intentional and unintentional use of parental alienation by the custodial parent. This lays the ground work on how to handle parenting issues with the focus being on what is in the best interests of the child.
The future-based plan helps restore relationships between parents by finding ways to meet the needs and wants of both parties but most importantly the children by setting guidelines and a baseline for all decisions yet allows for future change. The intent is that if communication or relationships falter between mom and dad as they co-parent they will still be able to continue without having to immediately run to court.
Common Law Couples
Fairness and Equity in all Matters
In Ontario, common law couples have similar rights as married couples for the purposes of child support and spousal support, custody and access and parenting, yet the statutes are not yet synchronized on matters of division of property. Common Law couples do not have the same rights to Division of Net Family Property as married couples do under the Family Law Act in Ontario.
As such, PRM Mediation provides an opportunity for couples to consider what is fair and reasonable regarding the financial implications of property accumulated during cohabitation and to explore the potential remedies of unjust enrichment and joint family venture to ensure fair and just resolution for both parties that would otherwise only be available to them through civil litigation.