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3 Financial Implications of Divorce Every Married Person Needs to Know

By Millicent Hicks, Wealth Advisor, Scotia Wealth Management


Divorce can be expensive in unexpected ways. When it’s time to say “I don’t,” separating lives can be surprisingly draining—physically, emotionally, and financially. If you are facing a divorce, you must prepare for these implications.


1. The divorce itself

Even an uncontested divorce where both parties agree on everything from division of assets to custody of children can cost thousands. According to a Canadian Lawyer legal fees survey, costs can exceed $2,500. For a contested divorce, that jumps to $7,200 to $74,000, with the average being $12,875.


On top of legal fees, there can be costs for duplicated services you and your spouse need, such as financial audits. Begin planning as early as possible with a financial advisor you can trust, someone you can share your intentions with, potentially even before you discuss them with your loved ones.


2. Assets and debts

During a divorce, the couple, along with their trusted advisor, lawyer, and accountant, should weigh in on how assets and debts are divided. While it can be tempting to split everything right down the middle, that is often impossible. Things get complicated when it comes to assets such as your primary residence and debts such as a joint credit card balance. For example, should you pay half the loan for a car that your former spouse gets to keep?


Draw on the advice of professionals, especially regarding assets such as pension plans and investment portfolios. Special care is needed here to ensure all parties are treated fairly and in the most tax-efficient manner possible.


If you both can cooperate, it is best to discuss the division of assets and debts early. Conflict costs money, so agreeing on some things early can save you time, money, and headaches in the long run.


If your divorce is acrimonious, try your best to keep emotion out of it. You might get temporary satisfaction from letting a joint mortgage or loan payment go past due, but you could end up with lasting damage to your own credit rating just as you’re starting your new life. That can make it more expensive to make purchases such as a home or car of your own.


3. Post-divorce income and expenses

Whether you were the primary breadwinner or a stay-at-home parent, your income is likely to decrease while your expenses rise significantly. You will now be solely responsible for covering your own household expenses, utilities, and other costs.


When children are involved, costs can increase even more dramatically. Depending on your custody arrangement, you may be required to purchase additional insurance, and you may no longer eligible to claim certain tax deductions.


Divorce has a way of completely derailing retirement plans, forcing you to re-evaluate your goals and objectives. Trying to maintain your pre-divorce standard of living will likely come at the expense of your new retirement savings needs. You may need to consider downsizing or taking a second job to make up savings shortfalls in order to stay on track to meet your retirement goals.


With time, you will gain a clearer picture of your new finances. Conduct a comprehensive evaluation of your financial plan. On paper, you are a brand new person with different income, assets, and objectives.


As a Certified Financial Planner®, I can help make sense of your post-divorce finances and guide you through necessary adjustments to achieve the goals you have for yourself and your family. Don’t be afraid to reach out and ask for help. It is a very uncertain time, and your professional partners and I can make it a little less uncertain.


Millicent Hicks, Wealth Advisor,

Scotia Wealth Management

Millicent holds the Certified Financial Planner® designation and draws on the expertise she has developed over her more than 15 years in the financial industry. She works with families of high net worth, business owners, women in business, widows, and successful professionals to help them achieve their financial visions with clarity and conviction. Being able to truly listen to what clients would like to achieve enables Millicent to successfully build the comprehensive financial plans that are involved in managing complex affairs and significant wealth. Millicent engages her clients by using language they can understand, being objective, and adding a dash of humour to keep things interesting!

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