Simple Divorce NOT Always So Simple

My spouse and I thought our divorce was going to be rather simple but it seems to be getting more complicated and contentious since we both hired lawyers to represent us. Can you suggest ways we can reduce the tension and cost?

Ending a marriage after having shared years of your life with your spouse is, in and of itself, an emotionally trying experience. Many divorcing spouses will pile on additional emotional and financial costs by hiring their own lawyers and financial experts in what often ends up as years of combative communications, billable hours, conflicting reports, and court appearances. The emotional and financial toll can be devastating.

Spouses often go through this ordeal because they’re not aware of any other way to settle their differences outside of this sort of adversarial approach.

However, spouses that are separating on good terms might want to consider the less costly and more efficient collaborative approach to divorce. Collaborative Practice is a voluntary dispute resolution process that is non-adversarial, mutually respectful and solutions-oriented. Spouses work together on the issues with their lawyers present for guidance and advice.

Because a collaborative approach to divorce is predicated upon both parties’ commitment to conduct negotiations in good faith, voluntarily disclose all relevant information, remain focused on the best interests of children, and reach creative resolutions that best address the goals and priorities of the family, they can regularly be less of an emotional burden than traditional, and often adversarial methods traditionally employed in a marital breakdown.

Costs are saved not only by avoiding the expensive court proceedings that so often accompany a divorce, but where differences do arise – say in conflicting opinions of the value of a spouse’s business – the parties can agree to jointly retain relevant experts rather than bearing the cost of their own professionals.

Collaborative professionals operate in a wide variety of specialties, including legal professionals, mental health professionals, mediators, and Chartered Business Valuators, like us. All collaborative practitioners must have completed an approved training program and so are specially trained to assist in matters like these.

You can find us and other collaborative practitioners on Collaborative Practice Toronto (http://www.collaborativepracticetoronto.com) 

Article originally published in Divorce Magazine 

Anyone want to buy a business? It appears not - The Globe and Mail

http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/succession-planning/anyone-want-to-buy-a-business-it-appears-not/article4102129/

Owning and running a small business is considerably different from selling a business.  There needs to be a lot of preparation to make a company saleable.  It is important to pre-plan and start organizing the business so it can be sold.  Many entrepreneurs have much of the business operating based on their knowledge.  But what happens if they are not available to run the business? Obviously problems for a prospective purchaser.  Organizing and optimizing a business for sale is an entirely different set of skills than are used in managing that business.

Self-Employed Spouse

My husband and I are getting a divorce and I’m worried that I won't get the amount of spousal support I’m entitled to. He runs his own business and we’ve always had plenty of cash and lived a very good lifestyle, but I know from our years together that he’s always reported lower income for tax purposes than he typically earns. How can I ensure I’m paid my fair share?

One of our most common assignments in a family law context is the calculation of income for support purposes. This is often referred to as an income valuation, income determination, or support calculation Because self-employment allows for numerous deductions that reduce taxable income, spouses that own their own businesses will often report earnings on their income tax returns that may not accurately reflect their lifestyles. This can pose problems when couples go through a divorce because one of the objectives of support payments, which are based on the Federal Child Support Guidelines, is to establish a fair standard of support.

There are typically two ways that income is underreported: overstating expenses and undeclared revenue.

The Guidelines provide a number of examples of expenses that should be added back or adjusted in order to give a truer representation of the income a spouse has available for support payments. For example, spouses that employ friends or family members and pay them wages over and above market rates for the same work will have to restate these wages when calculating their income for support purposes; we’ve also encountered spouses that deducted rental expenses for storing files or supplies in their own homes, and these expenses would also need to be added back. Any personal expenses that a spouse has been paying through their business are also included in their income, as well as an additional amount that reflects the benefits they received in doing so by paying lower taxes.

Unfortunately, the Guidelines make no mention of any provision for undeclared income. Some spouses conduct some or all of their business activities in cash and there may not be a paper trail recording these transactions. Income Tax Authorities will assess a taxpayer on unreported income using a net worth assessment to show that the income they reported could not account for their lifestyle or the increase in their personal equity (their assets, less their liabilities). The challenge with unreported revenues lies in presenting a convincing enough argument that this additional income exists; if you can make the case compellingly enough the Courts will often impute some additional income. Making this case often relies on evidence that demonstrates your spouse’s lifestyle, including reviewing their bank and credit card statements, mortgage payments, and credit applications to see if their stated income supports their obligations and their standard of living. Attention has to be directed to the assets and liabilities at an opening and closing period and the resulting changes therein.

Finally, if after all of the above, the Courts find that your spouse’s income as calculated using the adjustments set out above doesn’t fairly represent the income available to them for the purpose of child support, and if they are a shareholder or director of a corporation, the Courts can impute some or all of the Corporation’s net earnings to their income. This is a helpful provision even in cases when income hasn’t been historically underreported; sometimes, spouses will continue to pay themselves a management salary but leave additional earnings in a business to try and reduce the income available for support. However, unless they can demonstrate that their business needs these funds – perhaps for a future expansion, or the purchase of new equipment – the Courts may reject these attempts to shelter funds when they could easily be withdrawn by the shareholder and available for support.