In just a short time, COVID-19 has made a major impact on household wealth in Canada: house values may be down, investments may be facing losses, and businesses undervalued. If you are getting a divorce, what could that mean to the valuation of your assets? Georgia Swan, a Tax and Estate Planner with TD Wealth, joins Kim Parlee to discuss how the value of your assets right now might impact your divorce.
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- Well, in just a short time, COVID-19 has had a major impact on household wealth in Canada. Our house values may be down. Investments could be facing losses. Businesses are undervalued. And if you're getting a divorce, what could that mean to the valuation of your assets and the number attached to the final split?
Georgia Swan is a tax and estate planner with TD Wealth. She joins us from Barrie, Ontario for this Ask MoneyTalk. Georgia, our question is, I'm getting divorced. Will COVID-19 affect how my assets are valued?
- Well, I can say that one of the most common questions that I used to get in private practice was, can I afford to get a divorce. So the idea is, how much money is a party going to come out of a divorce with. And right now, there's no doubt that, because of the fact that the market is a little lower, we don't really know what the prices of things are. It's hard to value things.
There are going to have to be adjustments, if you've started to go through a divorce or you're thinking about going through a divorce, as to what the financial picture is going to look like once you get to the other side of it.
- Now, the assets in the marriage, are they not valued at the date of separation?
- That's exactly right. Most of the assets are valued as of the date of separation, except for the matrimonial home. That's a little bit different. A lot of times it gets divided, depending, though, on what happened between the date of separation and the date of whenever it's sold. But generally, its value gets determined on the date that it's sold with maybe some adjustment if one spouse was living in it and maintaining it during the time between the date of separation and the date of sale.
- It might be-- and then the hard part is, if you had a date of separation right before everything happened, and then fast forward and you've got your portfolio down 30%, this is-- I mean, it's a tough situation to begin with, but it gets tougher.
- That's very true. Because now if, for example, one spouse is required to buy out the asset of another spouse and it was valued back in January, for example, but the buyout is happening now, if the value of the spouse's investments have gone down, there may not be as much liquid cash, for example, to be able to buy up that asset.
But the thing about family law is that it's all about negotiating. It's all about looking at the particular situation of the two people involved and trying to decide what's fair. And if the parties can't actually agree to something, agree to an adjustment, agree to something different, the courts are available to do that for them if that's the only way that we can deal with it.
- But as you mentioned, and we spoke earlier, access to courts is a little trickier than it used to be in the pre-COVID times. For somebody-- if you think about both sides and both spouses, you might have, or probably fairly regularly have, one spouse with a higher net worth than the other. What are the things you should think about on both sides?
- Well, basically, you should think about what are the assets that are going to go in which direction and to which spouse. And then, of course, there's the idea of one spouse buying out the assets of another spouse. And if, for example, as I said, your investments are low, you have less money to do that.
On the flip side of that, that could be a positive thing. Because if your investments are depressed and you have to liquidate them and if, for example, losses are realized, you can use those losses against gains, perhaps, in other years. So in looking at this whole situation, there might actually be some positives with the fact that it's lower. It'll cost you less money to buy an asset, and there may be some tax benefits there that you can avail yourself of.
- Georgia, great insights as always. Thank you.
- Thank you.
- And if you have any questions you would like to ask MoneyTalk, you can send an email to moneytalk@td.com with Ask MoneyTalk in the subject line and ask your question. We'll find the right person to get your question answered. Or check on moneytalkgo.com, where you can find answers to so many questions about life and money.
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Georgia Swan is a tax and estate planner with TD Wealth. She joins us from Barrie, Ontario for this Ask MoneyTalk. Georgia, our question is, I'm getting divorced. Will COVID-19 affect how my assets are valued?
- Well, I can say that one of the most common questions that I used to get in private practice was, can I afford to get a divorce. So the idea is, how much money is a party going to come out of a divorce with. And right now, there's no doubt that, because of the fact that the market is a little lower, we don't really know what the prices of things are. It's hard to value things.
There are going to have to be adjustments, if you've started to go through a divorce or you're thinking about going through a divorce, as to what the financial picture is going to look like once you get to the other side of it.
- Now, the assets in the marriage, are they not valued at the date of separation?
- That's exactly right. Most of the assets are valued as of the date of separation, except for the matrimonial home. That's a little bit different. A lot of times it gets divided, depending, though, on what happened between the date of separation and the date of whenever it's sold. But generally, its value gets determined on the date that it's sold with maybe some adjustment if one spouse was living in it and maintaining it during the time between the date of separation and the date of sale.
- It might be-- and then the hard part is, if you had a date of separation right before everything happened, and then fast forward and you've got your portfolio down 30%, this is-- I mean, it's a tough situation to begin with, but it gets tougher.
- That's very true. Because now if, for example, one spouse is required to buy out the asset of another spouse and it was valued back in January, for example, but the buyout is happening now, if the value of the spouse's investments have gone down, there may not be as much liquid cash, for example, to be able to buy up that asset.
But the thing about family law is that it's all about negotiating. It's all about looking at the particular situation of the two people involved and trying to decide what's fair. And if the parties can't actually agree to something, agree to an adjustment, agree to something different, the courts are available to do that for them if that's the only way that we can deal with it.
- But as you mentioned, and we spoke earlier, access to courts is a little trickier than it used to be in the pre-COVID times. For somebody-- if you think about both sides and both spouses, you might have, or probably fairly regularly have, one spouse with a higher net worth than the other. What are the things you should think about on both sides?
- Well, basically, you should think about what are the assets that are going to go in which direction and to which spouse. And then, of course, there's the idea of one spouse buying out the assets of another spouse. And if, for example, as I said, your investments are low, you have less money to do that.
On the flip side of that, that could be a positive thing. Because if your investments are depressed and you have to liquidate them and if, for example, losses are realized, you can use those losses against gains, perhaps, in other years. So in looking at this whole situation, there might actually be some positives with the fact that it's lower. It'll cost you less money to buy an asset, and there may be some tax benefits there that you can avail yourself of.
- Georgia, great insights as always. Thank you.
- Thank you.
- And if you have any questions you would like to ask MoneyTalk, you can send an email to moneytalk@td.com with Ask MoneyTalk in the subject line and ask your question. We'll find the right person to get your question answered. Or check on moneytalkgo.com, where you can find answers to so many questions about life and money.
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