Each divorce or separation is unique. However, during many years of practice as a family lawyer in Vancouver, BC, I have come across a number of mistakes that people commonly make, explains our Vancouver Family Lawyer, Nassim Nasser.
Our Vancouver Divorce Lawyer explains top 5 mistakes to avoid in your divorce or family law case.
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DIVORCE/FAMILY LAW MISTAKE #1: Signing an agreement without consulting a Family lawyer
When you sign a prenuptial or separation agreement with seeking legal advice from a Vancouver Divorce Lawyer, you do not get the opportunity to know legal rights and entitlement upon divorce. You may be signing away thousands of dollars both in terms of property rights or entitlement to support.
In terms of legal fees, it is generally cheaper to seek independent legal advice before signing the prenuptial or separation agreement, and negotiate an agreement that is fair, as opposed later hiring a lawyer to apply to set aside or vary the prenuptial or separation agreement. Moreover, depending on the terms of the agreement, the courts may not be willing to set the agreement aside.
At Nasser Allan LLP, our Vancouver divorce lawyers routinely draft and negotiate prenuptial and separation agreements on behalf of our clients. Our practice is to require the other party to the agreement to also seek independent legal advice from a Divorce Lawyer in Vancouver or sign a waiver of independent legal advice confirming that they were given the opportunity to seek independent legal advice from a Divorce Attorney and they chose not to.
DIVORCE/FAMILY LAW MISTAKE #2: Involving your Children
Children are meant to be children. You should never involved them in your divorce or family law case, says our Vancouver Divorce Lawyer, Nassim Nasser.
A lot of time, divorced or separated couples put the children in the middle, asking them, for example to choose between parents, choose their parenting arrangements, or even negotiate financials with the other parent. Involving the Children in your divorce case or family law case puts a tremendous burden and pressure on the children, which may have significant psychological impact on them.
Family Law Judges generally do not appreciate seeing children being placed in the middle either and attempt to make decisions that would avoid involving the children in the family law or divorce case.
DIVORCE/FAMILY LAW MISTAKE #3: Not providing full and complete financial disclsoure
Full financial disclosure facilitates fair settlement in any family law or divorce case. Pursuant to the section 5 of the Family Law Act, parties to a family law dispute must provide full and true information to resolve a family law dispute. Without proper financial disclosure, parties are unable to assess their case or ascertain their entitlement. The court considers lack of financial disclosure in family law and divorce cases as the cancer to matrimonial dispute (Cunha v. Cunha (1994), 99 B.C.L.R. (2d) 93 (S.C.)), says our Vancouver Divorce Lawyer, Nassim Nasser. Failure to provide full and frank financial disclosure, may be a ground for setting aside any prenuptial or separation agreements (see section 93 of the BC Family Law Act). Moreover, failure to provide full and frank disclosure, may allow the court to set aside your final judgment and replace it with a new one.
To be able to negotiate fairly or calculate entitlement, parties are often required to exchange Financial Statements. In Supreme Court, this is Form 8 Financial Statement. Depending on the issues in dispute, you may not need to complete all parts of the financial statement. For example, if the only issue at dispute is property division then you only need to fill out part 3 of the financial statement. Read the instructions on the Form 8 Financial Statement carefully to see which parts of the Form 8 Financial Statement you need to complete.
Generally speaking, when issues at dispute are shared parenting, support, section 7 expenses, and property division, you need to complete parts 1 – 4 of the Form 8 Financial Statement. You will need to attach the followings to your Form 8 Financial statement:
- every personal income tax return, including all attachments, that you have filed for each of the 3 most recent taxation years.
- every income tax notice of assessment or reassessment you have received for each of the 3 most recent taxation years;
- if you are an employee, your most recent statement of earnings indicating the total earnings paid in the year to date, including overtime, or, if such a statement is not provided by your employer, a letter from your employer setting out that information, including my rate of annual salary or remuneration;
- if you are receiving EI, your 3 most recent EI benefits statements;
- if you are receiving WCB (Worker’s Compensation Benefits), your 3 most recent WCB benefit statements;
- if you are receiving income assistance, a statement confirming the amount of income assistance that you receive;
- if you are self-employed, for the 3 most recent taxation years
(i) the financial statements of your business or professional practice, other than a partnership, and
(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom you do not deal at arm’s length;
- if you are in a partnership, confirmation of your income and draw from, and capital in, the partnership for its 3 most recent taxation years;
- if you control a corporation, for the corporation’s 3 most recent taxation years
(i) the financial statements of the corporation and its subsidiaries, and
(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the corporation and every related corporation does not deal at arm’s length;
- if you are a beneficiary to a tryst, the trust settlement agreement and the trust’s 3 most recent financial statements;
- If you own or have an interest in real property, the most recent assessment notice issued from an assessment authority for the property.
DIVORCE/FAMILY LAW MISTAKE #4: Giving cash to your former spouse
Avoid giving cash your former spouse, warns our Vancouver Divorce Lawyer, Nassim Nasser. You cannot account for cash and if your former spouse says she did not receive the cash payment, then you will find yourself in a he said/she said situation. Unless you received a signed receipt from your former spousal, proving that you gave him/her cash is quite difficult and expensive.
DIVORCE/FAMILY LAW MISTAKE #5: Not accounting for taxes
Tax consequences are important in property division and spousal support. For example, monthly spousal support is taxable at the recipient hands and tax deductible by the payor spouse, while lumpsum spousal support is neither taxable or tax deductible. In property division, accounting for taxes is very important when the sale of the asset triggers significant amount of taxes to be paid, often this is a case when dealing with corporations, says our Vancouver Divorce Lawyer, Nassim Nasser.
Cases involving the division of family companies and professional practices require a deft hand to prevent disaster that could make a viable company begin to tank because of inappropriate valuation and compensation techniques.
In dividing interest in companies, you should be mindful of the income tax consequences that are payable both on capital gains on assets owned by the company and on monies that may need to be withdrawn to pay compensation payment to the spouse who will not be retaining their interest in the company after marital breakdown (distributive income taxes), warns our Vancouver Divorce Lawyer, Nassim Nasser.
Section 95(2)(h) allows the court to take into account tax liabilities that may be incurred by a spouse as a result of an order for property division in determining whether to order unequal division of family property. Where there is no evidence before the court that corporate assets will be sold in order to satisfy the compensation order, the court may not account for distributive taxes (Plester v. Plester, 1998 CanLII 6657 (BC SC)).
The issue of distributive was also visited in the case of M.S. v. M.M. In this case, although the husband argued that he would need to windup or liquate companies to pay any compensation order, there were evidence before the court that the husband may not necessarily incur distributive taxes to pay the compensation order since there were other sources of funds to satisfy the order. The Respondent was not able to establish why it would be necessary for the parties to incur the tax consequences of winding the corporations. However, there was evidence before the court that if the husband had to use the funds from one of the corporations, taxes would be incurred. The court ordered that “[i]n the event that it is necessary for the respondent to withdraw funds from 144 in order to fund the compensation order, any contingent tax liability arising from the withdrawal of such funds will be shared equally by the claimant and the respondent.” (M.S. v. M.M., 2015 BCSC 1599 (CanLII))
When dealing with distributive taxes, there needs to be evidence by an expert before the court regarding the likelihood that either spouse would incur distributive taxes and preferably as estimate as to the amount of distributive taxes.
If you are going through divorce, do not do it alone. Contact us to book an initial consult with one of our seasoned Vancouver Divorce lawyer to avoid making common mistakes and to know what your rights and entitlement are.