Posted on October 22, 2014 · Posted in Blog

A Fair Divorce

So, what is a fair divorce? First off, the economics of a divorce settlement can’t really say what is fair, however, it sure can show which spouse is getting what.

A Fair DivorceRecently we helped a wonderful couple sort out their differences which included their matrimonial property. Let’s call them Kate and Randall. Randall’s 45, Kate’s 38. Randall is a medical doctor and she’s a university professor. They live in Kelowna with their three sons who are aged 10, 6 and 3. Kate and Randall met in his medical office a few years back.

As with almost half the happily married couples in Canada, things changed. They came to use our mediation practise with a goal of divorcing without a long, acrimonious process and which focused on keeping their hard earned money in their pockets.

Easier said than done. Kate was never good with numbers and she wasn’t sure if Randall’s offer was a good one. Randall’s annual income hovers around $300K per year while Kate makes approximately $90,000. The medical practice, if Randall were to sell it is worth $300,000. The couple has $1.5M in regular assets and expect to earn 2% after inflation. They also own a $600,000 home with a $300,000 mortgage, which they are paying off in 20 years. Randall also has about $150,000 in a pension fund.

Randall is offering Kate the house and one half of the family assets. Randall would keep his practice, his pension and he’d move into a rental at $2,000 per month. He’d also pay $12,000 per year per child in child support; pay $25,000 for university for four years for each child, but nothing in spousal support. Randall tells Kate that this is more than fair.

So, is this offer really fair? Or is one of them getting set up to live a much lower standard of living long-term?

This type of scenario is played out with most couples that we see. Our job is to work with them and their accountants to determine what is the fair way to divorce.

In the above case, it turned out that Randall would have had a significantly higher standard of living than Kate when we weighed all factors. By allowing them to control the process and by giving them the necessary tools and help they needed to understand the numbers, they both realized that the mediation process saved them from a very expensive, bitter fight, and they met their goals while achieving a fair divorce.

So what did we learn from Randall and Kate’s amicable divorce? First, a dollar isn’t always worth a dollar, and our finances are very complex. In fact they can be so complex that one needs to use the right professionals to determine what is a fair divorce settlement. Second, using good financial tools and solid, proper assumptions can help people understand what is and is not a fair divorce settlement. And lastly, it is possible to have a win-win outcome at the end of a divorce.
FancyLine

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divorce mediation kelownaAbout Kelowna Divorce Mediation Services

We are not expensive lawyers; we are family divorce mediators and rebuilding coaches.  Our boutique divorce mediation firm has become Kelowna’s first choice when dealing with separation and divorce, and beyond. It is possible to reduce stress, time and conflict. Our mediation and rebuilding models educate and empower our clients, so that when you leave you have a document that will stand the test of time, and a process for rebuilding your life.

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