Beginning January 1, 2012 new legislation passed by the Ontario legislature will result in a dramatic change in the way pension assets are divided between divorcing couples in Ontario. According to the Ontario Family Law Act (FLA), the value of married spouses’ pension assets must be included in family property, so the new pension rules could potentially affect a large number of married people in Ontario.

Are you one of them?

Well, for starters, the new rules – formally known as Bill 133 – only apply to spouses where no court order, family arbitration award, or domestic contract that provided for the division of pension assets between the two spouses was made before January 1, 2012. If you’ve entered into any one of these arrangements before the end of 2011, you’ll have to stick it out under the old rules.

The new rules also affect only those pensions covered by the Ontario Pension and Benefits Act, or in other words, provincial pensions. So if you or your spouse is a member of a pension plan that operates at a nationwide level like those available to federal public service employees or banks, for example, the value of the marital pension will be calculated in exactly the same way it was before. Provincial plans, however – like HOOPP, OMERS, and Ontario Teachers’ Pension Plan – will be directly affected by the new rules and there will be a number of changes divorcing spouses with pensions like these should be aware of.

The first major change involves just who’s calculating the value of the pension. Pensions are currently valued by third party actuaries retained either by one (or both) of the divorcing spouses or their lawyers. The new rules, however, no longer give divorcing couples this option. Beginning in 2012 divorcing spouses will have to apply directly to the pension plan administrator to calculate the value of the pension to be divided as net family property. You will need to appeal to them directly by filling out a form from the Financial Services Commission of Ontario’s (FSCO) website and they will likely charge a fee for their services.

The new rules also allow divorcing spouses to transfer the value of the member spouse’s pension in the form of a lump sum payment if they desire; this option was not available under the old rules. Previously, the only way that a spouse could receive their portion of their partner’s pension was either as a percentage of monthly pension benefits, when they became payable, or indirectly through negotiating their settlement (kind of a, “you get the house and I’ll keep my pension” arrangement). It’s important to know that this new lump sum option is just that: an option. Spouses can still elect to go at it the old fashioned way if they desire.

The last big change involves how the value of the pension is calculated. As they relate to pension valuation the new rules don’t contain any provisions that require the spouses to do anything over and above what they already do; you still have to get that pension valued. However, the pension administrators – now the folks in charge of calculating the value of these pensions – will not be applying traditional actuarial practices in valuing them. The new rules mandate that all pension valuations be performed using a prescribed formula that should apply to all pensions.

This last change appears to result from an effort by the province to minimize conflict and lengthy court proceedings. By setting out a simple formula for the administrators there’s very little room for either party to argue or to revisit the calculation at some later date in light of a change in circumstances, both of which were not uncommon under the old rules. The downside to this approach, however, is that not all pensions are created equal (and certainly, not all divorcing couples are either). The new rules don’t make any provisions for the kinds of unique circumstances that could impact the value of pensions – like retirement ages or health issues – but unless the Courts decide that these issues should be taken into account as they arise, we’re probably stuck with them for the time being.

My aunt had a saying: “Money is the root of all evil and the funny thing is we’re all rooting for it!”

My aunt was a wise woman. Money is an important commodity, especially when parties are divorcing. I help people minimize the problems related to sorting out the money issues in a divorce or separation.

As a Financial Specialist in the Collaborative process, I am a neutral This is a real advantage in that you avoid or minimize the back and forth arguments around many of the financial issues when you have the help of a neutral third party.

As the Financial Specialist my job is to collect the financial documentation so there is full disclosure. This is the boring but necessary part of the process. I will ask you to collect your tax returns, account statements, property valuations, pension valuations, etc. before we begin the financial process. Sometimes each party will have a different valuation from an expert such as opinions as to the value of the home. We discuss these valuations and come to some agreement, often somewhere in the middle. This is much more cost efficient than fighting in court. Even better, the parties jointly hire a single valuator to determine the value. This saves money, time and arguments.

Within the financial process, we focus on the property and support issues. I create a report for the family so that they can easily see what the assets and debts of the parties were on the date of separation and date of marriage, We also do a review of the last three years of income for each spouse. From there we can begin to look at settlement options for the property and I can run calculations on support ranges based on the Spousal Support Advisory Guidelines and Child Support Guidelines. I make sure you make decisions based on the proper information. Throughout our meetings and communications, I work to educate you about your financial options. It is important that you understand any tax, income or legal issues. I work together with the lawyers to alert them to when you might need legal details as they relate to the financial issues within your family. When your tax issues are complex, I always recommend that you work with your accountant.

Throughout this process, we work as a team to help you negotiate a financial agreement through individual, joint and five way meetings. This is a flexible model and we work with the unique needs of your family to help you reach an agreement. It is very efficient and results in better agreements.

The Collaborative Financial Review is the report that summarizes the information, agreements and areas to be resolved. Where possible, I assist you to reach agreement and we document that within the report. When there are unresolved issues, I provide the supporting information and outline the issue so that when the report goes to your legal team, they can work with you to resolve that issue.

I find my role very rewarding in that I can often assist to reduce the anger and animosity in the financial negotiations, and help the family craft an agreement that works for everyone fairly.

I am not sure that my aunt was right when she said “money is the root of all evil” but it certainly can cause arguments, especially when you are going through a divorce. I help people just like you resolve the arguments cost effectively and in a fair way for everyone.

Everyone hates having to do a sworn financial statement. This is a court form used in Ontario to list your assets, debts, income and expenses.  It is long, cumbersome and, frankly, a pain to complete. If your case is in Court in Ontario, you must complete the form. The Rules require you to complete it and the court clerks won’t even open your court file without you filing a sworn financial statement.

If you aren’t in court, I don’t blame you if you don’t want to complete it.

As your lawyer, we ask you to do a financial statement to ensure that you are protected. Yes, to protect you! We want you to fully disclose your assets and debts on the date of separation and date of marriage to ensure that your spouse cannot wiggle their wait out of the agreement, claiming that you were hiding assets. The Family Law Act allows the Court to “set aside” (which means not enforce) a separation agreement if there has not been full disclosure.

The financial statement is an easy way to ensure that there has been full disclosure. It is like a checklist for lawyers.

We ask your spouse to provide a sworn financial statement for the same reasons. It is an easy way to ensure we have a complete financial picture from him or her too.

Once we have a complete financial picture, we can advise you as to the range of outcome should the matter proceed to court. In other words, we can give you legal advice. Without complete disclosure, we can’t give you advice: we are just guessing.

Lawyers can get into big trouble with the Law Society if we give advice based on guesses or assumptions that turns out to be bad advice. Okay… you got me… we are also covering our own butt when we are asking for sworn financial statements.

Disclosure is Essential

It isn’t the financial statement itself that is important – what is important is that there is full disclosure. It’s just that the financial statement makes it easy.

A recent case before the Ontario Court of Appeal, known as Ward vs Ward clearly states that the exchange of financial statements is not necessary but full disclosure and knowledge of the other person’s financial circumstances is essential. In that case, the parties exchanged some documentation with the assistance of the family’s accountant. Financial statements were not completed but there was full disclosure and knowledge of each other’s financial circumstances.

The court describes the disclosure process in that case as follows:

“…neither party filed a financial statement, nor was one required under the terms of the process to which they agreed. While this did not diminish the obligation to disclose, in this case, the parties relied on the collaborative law process and other avenues of disclosure, including net family property statements and information from Mr. Wetstein [the family friend and accountant]”

In the end, the Ontario Court of Appeal determined that the husband’s disclosure and the wife’s knowledge of financial circumstances of the husband were sufficient even without sworn financial statements exchanged. The Court refused to set aside the agreement reached.

Lawyers often use the financial statement because it is easy. It lists all of the categories of assets and debts so you don’t miss disclosing something important. In our law firm, we insist on backup documentation to verify every value in the financial statement. It is the backup documentation that is important and fulfills the obligation to disclose.

Collaborative Cases

In Collaborative cases, the Financial Specialist works with the clients to obtain a complete and accurate representation of the financial circumstances of the parties, usually without the use of a sworn financial statement. The Financial Specialist does a report and attaches the backup documentation for every value. Both lawyers ensure that their client has fully disclosed everything. Equally important, every lawyer must review what the other client has provided to ensure s/he has provided full disclosure.

In Collaborative cases, as lawyers we always carefully review the Financial Specialist’s report with our client to ensure it is accurate. Ultimately, the lawyers will ask for a sworn statement from each client stating that they have fully disclosed their assets, debts and income and that the Financial Specialist’s report is accurate and complete. Alternatively, the lawyers will add wording to the separation agreement that states both parties are warranting that they have fully disclosed everything and that the Financial Specialist’s report is accurate. Either way works.

Full disclosure is essential. If you are trying to hide assets or income, we won’t be your lawyer. We don’t play those games.

If you don’t like having to provide full disclosure, we get it. You are not alone. Complain all you want. We have big shoulders. We want your agreement done right and made to last so just get it done. It’s for your own sake.

The Attorney General Chris Bentley, pictured on the left, announced that effective July 18, 2011, all new applicants to Family Court in Ontario must attend the Mandatory Information Program. This is a 2 hour program held at courthouses across the province explaining the Family Court process and alternatives. The intention of the program is to let people know that there are less painful ways to resolve their family law issues than going through Family Court. The motive is excellent.

The problem with the program is that it is made available only after a court action has been commenced. By that time, the parties are often entrenched in their positions and ready for a long drawn out fight. The mud throwing has begun.

It’s like advocating against drunk driving to car accident victims laying in hospital beds. It would be better if parties knew about alternatives to Court before they start their Court case….before it’s too late.

If we could somehow reach out to the public to let them know that they would be better off starting with Collaborative Practice instead of Court, society would be better off. Collaborative Practice is an excellent way to resolve family law issues quickly and cost-effectively, while minimizing the pain, especially for the children. It keeps people focused on problem-solving rather than verbally beating up each other. It keeps people out of Family Court. It works.

I don’t mean to rain on the Attorney General’s parade. I believe his heart is in the right place. Families going through a divorce need to know that Court should be seen as their last resort. It’s just about timing. The public needs to know before they commence a Court action.

Linda L. Piff, a respected lawyer and blogger in New Jersey, writes in her blog, reproduced below, that Collaborative Practice is far more cost effective than litigation.

Although most family law cases do eventually settle, they do so on the court house steps after most of the damage of litigation has occurred. The inflammatory court papers have been filed and become a public record, large sums of money have been spent on litigation and the children become victims of the divorce process.

Collaborative divorce in a relatively new concept for New Jersey.  It was approved by the Supreme Court  as a way for parties to divorce on December 5, 2005.   While relatively new, collaborative practitioners are experiencing a demand for this way to divorce.

In a collaborative case, the parties agree not to litigate from the onset.  Unlike mediation, which uses a neutral as the only professional in the dispute resolution process, in a collaborative case each party is represented by an attorney.  The value for clients  is that they avoid the damage that is done through litigation and save the  expense of the lengthy court room battle.

What can be said with confidence is that no other kind of professional conflict resolution assistance is consistently as efficient or economical as collaborative law for as broad a range of clients.  While the cost of attorney fees cannot be predicted accurately, a rule of thumb is that collaborative law representation will cost from one-third to one-half as much as being represented conventionally by a lawyer who takes issues in your case to court.

Our experience in Ontario is the same. Collaborative practice is a far more efficient and cost-effective way of getting through your divorce.