#12. Divorce Finances 101 with Carlton Benjamin

This conversation delves into the financial complexities individuals face during and after divorce. Carlton Benjamin, a financial security advisor, and Divorce Coach Lisa share insights on managing emotions, long-term planning, and the importance of life insurance. The discussion covers various financial aspects, including investment accounts, pensions, and tax implications, emphasizing the need for a structured approach to rebuilding financial stability post-divorce.

We also tackle practical, often-overlooked questions like:
➡️ What to do with joint life insurance after separation
➡️ How to handle RESP contributions when co-parenting
➡️ Tax traps to avoid when dividing RRSPs, selling property, or receiving spousal support

☑️ How to split pensions and retirement accounts without triggering penalties
☑️ What "irrevocable beneficiary" really means—and why it matters
☑️ How to rebuild your financial foundation after divorce

If the money side of divorce is stressing you out, or you’re unsure what you don’t know...

🎧 This episode is for you.

P.S. Follow Carlton on Instagram @father0fsky3 for more practical tips on building financial security, understanding insurance, and protecting your future.

Follow me for inspiration and tips on how to reinvent yourself through divorce:
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🌐 Facebook
▶️ YouTube
I'm here to support you to turn the chaos into clarity and create a life you love! 💪✨

Transcript

Lisa (00:00)
When we go through divorce, financial stress is real because there are so many pieces we need to figure out, but also what to do with our investments. What about insurance and tax planning? It can be really overwhelming. That's why today we have Carlton Benjamin to talk about everything finances during

and post divorce.

Carlton is a financial security advisor with expertise in insurance planning, investment strategies, tax efficiency solutions, and retirement planning for both individuals and businesses. Carlton provides tailored guidance to ensure clients make informed decisions, extremely important, especially when you go through divorce, and achieve their financial goals. Welcome, Carlton.

Carlton Benjamin MFA-P (01:05)
Thank you for having me.

Lisa (01:06)
Awesome.

Carlton himself also went through this divorce journey, so he will bring personal experiences as well.

Carlton Benjamin MFA-P (01:10)
You

Lisa (01:14)
Before we start, I'm going to put this disclaimer out there. Carlton and I will be giving general advice today on insurance, investment, and taxes. Every situation is different you should always consult your counsel, whether it's legal, financial, or tax

Carlton Benjamin MFA-P (01:18)
Thank

Lisa (01:33)
I think it's important to talk about what's the biggest financial mistake you see people making during or after divorce.

Carlton Benjamin MFA-P (01:36)
What?

I think that most people allow their emotions to guide their decisions and not necessarily thinking about the long term impact A lot of people have learned to regret that in the future, after going through that process.

It's something that we see way too often, as advisors.

Lisa (01:55)
it's hard to keep our emotions out of the way. Really, really, really tough. so other than emotions, what's the number one financial considerations people tend to overlook when going through a divorce

Carlton Benjamin MFA-P (02:08)
the long term impact it's going to have on their family, especially if there's kids involved, People are not thinking about tomorrow or the day after. They're going through this process right now and they think that this is the end of it. they have to think when the dust is settled,

how are we going to move forward and ensure that we are both in a financial position to ensure that the children or the child is going be okay? once we decide to sever the knot, should we still work together to ensure that the child is financially stable? we probably should be thinking about this because the child is going to be impacted. And I know that your guests touch on that.

on the last episode that I've seen

let's talk about two years 10 years down the road financially. How can we ensure that we're both in a secure position to make sure that our children or child is okay, How can we make sure that if one of us weren't there anymore, how can we make sure that each person is in a position to take on the full responsibility financially?

to raise the children of the child.

Lisa (03:03)
I think it's consistent for us to say that have a long term view because when we go through a divorce, no matter how we divide things, it's going to be less. You view it as a loss rather than a gain it's hard to see beyond this timeline. But having a long term view, not just focusing on what's in front of you, it's quite important, So you mentioned about

Carlton Benjamin MFA-P (03:11)
Yeah.

Lisa (03:24)
make sure your kids are taken care of. What about ourselves? Because we can't really take care of our kids until we take our own finances. I think it's important that I tell my clients a lot, especially if you're a giver like myself, you want to make sure everybody else is taken care of. sometimes we need to put our oxygen mask on first.

What are some top considerations to make sure they have some sense of security first?

Carlton Benjamin MFA-P (03:51)
Okay, as you've decided that you're seeing this process through, we should gather all the assets and list them on a piece of paper or document the assets. And then we should also document all the debts as well that's registered to each person. And we should try to make sure that those things are balanced If one person needs to take care of their debt, another person does not have any, we need to decide how we're gonna go forward.

If we have assets we need to decide how we're going to be separating these assets, once we can put those in front of us on the desk and we can try to work our way through it, if we're not looking at these things in a whole, then that might be a problem.

Let's try to see, what am I entitled to? What are you entitled to? And not try to fight each other for, 100 % of everything and you get nothing. Just try to be fair so that both people can walk away and say, hey, we need to restart and rebuild and then they can rebuild and go forth.

Lisa (04:37)
fairness is an overuse in this process? Because what I think is fair, the other person might not think so. Let's see if we just think about an individual who just decided to start this divorce journey, What are some things I should consider to make sure my financial

Carlton Benjamin MFA-P (04:40)
Thank

Lisa (04:53)
future is protected as much as possible.

Carlton Benjamin MFA-P (04:56)
living arrangements, Where are you going to live? what is the cost of living right now? can we afford to maintain that or, will I be able to, sustain living on my own? In reality, we've got to go out there and do a research and we've got to see what those numbers look like. if you can do that, you're giving your self a better start.

Lisa (04:58)
Mm.

Mm-hmm.

Carlton Benjamin MFA-P (05:14)
people like yourself that are out here helping people that go through the process, you might already have some things that you may have on a list to say, hey, You should be looking into to make sure that you're secure that way.

Some people will refer to a lawyer, but there's easier steps, than putting money into lawyers sometimes there's a lot of money that goes into a lawyer and the situation at end of the day becomes even worse. So maybe we can start off with basics, having these smaller conversation with people that, been through the process, maybe using mediation or, having a divorce coach talk to you, walk you through it, help you and support you.

I think that people really need to lean in on the support systems that are there for them during the different circumstances of their life.

Lisa (05:52)
I absolutely agree.

I think if you are just starting this journey before you even jump into whether it's mediation or lawyer, It's doing your research and don't move out or go rent a place yet until you look at your finances because it's a big change. And also research what are your options, talk to your financial planner.

and talk to your tax planner or whoever you have in your network or a coach and someone who can look at that whole picture. And then after research, make your intentional moves.

Carlton Benjamin MFA-P (06:23)
if you also have friends that's been through the process you can ask them, What was that process like What should I expect? that could be the first step. everyone's situation might be different financially, but at least it will give you some perspective of what to look forward to.

and what you may be overlooking at the time. Because if you're not asking questions, sometimes you won't hear some of the things that may have never crossed your mind.

Lisa (06:43)
Absolutely, that's a great way. sometimes when we go through divorce, because we carry so much shame and guilt, and we might not feel like we want to talk to someone, but when you are ready, talk to someone who you really can trust, and who've been through this and who can give you some great pointers and support and referral as well. divorce is a huge transition. It's really whatever resource we have, tap into that,

Carlton Benjamin MFA-P (06:48)
Yes.

Lisa (07:06)
build this team together so that you can lead your divorce, so that you can lead your life. Very important. We talked about financial decisions are driven by emotional decisions.

What are some tips you can give to people to overcome that emotional overload and still remain calm and collected when it comes to financial decisions during divorce?

Carlton Benjamin MFA-P (07:26)
Well, I think it's just a matter of getting on the same page with the person that you're going to separate from. I was fortunate enough that my ex-wife and I had the same understanding. Hey, the relationship is going to stop here, but we still got to remain being parents. And that was really, really, really important for us that we try to shelter our child from any financial impact.

I understand that not everyone is going to be able to be in that position but

you can make the decision to say, you know what, let's just put our egos aside for a second and let's talk about this. if we can get know, both parties to, agree that this makes sense, then it's going to work. For instance, in my situation, we had a bank account for my daughter. We still have that bank account today. All of our expenses goes right into that bank account. Every month we put money in both of us. We can both see it.

If there's something that came out that we didn't really understand, we would have a communication about it, Now, I understand that some people can't be trusted,

for me, what worked was that we decided that regardless of the relationship ended, we were gonna still work to ensure that both of us are financially supported.

whatever jobs we both have, we support. If I had to take my child on an extra day, that wasn't my day, it's fine, especially if the other parent needed that day to bring in an income. So being there to support each other when they're trying to make a living is also very important. And for me, it's the same way.

because we want to make sure that we can both equally provide for the child.

Lisa (08:49)
Yeah, I think it's so important and I see so many high conflict situations and definitely this is not available. But the idea of leaving our ego out of the door during the process, the more you do that, the faster this legal process will go and the faster you can recover and start to rebuild. It's very important because ultimately a lot of people in this process are fighting to be seen, to being heard.

Carlton Benjamin MFA-P (08:50)
Bye.

you

Lisa (09:16)
and to find justification or fairness, it's a dead end. But the sooner we can bring ourselves back to focus on either ourselves or building life with our kids, no matter what, if you have a child together, you will be co-parenting, right? the best way is to work as a team. Thank you for sharing that.

Speaking of which, we're going to dive into some specifics, why is life insurance an important consideration during divorce? Because it's a piece that lawyers would ask you to put in the separation agreement when you go through a divorce, should someone look into modifying an existing policy or getting a new one?

Carlton Benjamin MFA-P (09:57)
let's just go back before when we have a family. it's important that every family have life insurance. Why? Because we can all die, right? And the life insurance policy is basically saying,

I made sure that I could leave $10 million, $5 million, $1 million, $500,000, it doesn't matter. We should have it. Now, let's fast forward to a relationship that didn't work out and they have a divorce.

If they had life insurance and it's joint, we have to dissolve that policy. that one definitely needs to be modified because we're no longer a joint first to die, last to die. It doesn't work anymore. We now need individual insurance. One of the things that most people have found when they do joint policies is that if they have half a million dollars, now we have to sever the half million to 250 and each person have 250. Now what happens is that they may need more insurance.

It's also very important to have life insurance before you get divorced because during that time somebody may have become uninsurable. So you're a stay of home spouse and now your husband and you have separated and he was the main breadwinner. But some way along the line he's not insurable and now you're going to put into the court papers, hey, he needs to have life insurance if he's not able to pay child support or spousal support. But guess what?

Lisa (10:51)
Mm.

Carlton Benjamin MFA-P (11:07)
He doesn't have rights of a policy if he's not insurable. If the insurance company is not going to accept him to be insured, no court can demand an insurance company to say, insure this person because he has an obligation to his child support. So every parent that's watching this, you might be happy today and you might not think it's important. But if you get to that time in your life where life threw a curve ball at you,

And the person that you're looking to support you may prematurely pass away. They may need to put a life insurance contract in place based on recommendations from the court. You're going to become an irrevocable beneficiary. I've done that many times where the court order came in or clients come and say, hey, I have to get some life insurance for the next 20 years to ensure that if I'm no longer around, I can still support my children or my, you my ex spouse.

The next step is let's apply for life insurance to see if you qualify. But if that person says, I've had some health issues in the past and no insurance company will insure me. What's next?

Lisa (12:03)
Yeah, what's next? Do they just keep the joint policy?

Carlton Benjamin MFA-P (12:03)
Right?

Well, that's if they had insurance, they would have to keep the joint policy, if we separate the policy, they still get to keep 250 and 250. If they needed more, they would have to apply for it. And if they couldn't, then 250 would just be the amount that the spouse would be able to.

Lisa (12:20)
⁓ so

they don't have to do the medical test in this case. Okay, got it.

Carlton Benjamin MFA-P (12:24)
You don't have to do the medical

with the policy that was already approved. Once you're approved for life insurance, whatever that amount is, you pretty much have that for permanently unless you decide you don't want the policy anymore.

Lisa (12:36)
Even if you are splitting one joint policy into two, you can keep as is. As just half of the amount of the original amount, that's okay. But if you want to increase, let's say if I had a policy with my ex-partner for half million, now I'm 250. But I'm obligated because of my spousal or child support amount, I'm obligated to get half million life insurance. In that case, I have to do the test and on the insurability part again.

Carlton Benjamin MFA-P (12:41)
Yeah, can categorize this.

Thanks for that.

Yes, correct. yeah, if you can't get any more insurance, unfortunately, you're stuck with a 250. that is something a lot of people don't know that they can have put into the court documents or requests for the settlement is to ensure that the spouse has life insurance policy and their

Lisa (13:05)
Got it, got it.

Carlton Benjamin MFA-P (13:21)
named as a beneficiary. Now a lot people are hate me for this, but make yourself an irrevocable beneficiary, not revocable. And why? When you're in an irrevocable beneficiary, you get to know what happens to the policy if they want to make changes. So if somebody says, yeah, I'll make Carlton the beneficiary two years down the road, I'm going to change it, you won't know. Guess what? When you're in a irrevocable beneficiary and he wants to change, you have to also sign off on that document.

any changes to the policy requires your signature. so it keeps you in the know and that's better security. you want to be secure

Lisa (13:54)
Yeah, it's extremely important if you can agree with your ex partner, especially you are the receiver of spousal or child support to guarantee that if anything happens that you're the irrevocable beneficiary so that you will be informed at the first moment when anything changes because these things do happen. My lawyer shared case with me that.

their ex-spouse canceled the policy without the other spouse knowing and then that person passed away. the other spouse had two relatively young children to raise. In this case, you can go after your ex-spouse estate. But what if their estate has nothing in it? Again, you have to go through a legal battle to get that. However, in some cases, in my case, my

Carlton Benjamin MFA-P (14:34)
point.

Lisa (14:38)
ex-spouse was adamant about not adding me as a irrevocable beneficiary. And I don't know why. If in that case,

you're not moving the needle, per se. Make sure your children are the irrevocable beneficiaries, and if they're minors, you can have help me out.

Carlton Benjamin MFA-P (15:00)
You are the trustee.

in a case like this, I would just ask to make sure that the policies don't place. would like every annual, you would like to get statements. What I would say in this situation is say, Hey, perfect. at every annual statement that comes in, I need a copy of it to prove that this policy is in place. And that would be in my separation agreement.

Lisa (15:16)
Yeah, so in the separation agreement, it says annually when we update spousal based on last year's income, we also need to update each other about our insurance policy to be in good standing.

what I'm just saying is that there are ways to work around it. If the other party, doesn't agree to get life insurance make sure your legal counsel cover that piece. It's incredibly, incredibly important because life happens.

and accidents happen. That's why we have insurance. if you are capable, this is me, term insurance is so affordable. And if you can, I would insure more than the minimum legal requirement, just because if anything happens, you want your kids to be taken care of.

because things are already going to be so hard for them. You want them to have extra money. when you have a million dollar term insurance policy, if you're still relatively young, and the half a million premium compared to one million is so small. Pay more. That would be me.

Carlton Benjamin MFA-P (16:19)
everybody thinks like you, but that's the way that you should be when you're trying to be selfless. And I think that a lot of people should try to model that mindset. there's also one thing that I could have mentioned. there's a life insurance trust that you can create where life insurance can pay into a legal trust there's opportunities there for people to explore. I'm not going to dive into that today because it's a little bit more complex. But if somebody didn't have a trustee,

it's for children and they want to make sure that they leave money to their child, they can create what's called the life insurance trust that's going to be their legal entity to receive this money. there's instructions on what can happen with this money structured into this trust as well. So there's a lot that we can discuss in terms of those situation when it comes to that complex,

Lisa (16:59)
thank you for that explanation. I wanted to mention that there is also permanent insurance. think Carlton mentioned that you can have a lot of flexibility because a corporation can hold your life insurance policy as well. You can put a trust in that. You can have a lot of tax efficient benefits.

Carlton Benjamin MFA-P (16:59)
word.

Lisa (17:16)
That's why it's important to reach out to a professional like Carlton to give you based on your situation, You might have a small business on the side. he will give you tailored experience. just full disclosure, My kids have permanent life insurance. I think everybody

Carlton Benjamin MFA-P (17:27)
or

Lisa (17:32)
should explore permanent life insurance because Permanent life insurance is a legacy you can pass down to your kids. we won't dive into that, but just consider talk to professional. You do have options, even when you're going through a divorce. Mm-hmm.

Carlton Benjamin MFA-P (17:35)
Thank

Yes.

And

just to piggyback on that this insurance for the children ensure guarantee insurability as well, because we don't know what life will throw at our kids So if we've given them the gift of insurability from an early age and they grow up and they have this policy, that's for their kids and their family to be passed down wealth as well. it's important to say, hey,

Let's build a foundation for our children while they're insurable. They're going to see that, my parents did this for me. I should probably do that for my kids. It just sets great values, for generating wealth or passing down wealth.

Lisa (18:19)
we're talking about permanent life insurance here. It's a great tool that a lot of ultra wealthy people use. So we should learn from them, if anything, right? Even though we're not super ultra wealthy, but we can learn.

Carlton Benjamin MFA-P (18:30)
You

mentioned you mentioned tax free, transition of money and you're right. Life insurance is 100 % tax free pass, passing down to the next person. There's no tax on it. It's the only tax free money being passed down in this country. So why don't we all have it for our kids?

Lisa (18:46)
Yeah,

especially in Canada. my God, tax we're to talk about later because it really hurts when you have to pay a lot of tax, especially during divorce. So we talk about insurance. Let's talk about a little bit about investments. we have several investment accounts in Canada, RRSP TFSA and RESP for most people. If you have kids, you may have RESP. Let's talk about

Carlton Benjamin MFA-P (18:49)
Yeah, I I think that's fair. I that's easy

Lisa (19:08)
these accounts and how are they different what are some things we should consider when we divide these accounts during divorce.

Carlton Benjamin MFA-P (19:16)
So for instance, the RRSP the Registered Retirement Savings Plan, this account has a tax penalty when we access the cash. So if we're going to be separating this account, it's important to remember that we need to transfer the amount into the next person's RRSP account as opposed to withdrawing the cash, because that's going to trigger some tax implications for the person that's doing the withdrawal.

that's one tip that I would definitely recommend. On a tax-free savings account, There's no division of a tax-free savings account, essentially. For RESP, there's a lot of rules surrounding RESP. And that account is for the child. The child's the beneficiary. The spouse or both spouse contribute or the owner of that account.

You can separate it if you'd like, but you probably shouldn't at this point. if you're going through a divorce, both of you can still be the owner. And if you can both contribute, continue to contribute for this child, just know that once we need to withdraw money in the future for the child's education, both people have to sign as well. I don't recommend separating the accounts if you don't have to, because the government gives you grants anyway. you want your child to continue receiving these grants.

Lisa (20:15)
Mm-hmm.

Carlton Benjamin MFA-P (20:25)
But if you're the main spouse that's been contributing to this one, now that we're separating, I'd like to have my own, feel free, go ahead. As long as we're not going over the max contribution, still, we both can get the grants. So right now, the maximum contribution technically is about $208 per month. So if one spouse wants to do 104, the next spouse wants to do 104, perfect. You will receive 50 % of the grant, the other spouse receive 50 % of the grant.

So that's not gonna change in terms of who gets the grant. If you say, I'd like to contribute $208, then you're gonna get the 100 % of the grants from the government. And the next person is not gonna get any grants. However, they can still put that money into the account. So everyone's different. However you wanna work it out, it's up to you. But when it comes to paying somebody from one of these registered accounts that you can pay from, it's best to transfer as opposed to withdraw.

I'd like to recommend that we look at this before we make a decision

Lisa (21:15)
especially for RRSP, if you withdraw, you basically trigger a tax payment, you don't want to be dinged during this time. And yeah.

Carlton Benjamin MFA-P (21:23)
tax bracket like so if you your

money it looks they're gonna see this income and so it's gonna have some impact on your annual income anyway and it's not gonna be a good one

Lisa (21:31)
And

yeah, and it's going to impact your spousal or child support payment as well because it's based on your total income. I want to bring some of my insights here. RRSP, so when you calculate your total family asset, your RRSP usually should be considered after tax, right? It's usually 70 % of the value. So your lawyer or your mediator should be calculating that way.

Carlton Benjamin MFA-P (21:39)
you.

Lisa (21:57)
Sometimes let's say you're the RRSP owner, let's say you've worked, your spouse didn't, You can negotiate to keep it in your account, And give something else to the other spouse. it can still be intact in your name. That's totally possible.

Like Carlton said, just make sure you don't sell things in your RRSP to pay that person. So you can make the book on your total asset balance without transferring anything in real life,

TFSA is pretty straightforward. There's no tax implication. But again, I believe if you do withdraw in one year, that will impact your total capacity to contribute. Yeah.

Carlton Benjamin MFA-P (22:27)
thanks.

Yes, you'd have to

look for next year to re-contribute that amount if you were to withdraw that year.

Lisa (22:43)
Exactly. So best to if you can make money

work, stay status quo with everything. Just keep the money there. So RESP, again, Carlton is talking about a very amicable situation. I see a lot of high conflict situation. from my perspective, RESP doesn't matter if you have a joint account because

it's for the kids as long as we both contribute. But sometimes your spouse may be very adamant about having a clear separation financially. So they will want to contribute on their own. It can be divided in half way. And then you can contribute on your own and get your grants on your own.

Carlton Benjamin MFA-P (23:05)
Yes.

you

Lisa (23:25)
So it's at $1 0 4 in total, I think every month is 208.33 cents. So can get your own grants your way 50 50 fair contribution. And also, go ahead.

Carlton Benjamin MFA-P (23:32)
Thank you your time.

Sorry, so you're

doing 208 or you're doing 104?

Lisa (23:45)
I have two kids. So half of me is 208.33. Yeah,

I think having an RESP is so important. If you don't have one, should definitely open for your kids because no matter how tough your financial situation is, saving $200 is really not hard, but it has a huge effect for your kids when they go to college, if they do. And if they don't, you can still take this money back, but not the growth or the grant from the government, but you can still use this money. another thing I want to make sure

your legal team covers it is how you and your ex-spouse and the kids will pay for their college because your RESP at 10 years later, if your kids are eight or something, is not going to be enough to cover everything. So make sure in your separation agreement, it clearly defines, maybe your ex pays one third, you pay one third.

tap into the RESP and then your kids when they work, make them save some money, they will pay one third so that we can pull this together. Make sure you clearly define that in the separation agreement because your kids may be five now. 13 years later, you do not wanna...

Carlton Benjamin MFA-P (24:47)
Yeah.

Lisa (24:55)
your ex not to cover that, have any kind of disagreement. Better just do it now.

Carlton Benjamin MFA-P (24:59)
Yes.

And just to piggyback on that, you mentioned the funding part of the investments. I've also encouraged people when someone wants to buy the kids birthday gifts and they say, hey, Carlton, what to buy? It's really easy to say, you what, I have an RESB account. I would be happy if you can contribute instead of buying a toy or they can resell toys that these kids play with two times anyway. now they don't need it anymore. We can sell them on market.

There's different platforms that can sell these toys on. Clothing. Kids grow out of these clothes really fast. One day they fit, the next day they don't. I've encouraged lots of parents and lots of parents have done it. They say, we will sell their clothes on marketplace and we'll take this money and we'll dump it into an RESP. We'll pull grants and we'll invest aggressively because we know.

We want to take advantage of all the growth we can get over the next long-term goal. And so there's ways around saying, hey, I got to come out of pocket for this money. There's people that's giving you stuff all the time, every birthday, every Christmas. Let's leverage some of those money to grow our kids' education fund. So I just wanted to touch on that saying it's easy to fund it.

Lisa (26:05)
I love

that. I think it's so important, especially as a single parent, to be flexible and resourceful. Whatever works at the time, make sure you tap into those strategies. during this time in...

Frugality is always the way to go. It doesn't mean you have to starve yourself. You just have to do whatever you have to do to make this work. And again, like Carlton said, have a long term view. What's happening now doesn't mean It's going to continue like that down the road.

Carlton Benjamin MFA-P (26:30)
Yes.

Lisa (26:34)
we talked about insurance. We talked about different investment vehicles. What about pension, know pension is so rare now, but still some people may work in the government, What's it called? OMERS in Ontario? Yep. And other retirement assets, we have LIRA and when people get a little bit older, we have OAS. So how do we approach these?

Carlton Benjamin MFA-P (26:47)
Where is this?

Lisa (26:58)
during divorce and are they different

Carlton Benjamin MFA-P (27:02)
So with the Old Age security, that's something individualized. that's not going to be split in, through a divorce. However, the pension, the Omer pensions, can be divided with legal settlements. They would just have to transfer part of that pension over into, we've had cases before where our clients have come in and said, hey,

You know, I was a stay at home mom for a very long time. My spouse has a pension and he's going to transfer it. Can we create an account? we've created a locked in retirement account and have it ready. And then we do a transfer of the division, the amount that they were supposed to get. And it comes over. We have also seen, there is as well in the regulations in the Ontario regulation for LIRAs you can split, you can have access to the money in separation.

Those accounts should always be, brought up when you're doing our asset divisions. Because if you're entitled, you're entitled and it's something that we can definitely transfer over to a Spousal account.

Lisa (28:00)
Yeah, LIRA stands for locked in retirement account.

Carlton Benjamin MFA-P (28:05)
Yes. So when we have any pension or DCPP DPSP, those type of accounts, the way they are a little bit structured in a pension setting or employer contribution settings, those ones are usually structured in a way that they have to be locked into a locked in retirement account whenever it comes out of the

Lisa (28:06)
awesome.

Carlton Benjamin MFA-P (28:24)
the group retirement settings or the pension settings. So.

Lisa (28:26)
Okay, what does that mean locked

in that? Let's say, if my ex had 300,000 in Omer's, for and those are accumulated after our marriage. So when we divorce, I'm entitled to 150,000. how do we process that? So you will, if I come to you as my financial advisor, so you will be creating a new retirement account for me that

Carlton Benjamin MFA-P (28:47)
you

Lisa (28:52)
hold these 150 ohms but locked in. What does that mean? That I cannot access it until what time?

Carlton Benjamin MFA-P (28:55)
Yes.

You can't access this money until you're in retirement or there's some occasions that you can access this money. Like if financial hardship is one of those. So you have to demonstrate that you have some hardship. When you get to age 55, you may have access to 50 % of the money, but there's penalties. these locked in accounts are usually government regulated where you can't, have access to this money until retirement. But there's some circumstances where you can.

Lisa (29:07)
Mmm.

Carlton Benjamin MFA-P (29:23)
to have access and divorce is one of them. If you're going through a divorce and you have money in a pension, you can without penalty access this pension to transfer some of the portion that you've settled in your divorce over to the spouse.

Lisa (29:36)
so it's penalty free. Okay. That's good to know. But as a receiving spouse, I won't be tabbing to it due to the government regulations. Okay.

Carlton Benjamin MFA-P (29:37)
Yes, they can move this money as well.

Yes, you won't be able

to access this money. you can only access this money if there's financial hardship. One other in Ontario here, locked in retirement account, you can access if you're late on your rent, or, you mortgage, or in default of a mortgage.

Lisa (29:57)
⁓

Carlton Benjamin MFA-P (29:59)
And they say, prove it. You got to send in these statements saying that you're late, on your rent, you may have gotten some notice from your landlord. You can submit these and they're able to access some of that money just to cover those defaults.

Lisa (30:13)
Awesome. That's great information I didn't know that. Great. Frugality. Try not to tap into those retirement accounts because they're for your retirement. Yes. Let's talk about our favorite topic, taxes.

Carlton Benjamin MFA-P (30:16)
We don't recommend it. We don't recommend you to touch it. Why? It's a retirement account. It's

Lisa (30:27)
what are some of the most common tax consequences or surprises people face during a divorce?

Carlton Benjamin MFA-P (30:33)
I'm thinking that this might be relative to each person. if you with draw the money from the RRSPs like I said earlier, that could be a tax penalty that you may have not considered that would have been an issue. some spouses, may get the child tax credit.

And if they have a separation agreement or a settlement where they're 50-50, that could also be an issue if one person is collecting all this child tax credit the next person is not. Because if the spouse calls into CRA and mention that, we've been separated and you've been sending this child tax to one person and I'm entitled to half, there could be a payback.

those are two things I can think of the top of my head, Is there something that, you probably had some experience with?

Lisa (31:16)
That's a great suggestion. One is our RRSP withdrawal is taxable. Make sure you try to avoid that. The other one is any taxable credits you receive due to your children, you need to share in most cases with your ex-spouse and make sure your lawyer put that in and especially you're not the one receiving it,

Carlton Benjamin MFA-P (31:18)
Thank you.

Lisa (31:35)
I think another, just some fundamentals and we assume people know. child support is not taxable. it's a table amount. If you receive child support, you don't pay tax on that. But if you receive spousal support, it's taxable for the receiver and it's tax deductible for the giver. I think even when you are negotiating something to consider,

Let's say you have kids and compared to your spouse, you have a lower income relatively, and you're receiving spousal support. say spousal support has the low, mid, and high amount, and usually court would choose the mid ground. again, consult your lawyer. Let's say if you receive $500, the number is $500 a month for spousal support.

you're already making $100,000 a year. just making it up. $500 is $6,000. So that $6,000 a year you're getting is basically taxed half Think about that. So you're actually getting $250 in your pocket, one. But your spouse would get a tax deductible on their tax.

Carlton Benjamin MFA-P (32:34)
Yes.

country.

Lisa (32:43)
If you have the majority custody, spousal support will consider your total income that would also reduce the Canada Child Benefit you're receiving. So just consider that it's a huge difference. I always say,

Carlton Benjamin MFA-P (32:58)
Yes. Yes,

Lisa (33:01)
divorce negotiation is, let's say there are eight pieces on this pie, right? Spousal support is one, child support is one. If you have other pieces like assets, houses, investment, rental properties, and every other pieces, is this really worth fighting for this $500 a month spousal support when you're only getting 200 actually in your pocket and other implication? Just something to think about.

Carlton Benjamin MFA-P (33:05)
Yes.

Yeah, that's right. Do the calculation, see the benefits, the pros and the cons, I must say. It's interesting because they do see the spousal support as an income. so this money is going to get added on to your income and perhaps push you into another tax bracket. If your income is low and you're still going to be taxed even when

you add this to your income, it might be worth it at that point. But if you're very high income earner anyway, and it's just gonna make you pay more taxes, definitely you wanna talk to your accountant and see which is the best course of action.

Lisa (33:56)
Yeah. Is it worth fighting for? Because spousal support is not like child support, which is so straightforward, right? Spousal support, it has a lot of gray. So there is no straightforward. And some people fight over this for years. And if you're spending 30,000 legal fees on it, is it worth it? Just to have to think about very strategic. Another thing is myself experienced, if you do have investment properties or other investments, stocks and everything, when you sell again,

Carlton Benjamin MFA-P (34:03)
Yes.

Lisa (34:22)
you have to pay tax. let's say you have your matrimony home, you and your spouse owns an investment property. However you arrange it, whether you sell that property, it will trigger capital gain, which can be really big. Let's say if you bought the house at half million, now it's selling for 1 million. You're paying half million, capital gain tax on top of your income.

Carlton Benjamin MFA-P (34:26)
Thank you.

Yes.

Yes.

Lisa (34:43)
That can be huge. But again, consult your tax accountant. It has some intricacy in it because you can have some write-offs and stuff. However, let's say if you have two houses, a cottage or a matrimonial home, you will keep the matrimonial home. Your spouse will keep the cottage. The calculation of how much these houses are worth will be different because the other one is an investment property. It will have capital gain.

implications even if you're not selling it now, it will be considered when you calculate your total family asset. Does that make sense? Something to consider as well. Not every house is equal either in Canada because we have to pay taxes.

Carlton Benjamin MFA-P (35:24)
I was going to piggyback on the capital gain tax. So in theory, you pay tax on 50 % of the profits, just to clarify. So if you bought your purchasing price was half a million and now the property is worth $1 million, so your profit is half a million, the capital gain tax is only going to be on $250,000.

So 250,000 will be no tax and then 250,000 will be taxed. what would happen is that both spouse at this point would divide the 250 into half and they would assume their own, what tax is gonna be triggered on those,

Lisa (35:57)
Yep,

Carlton Benjamin MFA-P (36:02)
you don't have any confusion on that part. And this is why it's good to you bring up these topics, for your viewers to have that discussion so you're opening up the doors for them to have these conversations with their professionals.

Lisa (36:14)
Absolutely. Just something to consider and it's great to work with a coach to bring all the resources together like Carlton or Tax Account and Realtor and to look at the whole picture. Amazing. Here is something that I am learning as well. I can share because since my divorce and every day I would check my bank account.

Am I paying all the bills? What about the kids insurance is coming up or car insurance, whatever. you feel this sense of insecurity. are you taking good care of yourself and your kids, especially financially? on this journey of rebuilding yourself and your family. what are your top, two or three tips for rebuilding?

wealth and this sense of financial security after your divorce.

Carlton Benjamin MFA-P (36:57)
Okay, so set financial goals. You definitely want to set goals for long-term stability. Create a budget, ⁓ That's going back to basics as well. now that things have changed, let's revisit a budget. Some advisors will provide you with tools like spreadsheets, already have formulas.

Lisa (37:00)
Hmm.

Carlton Benjamin MFA-P (37:15)
integrated into the spreadsheet for you. All you gotta do is just go in there and put your numbers and you can track your monthly expenses, What's coming in, what's going out. If you need to cut something that's not needed to ensure that you're meeting the needs, then that's great. But in that budget you get to rebuild an emergency fund. So in our budgets that we create for our clients, we have...

an investment section, savings and investments. We have a section there where there's an emergency account and you're to allocate, 150 bucks per month or per week, to these accounts. But it's in your budget. There's also a section for your liabilities. Do you have car payments? What does that look like per month?

And so all of this can go on a spreadsheet where it's organized, it's in one place. You can look at this and then you can see based on the inflow of cash that I get on a monthly basis, where do I stand when I input all these numbers on a monthly basis? Am I in the green still or am I in the red now? Am I coming in the minus? And if you're coming out of the minus, then we need to start looking at where can we make some changes. In that case, look at your phone.

Look at what you're paying on a monthly basis. Could that be lowered? Look at your car insurance. What are you paying per month? you've just been renewed with the same company. Go out and shop around and see if you can save some money there. There's a lot of things I've done with clients that literally still give them the same quality of life, but they're paying less for it. So go look at the budget, see where there's opportunities for you to modify those plans and pay less so you can keep more money in your pocket and then you can fund.

your emergency fund because you need to have one of those. Some people have three months of expenses. Some people have as much as six months of expenses. And once that emergency bucket in your spreadsheet is filled out and is full, then we can say, investments, we need to put extra money in there so we can grow, we can compound. But having clear financial goals is important. Having a budget is also important. And also making sure that an emergency fund,

An important part of this as well in the budget is our insurance, What is insurance? It's what protects your income. So insurance is also very, very key, especially when you're a single parent.

Because one, if we have an injury and we can't work, we need to understand is there going to be someone there to write us a big check? If we don't have a parent that's rich, that's going to daddy or mommy just going to write a big check. We need money from somewhere. If we have a job that does not provide long-term or short-term disability and we don't have a check due to an injury, where is that money going to come from to still operate all of these expenses? if we were diagnosed with an illness, cancer, heart attack, stroke, and we were supposed to

bed rest for six months. Is there somebody waiting to write us a check? So make sure that when we create our budget, insurance is the very, very key piece of this, keeping this financial stability together. Because if something were to happen and an insurance company wrote you a nice check for disability or for, you know, critical illness, you can still fund

you can still keep your savings goals And you can make sure that all of these expenses outflow of cash is still being met every single month Those are my I would recommend to start ⁓

Lisa (40:12)
Yeah, budgeting and setting goals and make sure

adding insurance as part of investment strategy and very, very important. so I look at my budget at the end of the year, and also around June because that's the time in July, you will get new numbers for support and also your CCB numbers, You're also planning the next half of year. Just know OK.

Carlton Benjamin MFA-P (40:16)
Yes.

Lisa (40:33)
Am I in red or green? What other areas can I focus on? Maybe there are some trips coming or you want to invest in yourself on some educational courses have the sense of planning is incredibly, incredibly important. budget also super important. That's a great piece to be aware of where you are at, because sometimes we're so afraid to even check in where we're at, right, let alone. And then later on, we're to talk about how do we have

sustainable habits to help us stay on track. Very important to that's why it's great to have a financial advisor because if you put money in, if you want to withdraw some money, you have to talk to that person. The person is going to ask you why and then probably prevent you from sabotaging your own goals.

Carlton Benjamin MFA-P (41:01)
Yeah.

Absolutely.

Yeah, absolutely. Cause you're going to be,

I'm going to ask you why, why are we disrupting your investment goals? And some of my clients have actually printed out their Excel sheet and stick it in their fridge. So every day they're leaving the house. They see, I've already met my budget for the month for this. So I can't do any takeouts. Um, I can't go shopping because I've already spent the $200 per month that I have on, gifts and clothes for myself.

And so every day as a reminder, especially when you're going through a very critical piece of your life, you definitely need to stay organized and stay within the budget because anything can happen. And that's what we need to keep in mind.

Lisa (41:54)
Yeah, and especially during divorce and we don't budget for legal fees, but that's a huge piece. So after we started, I started to put, a budget for the legal fees as well, because this is real money is going out, but nobody's budgeting it because we're hoping that this will end soon or whatever. But it usually tends to be more than we think, just how the legal process goes. Great. Amazing.

Carlton Benjamin MFA-P (42:00)
You

Thank

Thank you.

Lisa (42:17)
Before we wrap up, any things you can think of that we haven't covered, that people should know?

Carlton Benjamin MFA-P (42:22)
I feel like we covered everything,

if anyone have any specific questions, feel free to reach out to myself, feel free to reach out to Lisa if you're on my platform and we can answer any questions. We're on Instagram and I'm sure, the information is going to be on your screen. But if you want to just give me a call, it's 509-590-8014. My office is located on Belmont Village. It's 678 Belmont Ave West and it's unit 303.

Eau Claire Partners and we are a financial brokerage. Thank you.

Lisa (42:51)
Amazing.

Thank you so much again for your time Carlton. we'll see everyone next time.

Carlton Benjamin MFA-P (42:55)
This is great. Thank you.