Hey healthy mamas!

Welcome to the 40th episode of the Healthy Mom After Divorce Podcast!

I can’t believe I just said 40. When I started this podcast last summer, I didn’t know just how much I would fall in love with connecting with an audience in this way.

On that front, I do have some news. This episode will be the final episode in season 1. I am looking forward to coming back in a few months with a second season of brand new episodes!

But that doesn’t mean that I’m leaving you guys hanging until then! For the next 12 weeks, I’ll be running a Listener’s Choice series of episodes. I have covered so much over the last 40 episodes but there are some that have had a particularly large impact on listeners, so I want to share those with you again.

Now on with this episode.

First things first, everything shared on this podcast is for informational purposes only. It is not intended to be taken as mental health, legal or accounting advice. Please contact a mental health professional, legal professional or financial professional for specific questions related to your situation.

So here in Canada where I live, it’s everyone’s favourite time of the year: tax time. Because of that, I thought it would be a good time to talk about divorce finances.

And as you may or may not know, my husband is an accountant. So I thought it would be a perfect time to talk to him about divorce accounting and what he thinks are some key questions for my listeners to ask their accountants to make sure their financial interests are being protected throughout the divorce process and beyond.

Finances and taxes are not everyone’s favourite topic, maybe because they find it dry or difficult to understand, but they are really important to understand, especially during a divorce.

It’s important to know what questions to ask and what information to gather so that you can get through the money side of your divorce as efficiently as possible and come out feeling like you weren’t taken advantage of. This can be particularly important if there was financial abuse during your relationship, which as we know, is often the case in high-conflict divorce.

Now obviously I cannot and do not provide legal, financial or accounting advice but I do want to provide you with some food for thought and questions you may consider asking your accountant as you move through your divorce.

#1. Who do I hire to help me with my finances?

Figuring out who to work with is the crucial first step.

Now, you may or may not have an accountant who files your taxes every year, but it might be worth getting some independent accounting advice, especially if you’re early in the divorce process.

If you have a family accountant, you can go to them to get information and an overall understanding of your family finances, assets, liabilities, those sorts of things. They can get you copies of tax returns if you don’t have them.

But to get specific advice on your personal financial situation, look into hiring your own independent accountant who is looking out for your interests.

If you have a family company, whether or not you’re a shareholder, your finances just became more complicated. Your company may have an accountant so again, you can get information about the company from them but it’s a good idea to seek independent accounting advice for yourself.

I realize there are additional costs associated with this, but it may be one of the best investments you can make.

If you have a family trust, make sure the person you hire is familiar with family trusts and how best to deal with them. Basically, if you’re not familiar, a family trust is a tool usually used to protect assets and there are ways you’ll need to deal with these during the divorce process.

To add one more layer, if you suspect that there may be fraudulent activity going on in the company (like hiding assets or falsifying accounting records, for instance), you may need to hire someone who is a fraud examiner.

This is a specialized certification that accounting professionals can obtain and it’s separate from their CPA designation. Not all CPAs are fraud examiners so if you suspect fraud, make sure you work with someone who is trained to help you with that.

In short, first look for someone with a CPA designation (or whatever the professional accountant designation is in your jurisdiction).

Then, some follow up questions you can ask are:

1. Are you familiar with and have experience in divorce accounting?

2. Are you familiar with and have experience in family trust accounting? (if you have a family trust)

3. Are you a certified fraud examiner? (if you suspect fraud)

#2. What questions should I ask my accountant when it comes to my personal divorce finances?

When it comes to personal finances, I am going to use 3 broad sections to categorize the questions for ease of understanding: income, deductions/credits and benefits.

Now every jurisdiction is different so it’s imperative you speak to someone who is familiar with accounting and tax laws in your area.

(A) Income

Talk to your accountant about the income & tax implications of any support (spousal or child), lump-sum payments, buyouts, etc. that you may be entitled to or already receiving.

In some jurisdictions, certain kinds of support are taxable for the recipient and deductible for the payor while others are not.

You also want to talk to them about other sources of income like investments in education savings plans and retirement savings plans.

Some questions you could ask regarding income are:

1. Is the money I’m receiving/paying in support taxable/deductible, as the case may be? If so, what are the tax implications/benefits?

2. What are the tax implications/benefits of any lump sum payments (that could be from support or a buyout related to a family asset)?

3. How do I properly claim any funds received/paid, support or otherwise, on my tax return?

4. How do I best deal with registered investments (like education and retirement savings plans) that is most advantageous to me and/or the kids, as the case may be?

(B) Deductions/Credits

Just like certain types of support may be tax deductible, there are others deductions and credits that you may want to discuss with your accountant.

Some questions you could ask regarding deductions/credits are:

1. Am I eligible to claim out-of-pocket medical expenses for my children? If so, which parent claims them? If we both claim them, what’s the split?

2. Am I eligible to claim childcare costs for my children? If so, which parent claims them? If we both claim them, what’s the split?

3. For parents with kids enrolled in post-secondary education, am I eligible to claim any of the tuition costs?

4. Am I eligible to deduct my divorce-related legal expenses?

Now these are not necessarily divorce-specific deductions/credits (other than the legal expenses) but they quickly become complicated when parents don’t agree on who can claim them.

Talking to an accountant before finalizing your separation agreement can help iron out some of these details in advance so it’s not a shock (and usually an argument) come tax time.

(C) Benefits

Again, every jurisdiction will have different tax benefits you can claim. Here in Canada, two big ones are the Child Care Benefit (CCB) and GST rebate.

As an example, the CCB eligibility is driven by both income and parenting time split so understanding the implications of these two factors in advance will help with any surprises later on.

A question you could ask regarding benefits is:

1. What benefits are available to me and how will my divorce impact my eligibility?

#3. What questions should I ask my accountant if there is a company involved in my divorce?

A company will automatically make a divorce more complicated. And like I mentioned earlier, if there is a family trust involved too, there is another entity to deal with. And if you think there’s any fraud going on, it’s going to get messy.

If you’re speaking to your family accountant or your company’s accountant (not your independent account), some general questions you could ask are:

1. What shares do I hold?

2. What investments does the company have?

3. What are the company’s liabilities?

4. Can I get copies of the financial statements and tax returns (personal and corporate) for the past 3 years (at least)?

Then you can take whatever information you have to your accountant, the independent one you hired to look out for your interests, and ask them to verify the information you have, talk to them about your concerns, ask them your questions and discuss any fraudulent activity if that’s a concern for you.

Some questions you could ask your independent accountant are:

1. What is the value of the company and what are my shares worth? This is a tricky question to answer so it may be the time to discuss whether or not a formal business evaluation would be something worth exploring.

2. What are the risks and liabilities associated with those shares that I hold?

3. What are the different options I have to get my interest out of the company (if that’s what you want to do)?

4. What are the tax implications of selling my shares? What are the most advantageous options for me in both the short and long term?

Now this list of questions is not meant to be exhaustive. Often, when one question is answered, three more pop up. But it’s a starting point, something to get the conversation started.

The key things I want you to take away from this episode are:

1. Get an accountant early in the process, especially if there are companies or a family trust involved in your divorce.

2. Hire someone who has the qualifications you need. Not all accountants are familiar with divorce accounting, family trusts or fraud so do your research and choose wisely.

3. Get as much information as you can as soon as possible. If your divorce is non-contentious and you don’t expect any resistance from your ex-partner on obtaining financial records, then the urgency is less. But if there is a high level of acrimony and financial abuse, obtaining information will be tricky. Even better, if you can safely obtain any records prior to separation, do it.

4. Ask lots of questions. Don’t be shy, don’t feel stupid, don’t think that everyone should know this stuff. It’s super complicated and tax laws change all the time. It’s better to know what you need to know sooner than later so ask questions, then ask more questions. There is nothing more empowering than knowledge.

I hope this final episode of season 1 was helpful to you as you navigate the tax side of your divorce. It’s rarely anyone’s favourite topic but it’s one that affects us all and it’s better to know in advance.

I’m sure we’ve all suffered a surprise or two come tax-time at some point in our lives. Divorce is stressful enough so let’s not make it one of those times. And I don’t want you to feel daunted by all the information because you don’t need to retain it all. It’s just about learning as you go along, knowing what to ask and knowing who to ask.

I’m actually going to make the list of questions downloadable from my website, but I haven’t done that yet. In the meantime, though, if you download my free guide Take Your Power Back: 4 Ways To Feel In Control Through Your High-Conflict Divorce, I’ll email you this list of questions in pdf format that you can just print off or save to your computer to refer back to when you need it.

Thank for joining me for this first season of the Healthy Mom After Divorce Podcast. Like I said, I’ll be running a Listener’s Choice series for the next 12 weeks. I’m really looking forward to looking back on some of your favourite episodes.

And until next time, chin up, rose-coloured glasses off and pen and paper ready. It’s time to take your ask the right questions, get the information you need and feel empowered to build the healthy life after divorce because healthy moms raise healthy kids.