We keep reading and hearing that divorces are going up due to the COVID pandemic, largely based upon lawyers anecdotal opinions, perhaps influenced by a desire to drum up business, or a sort of sense that COVID makes for stressed relationships.
Is this true?
No. It's not true at all. As reported in a Calgary Herald article, ironically titled "COVID-19 infecting marriages, driving up divorce numbers, say family mediators", while relying upon the idea of a non-lawyer largely displaying a complete lack of understanding of how divorce even works, the article quotes actual statistics which show:
"Figures provided by the province show the number of divorce application filings in Alberta Court of Queen’s Bench from March through June this year number 2,490, which is 29 per cent below the 3,503 in the same four months of 2019.
And this 2020 number is 35 per cent below the 2016 figure of 3,808."
What? Divorces are actually lower post-COVID than in the previous two years? Yes - that's correct.
Why? Well, because it's a terrible time to get divorced. For the primary income earner, current income is likely lower, but they run the risk of support being based upon 2019 numbers. For the supported party, the uncertainty of COVID makes low-income arguments more tenable - and once support gets set, it can be difficult to change it.
Regarding property distribution - many investment portfolios are down, business values may be down, and so prudence might be a better course of action than charging into a divorce during a significant economic downturn - particularly in this part of the Country.
In the news this week - another article touting the fact that Divorce does not have to be a war where the only winners are the two lawyers.
Have a look at this recent post in DivorceMagazine.com where the benefits of Collaborative Divorce are discussed. If you're interested in pursuing your divorce in a collaborative fashion, Robert G. Harvie, Q.C. (former President of the Collaborative Divorce Alberta Association and Tyler S. Pollock (current Board Member with the Collaborative Divorce Alberta) are specially trained and ready to provide you assistance in working through a Collaborative Divorce.
Estate Planning; Wills, Enduring Powers of Attorney and Personal Directives
Settling Famiy Property issues without a lawyer
Settling Property WITHOUT a Lawyer
First - Set Guidelines for you and your partner/spouse
Normalize Disagreement – disagreement is ok, and is to be expected… neither of us will get excited or angry as a result of disagreement. It’s simply an obstacle that we will address as part of the resolution process
Related to above – we will be respectful – we will speak to each other in a respectful fashion;
We will NOT allow ourselves to lose focus to issues not before us. We are discussing property division, not parenting, not support, not personal issues... and we each reserve the right to suggest to the other, respectfully, “I believe we’re getting off-point”
Understand that negotiation of an agreement is not a “one step” process but will involve a number of “agreements” that then lead to the main agreement. Each one of those agreements, however, is a positive step establishing trust and a willingness to attack “the problem” and not each other.
Agreement #1 – Screw the Lawyers
The most immediate agreement is that both of you wish to avoid giving money to lawyers if at all possible.Lawyers, while charming, lovely people will quite likely do just fine without the two of you contributing more to THEIR children’s university costs or the purchase of their new home in Scottsdale, Arizona.
I have yet to raise this issue and to have anyone say, “No, I would really rather give money to my lawyer than to have it in my own pocket.”
This seems trite – however, it is very helpful to come to this as “Item 1” in your agreement, and to return to that if things become difficult.
Agreement #2 – Valuation Date
Agree upon a valuation date – which could be the date of separation, or some other date if finances continued to be commingled for some time – if there is a disagreement, the first of the month immediately preceding the meeting should be the default absent other agreement.
This is usually not contentious, but it is very helpful to agree on the date to be used as you will likely be obtaining bank and investment statements and it’s very helpful to have a clearly understood valuation date. Once this date is agreed to, you have Agreement #2.
Agreement #3 - Define the Assets
1. Decide who will begin – flip a coin if desired, and the first person will list what they believe to be the significant assets of the relationship – WITHOUT DISCUSSION OF VALUES – THAT COMES LATER
2. After that person is done – the second person is entitled to then:
- Add any assets they believe have been missed; and
- Make any comment regarding assets they believe are not properly included in the discussion – those assets not being “removed” form the list but followed by a question mark (“?”) to signify there is an issue regarding their relevance
3. The first person then completes their own response to signify whether any of the added assets are in issue, and marks those with a question mark.
CONGRATULATIONS – YOU HAVE JUST COME TO AGREEMENT #3… regarding what assets MAY need to be divided.
Agreement #4 - Removing Assets in Issue (Exemptions)
Under most jurisdictions, including Alberta, certain types of assets are not divisible (they come out of the “pile” of assets to be divided) – and we typically refer to those as “exemptions”.
1. The value of assets owned at the date of commencement of cohabitation IF traceable to presently existing assets.
- For Example – a home owned pre-relationship, or savings that went to purchase a home that you still own… however, if funds were expended (Honeymoon, living expenses) the exemption is lost
2. The value of assets received by inheritance or gift from someone other than your partner/spouse as at the date of gift or inheritance – again, that must be traceable to presently owned assets;
3. Proceeds of an insurance settlement or legal claim for loss not related to loss of property (personal injury typically) – again, if traceable to presently owned assets;
If either party has assets falling into one of these categories – the value on the date in question (date of marriage, date of receipt) is not shareable, BUT increase in value IS shareable.
Other assets may also be in issue – for example, occasionally there are arguments over possible “future assets” (future inheritance) – if there is a serious issue, at that stage you will likely require additional legal advice… keeping in mind the cost of litigation to establish what might be a questionable claim (would you place $50,000.00 on the red square of a roulette wheel?)
With a little bit of work – you should be able to now come to agreement on what assets WILL be divided – and another block will be set by Agreement #4, which is what assets you agree ARE to be divided.
Agreement #5 - Asset Valuation
This is more difficult and more likely to result in disagreement – but as above, THAT IS OK AND IS NORMAL.
Go through the list, one item at a time, and provide either your opinion of value – or it is defined, the actual value (bank account balance as of the agreed valuation date.
As per the above, after person one does this, person 2 reviews the list and provides their opinion as to the items they agree to (YAY!) or the items they do not agree with (NORMAL), providing their own opinion of value – or, if they simply feel they do not agree, but don’t have their own sense of value, they can just put a question mark beside the value.
Once this is completed you will have a list of all assets, and an indication of which items are not yet in agreement.
Now the task becomes how to resolve items of disagreement. At this stage, as a mediator, we would engage in “brainstorming” – each person giving ideas as to a process to resolve the differences… which could include:
Then – the two of you review the ideas, and pick the one that the two of you agree upon – understanding that if you don’t agree on a process, you may need to hire a lawyer and go see a Judge (generally, a bad idea).
Certain types of assets are not easily amenable to valuation on your own – including businesses, pensions, minority interests in property (1/10 share of lakefront cabin)...
For example – particularly in Alberta where Government Pensions have changed, the “Commuted Value” the pension authority provides is NOT the value of the pension and you are well advised to hire an actuary to value the pension as commuted value could be less than ½ of the actual pension value.
As well, some assets include potential tax (RRSP’s, business property).
Where you have assets not easily amenable to valuation on your own, or that may require specific tax advice, you are best to table those assets for now and seek advice on the best course of action to resolve the valuation and tax issue.Often a jointly retained Accountant can provide assistance in this regard.
If you do come to a stalemate on any particular asset or assets – you are still not left to go to court and pay lawyers thousands and thousands of dollars.One possible solution would be to find a reputable, experienced family lawyer and ask them to “arbitrate” items of disagreement.This does not necessarily mean a full-blown lawyer/lawyer/arbitrator arbitration – you could hire a family law arbitrator to make an impartial decision without lawyers being involved.
DEBTS – as much as we would like to forget about debts, the assets to be divided are NET of liabilities.This is usually not a difficult process and requires production of statements to establish amounts owing at the agreed valuation date.
Once this process is concluded – with a little work and patience you will come to Agreement #5 – valuation of assets and liabilities, leaving you with the net shareable value (assets less debt).
Agreeement #6 - How do we divide? Who gets what?
At this stage it is worth noting in Alberta, there is a strong presumption of equal distribution of net assets. Absent significant evidence of waste or wrongful use and disposition of assets (assets lost to gambling, drug use, etc.) most cases are going to result in a 50/50 distribution of net assets.
Who gets those assets is up to discussion – and to a great extent, this will often be easy to resolve – usually people will keep their own bank accounts, vehicles, etc… but you may need to have discussion on assets where both parties would possibly like to keep that particular asset. In such a case – you can discuss (respectfully) why it would make more sense for you to keep a particular assets – but if there is a stalemate, you could simply agree to “sell it” to the highest bidder. “I want the house, and I’ll agree to take it for $400,000.00!” No – I’m willing to take it for $410,000.00… etc.
This is generally rather uncommon – however, keep in mind again, the cost/benefit of continued conflict vs. agreement.
Often once you align assets to the two of you – you will then end up with a balance owing to one person or the other. This is where you should discuss how and when that will be paid. Typically, parties separating do not wish to stay connected, and as such, if time is needed to complete payment it should be relatively short (less than 24 months typically) and should be secured against assets to prevent loss on bankruptcy. It should also carry interest at something beyond normal mortgage rates, as neither of you wishes to be a bank – so quite typically we discuss something like two percent over the current prime lending rate for a major bank.
Once you have decided on who gets what, and what the difference is, and how and when it will be paid – you have basically settled your property division – Agreement #6.
7. NOW Comes the Lawyers – Paper the Deal
In Alberta, to have a binding property settlement which is not subject to challenge down the road, you must have independent legal advice and as such, one you believe you have an agreement – you should write that down, and take it to TWO SEPARATE LAWYERS for independent legal advice on the agreement – and to assist in fine-tuning any issues that you may have neglected to consider:
CONGRATUALTIONS!! You have avoided contributing to my next holiday in Mykonos – well done!
It seems that everything has changed since the arrival of COVID-19 here in Alberta. Social distancing, non-essential businesses closed, Zoom drinks with friends, Skype calls with family members only kilometers from your home. These and other changes have become almost routine in under a month with the spread of the pandemic and life will likely be irreversibly changed as a result. One thing which has not changed is the continuing importance of having proper, up-to-date estate planning documents to ensure your wishes are respected, and your loved ones cared for, regardless of what happens to you. This is as true today as it was last year.