This article appears in the May 2021 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.
Around the world, previously happy couples are now struggling and headed straight for Splitsville. The stress of the pandemic has been blamed by some, while others say Covid-19 has simply exacerbated pre-existing problems.
Diana Isaac, a family lawyer and partner at Shulman & Partners LLP in Toronto, said she’s seen a 40% increase in calls from couples across all age groups seeking to end their marriages since the pandemic began. In “grey” divorces, retirees’ reason for calling it quits often is as simple as “life is short and I want to be happy,” Isaac said.
“In terms of grey divorce, I find there is less stigma,” Isaac said. “When you have people who grow apart after a long-term marriage, they are open to the idea of divorce and want to be happy. I think the pandemic has really brought that to light.”
Grey divorcees — also called “silver splitters” or “diamond divorcees” — face specific challenges. They must consider factors such as their life insurance designations, which may need to change, and how to fund their retirement.
“When there is a marital breakdown, you need a strong financial and legal plan because, in the case of grey divorce, each spouse will need to use the retirement nest egg to fund two retirements versus the one they had before their breakdown,” Isaac said.
Some divorces are amicable, while others end up in court. But with the court system backlogged due to Covid-19, divorcing clients who aren’t seeing eye to eye may want to consider a more amicable option — especially if they don’t have many years left to live.
In family law, clients don’t have their “day” in court — they spend “days in court,” Isaac noted. Couples who split amicably will not only save money by avoiding the cost of going to court; they’ll also save time — time that could be especially precious to retirees who just want to get on with their lives.
“Court should be the last resort — not just because it’s backlogged, but [because] court intervention is really at a point where we’ve reached an impasse,” Isaac said.
According to Isaac, court cases should be reserved for large disputes — if one party wants to force the sale of the matrimonial home, for example — or instances involving children and/or spousal support. She did note, however, that some clients are “emotionally charged” and inclined to go straight to court regardless of their situation.
In these instances, Isaac said she reiterates the benefits of settling matters amicably. “When you talk about the speed and that it could be less costly — financially and emotionally — it tends to resonate with many people,” she said.
Nathalie Boutet, managing partner with Boutet Family Law & Mediation in Toronto, works only on divorce cases that don’t go to court. She said grey divorces lend themselves to being resolved outside of a courtroom.
“I think grey divorce tends to be a little bit more transactional, and therefore really well suited for non-court,” Boutet said. “It’s really in [clients’] best interest not to go to court and spend a lot of money, because they won’t be able to make it up.”
Like Isaac, Boutet noted that retired divorcees must fund two retirements instead of one. Settling their divorce amicably is significantly more cost-effective and avoids diminishing each party’s nest egg.
Further, recent amendments to the federal Divorce Act, which came into effect March 1, introduced new legal obligations for family lawyers, Boutet noted. Lawyers now have a duty to encourage clients to try to solve issues out of court unless doing so would be inappropriate. Non-court options include negotiation, mediation, collaborative law and arbitration.
Along with saving time and money, avoiding court eases emotional stress, Boutet added. Not only are court proceedings public, the final decision is imposed by a judge. In all other forms of divorce, the spouses have some say in their future.
Boutet encourages divorcing clients to work with a financial advisor to know what their post-divorce future will look like.
After the lawyers figure out what is being offered in a divorce settlement, Debbie Hartzman, financial advisor with Professional Investments Inc. in Kingston, Ont., works with her divorcing clients to help them understand what that offer will mean moving forward. Clients may need assistance in budgeting for a life on their own once they know what they’re getting in a settlement. “What I am trying to do is help them understand their new reality,” she said.
Other considerations include reviewing life insurance beneficiary designations and understanding the significance of the matrimonial home. In many cases, the matrimonial home is a divorcing couple’s most valuable asset — and the one couples most often disagree on. The divorce is likely to cause the house to be sold or, at the very least, cause both parties to secure a mortgage, which will negatively affect their cash flow.
On the bright side, given the current real estate market, many couples have “wildly unexpected wealth” tied up in their principal residence — as long as both parties are willing to sell, Hartzman said.
Isaac also encourages her clients to work with an advisor to understand how a divorce will affect their retirement — whether they’re already retired or on the cusp of retirement.
“There are unique challenges to every divorce, but when you’re 50 or older, it’s crucial to address the financial aspects of a separation,” Isaac said. “Many will have to cut back on their lifestyle [after their divorce], while others may have a more comfortable retirement than they anticipated.”