Family Law Matters: Protecting Wealth, Preserving Peace

In this episode of Forthlane Features, Vanessa Hui sits down with Anna-Marie Musson, Managing Lawyer at M & Company. Together, they unravel the complex intersection of wealth, family law, and relationship transitions.  From crypto and collectibles to prenups and postnups, Anna-Marie shares expert insights on how high-net-worth individuals can approach divorce with foresight, financial strategy, and emotional intelligence. 

With stories of "quiet divorces," illiquid assets, and shifting market dynamics, this episode reveals how to safeguard wealth even in life’s most challenging moments.

 GUEST: Anne-Marie Musson, M and Company

Website | Email | LinkedIn

CONNECT WITH VANESSA HUI

Website | LinkedIn 

Chapters

• 5:23 Are You Making the Million-Dollar Mistake Before Marriage?
• 10:14 Can a Down Market Actually Help You in Divorce?
• 10:22 What Is the Quiet Divorce?
• 16:15 How Do You Value Illiquid and Volatile Assets in Divorce?
• 25:00 What Are the Misconceptions around Prenups and Postnups Today?

Transcript

Vanessa Hui (00:10):

Welcome to another episode of Forthlane Features, a podcast where we dive into the world of global wealth and asset management. I'm Vanessa Hui, senior client advisor at Forthlane Partners, and I'm joined today by Anna-Marie Musson, managing lawyer at M and Company, a leading family law firm that helps high net worth clients strategically navigate the legal, financial and emotional issues in divorce. Welcome. Good morning.

Anna-Marie Musson (00:39):

Hi Vanessa. Thanks for having me.

Vanessa Hui (00:42):

Thank you for being here. So today's conversation, which I'm very excited about, takes a bit of a different angle than our usual focus on Forthlane features on markets and investing and portfolio construction, but we're still going to talk about wealth and the reality that life events like divorce have material impacts on how wealth is preserved, protected, and passed on. Before we dive into things, Anna-Marie, I'd love for listeners to get to know you and your path to founding M and company.

Anna-Marie Musson (01:18):

I was a Bay Street lawyer for a number of years While I was working in my practice, I really identified that there was a gap in family law in so far as lawyers who really understood the corporate commercial side of things, contract law, how that aspect of law dovetailed into family law. And what I was noticing in my practice was there were a lot of high net worth individuals who had very complicated financials and there just was a gap in this niche, I'll call it, of service. So because I had the background in corporate commercial litigation, I was able to develop this practice where we are able to help high net worth individuals, professionals, entrepreneurs, divide their assets in family law, but with a perspective as a corporate lawyer. So that's really how we came to

Vanessa Hui (02:23):

Be. I love that. And yeah, something that I've learned from you as we get to know each other is that M and company is particularly well positioned to deal with clients who have these complex financial situations, but for listeners who might not be able to appreciate, what does complexity look like when clients come to you? Can you give us an example of that? And I guess in addition to your background in corporate and commercial litigation, if there's anything else that makes your team particularly strong at handling complexity.

Anna-Marie Musson (02:59):

So from a complexity perspective, we are best suited to handle cases where there perhaps are businesses that need to be valued. Generational wealth trust. We deal with a lot of cases where there are trust that need to be addressed in a family law perspective. A lot of entrepreneurs, medical professionals, professionals who have both professional corporations holding companies, anything where there's an asset base that is a little bit more complicated than let's say simply investment

Vanessa Hui (03:37):

Income

Anna-Marie Musson (03:39):

Or RSPs or something of that sort as well. Complicated financials can be things such as unusual, I'll call 'em illiquid kind of assets. So we have clients who have invested in really interesting tech companies, things like that, Bitcoin, crypto, anything where it's a little bit unusual or different, that's where we do our best work. And so from our perspective, we have the Bay Street background, but then a lot of us, in fact at our firm have actually been through family law on a personal side. So we've actually been sitting in the client's seat and I myself went through a divorce. So I understand the feelings, I understand the uncertainty, I understand the fear. And so having been in that client's seat, it offers me a perspective that can be a little bit different and it also offers me some empathy to the situation and I'm able to communicate in a little bit of a different manner because I know what it's like to be in that seat.

Vanessa Hui (04:45):

I can imagine that really does make the world of a difference when connecting with your clients. I want to get into what you've mentioned about the challenges around private companies and things like crypto, but I'll save that for a few minutes. But before we get into that, I'd love to just get your thoughts on through all your years of practice, what are, let's call it one or two of the biggest legal or financial mistakes that you've seen that erode wealth during divorce.

Anna-Marie Musson (05:23):

Well, the very first thing, and I think this is one of the absolute best and biggest tips I can give people who are high net worth who aren't going through a divorce but who are getting married. When you get married, you actually get a credit in family law for your net worth on your date of marriage. But the kicker is you have to be able to prove it. So a lot of people do not keep things like their investment statements on the date of marriage, if they have a business, they don't have financial statements. So we kind of have to go back in time and recreate what we think the person's net worth was on the date of marriage. And I'll tell you more times than not, it's either significantly undervalued or we don't get a credit at all because we can't prove it. So my number one tip is paperwork. When you get married, when you get your marriage certificate, also put together a net worth statement with your paperwork behind it, especially if you have a business, if you have the financial statement, your general ledger, your accounting documents for the date of marriage, so that year you got married, just put it in a file folder somewhere, scan it, have extra copies, treat that very, very carefully because I kid you not, it could save you millions, plural. Right,

Vanessa Hui (06:48):

Right. I didn't know that. And maybe I should have talked to you a year ago when I got married last July. Okay. So that's one for pre-wedding planning. Do you have another kind of legal or financial mistake that you've seen when clients are going through a divorce?

Anna-Marie Musson (07:11):

I think one of the biggest things is not really being focused on your goals. So you have financial goals and you really need to stay focused on that when you're going through divorce and separation because it can get very messy very quickly. Everybody's emotionally compromised. There's nobody who's not. I was emotionally compromised when I was going through my own divorce. And so having that sort of focus on what it is you want and how we're going to get there is so critical during negotiations. There's not much you can do in terms of preserving your wealth if you don't have a prenup agreement or a cohabitation agreement on divorce and separation. But most certainly, if you have your goals, you might have some flexibility in terms of how you negotiate with your partner. Doesn't mean you have to follow the family law act to a T. Certainly you can have some flexibility, but really how you negotiate in that space and at that time can be really, really critical.

Vanessa Hui (08:18):

I love that point. So now I want to talk a little bit about markets because after all, this is a wealth and asset management podcast, but something that I've heard and understand to be the reality is that when couples are going through a divorce and they're valuing their assets for division, they're somewhat at the mercy of the macroeconomic environment, meaning that if it's a soft real estate market like it is right now, you might be valuing your home at a different price or in a tough year in markets like in 2022 when both equities and fixed income were having a tough down year, that could really impact your overall investment portfolio value. So how do you help clients navigate this? It's

Anna-Marie Musson (09:13):

Actually can be quite strategic. So the starting point is looking at the assets you own separately, because in family law you don't actually divide the assets. So it's not as though you have an investment portfolio in your name alone and then half of that investment portfolio gets transferred to your spouse. It doesn't work that way. How it works is that we transfer half the value. So how you fund it is a different conversation, but we look on the data separation, what was the value of the asset? So let's say it's the investments. Well, if you're the owner of those investments and they perhaps have gone down strategically, it actually might work to your advantage because now you're paying less to your spouse for their interest, I'll call it in the asset, and it makes it actually more economical for you. So we see this a lot as well with businesses.

(10:14):

So when we see markets kind of take a bit of a turn and business values go down, that's actually the time where sometimes we see more divorce because buying out a spouse's interest in the business is actually a lot cheaper to do it when the market is down. So there's a lot of strategic advantages to it. But when you're dealing with joint assets such as real estate, which we see a lot of that it can be problematic because people don't wish to put homes on the market right now when it's not a great time to sell. So some strategies we've done is sometimes the couple will divorce but continue to co-own properties while they're waiting for the markets real estate market to rebound. So we've seen that in the Toronto area a lot. You do need to espouses who are pretty cooperative because we're shifting it from a romantic partnership to more of a business partnership and we treat it as a business partnership. You do partnership agreements and all of that. It's just no longer a family law issue. It's now more of a commercial issue.

Vanessa Hui (11:22):

So on the theme of being strategic, can you share an example of something that you can share, but a recent client situation where you might've considered macro trends such as changes in tax policy? For example, last year when we thought maybe the capital gains inclusion rate was going up or just if people are considering where interest rates might be going and how that could impact their investments. If you could share one example.

Anna-Marie Musson (11:57):

So we were actually dealing with this specific issue when we were valuing a business for a client last year, and there was a lot of talk about capital gains and how they were going to be treated. And so one of the issues we had to determine was how do we get to the net value of what the business is and what tax law applies when, and sometimes there can be some conflict. So we bring in very skilled accountants who come and help us sort out what is the most tax efficient way, shall I say, to value a business. And because we operate in net numbers in family law, the tax rates matter because the ultimate payment that our client will make potentially in family law is based on a net number. So if we get the tax rates wrong, our clients could overpay. So it's very important and critical that we do our due diligence and double, triple check every possibility for how tax rates might be treated and what options are available there to make sure that the number we ultimately land on for the value of the business is accurate.

Vanessa Hui (13:09):

And so other than bringing in tax advisors, can you talk a bit more about the process involved in valuing private company shares that are illiquid?

Anna-Marie Musson (13:19):

It's complicated, very complicated. It involves a lot of paperwork. It's a lot of work for our clients. It involves interviewing our clients, sometimes interviewing their partners if they have them other shareholders to determine exactly how the business operates and how and what approach we use to valuing the business. And so making sure that we have the right professional partners in place is absolutely critical because if you don't understand the business, the valuation can be completely incorrect. So that's sort of the big thing we do. It takes a lot of time if we get to a point where we actually aren't able to establish a value for the business. Some things we do or we've dealt with a number of clients who have illiquid investments in certain forms and we might not necessarily be able to value their assets. And so what we've actually done is simply divided the interest in the illiquid assets and both people continue to hold onto them until whatever stage they can, I'll call it, cash them out.

(14:34):

So it might be a situation where one spouse does continue to hold shares in a corporation, and again, we shift from a family law agreement to a more traditional commercial shareholder agreement say. But that is for couples who are able to continue to work together. That is for clients who they don't have to be completely amicable, but there has to be enough trust there that they can continue to work together in some fashion towards, I'll call it this financial goal. And usually there's an end date of some sort. So usually we'll say this gets revisited in X years, five years, three years, 10 years, whatever it is, because at some point usually people do want to end the commercial relationship with their ex spouse as well.

Vanessa Hui (15:26):

And so do you find yourself drafting family law agreements as well as shareholder agreements for your clients?

Anna-Marie Musson (15:32):

Well, I do the family law piece and then I have a wonderful team that I'll work with at other firms who do the corporate side. But the benefit of working together is we do the agreements hand in hand. So it helps to ensure that there's continuity between both. Everybody understands what's expected of each other and instead of doing things in a vacuum, we all work together. So the process works really well.

Vanessa Hui (16:01):

And so what about extremely volatile assets? So let's take crypto for example. What would be the process in determining the value there? Is it a certain date? How does that work?

Anna-Marie Musson (16:15):

So we typically start with the data separation to value all of the assets. When a client does a financial statement, however, they do need to disclose current value dates right up until basically they sign the separation agreement. If there is a big increase or decrease on the value of certain assets, then it does become a negotiation point. So technically in law, yes, we value everything on the data separation, but if there is a huge increase in the value of let's say the crypto, by the time the couple signs, the separation agreement, I absolutely expect there to be a question or a claim to share in the increased value of the crypto. So it's an interesting dynamic to have to navigate through. It is obviously best for the couple to reach a resolution themselves, not leave this up to a judge to decide. And for the most part I would say if people look at it with the lens of something that's being fair and reasonable, we usually are able to sort it out and reach an agreement that makes sense for everybody. And then once the separation agreement is signed, all bets are off. So everyone's assets and everyone is on their own then to invest and invest in volatile assets, invest in risky assets, invest in conservative assets, whatever they wish to do.

Vanessa Hui (17:43):

Got it. I mean if they're investing with forthlane, then we can take that volatility piece out because as you know, at the core of what we do is investing in a way that takes out that rollercoaster ride of markets and really provides a consistent and predictable return in any market scenario. So one more question on valuing because I'm fascinated about this. Can you talk about a client example where you've had to evaluate something non-traditional, something like a collectible that was just quite hard to ascribe a value to?

Anna-Marie Musson (18:23):

It can become very difficult, especially when there's an emotional attachment to it. So I see this a lot with antiques, perhaps clients who think that an antique is worth a lot less or a lot more than they think it is. So finding the rest, the right appraisers to come in and actually provide credible values for them can be a little bit of a challenge. Other things we see actually quite a lot gold bars. So I had a client who had a significant number of gold bars that we had to value. I've had designer handbags, so clients who have wives who have a number of handbags, which on the, I guess we'll call it the secondhand market, can actually increase in value to some degree. So

(19:15):

Like anur MA's, Birkin bag can have an extremely high value even more than what one purchased. And I think people are very shocked to learn that. They're shocked to learn that the designer handbags are potentially a marital asset and half the value needs to be shared with your partner, your spouse on separation. So that is quite surprising. We see a lot of watch collections, that's another big one. Car collections, that's another one we see. Sometimes art, art can also be a little bit tricky. So sometimes we have to go and contact through international channels to find the appropriate appraisers for those. And sometimes the clients will simply decide, you know what? We're just going to share. I'll take one piece of art, you take the other, let's not even equalize it. Let's do this a different way.

Vanessa Hui (20:06):

Let's not spend six months trying to value.

Anna-Marie Musson (20:08):

That's right, exactly.

Vanessa Hui (20:09):

Okay. Would you say that there are any trends that you're seeing in your practice now that perhaps you weren't seeing five or 10 years ago?

Anna-Marie Musson (20:22):

I was actually writing a little bit about this earlier this week, but the trend I've seen recently is called something called the quiet divorce. So what a quiet divorce is is where the couple will work together, they'll work with their lawyers, their financial advisors, their tax people, and they will actually resolve the issues in the divorce. And it'll even be parenting as well

Vanessa Hui (20:48):

Before

Anna-Marie Musson (20:49):

They actually announce that they're getting divorced. So by the time they tell, I'll call it extended family, extended friends, sometimes even the children, they will have already settled all of the issues. Interesting. And so the benefit of a process like that is you really take out any of this sort of commentary or

Vanessa Hui (21:14):

The emotions that

Anna-Marie Musson (21:15):

Emotions, it's a process that's very respectful. They respect the fact that they want to keep this as a private matter. They don't want friends or family members getting involved where it might not be appropriate. And by the time they make the announcement, everything is resolved. So there's a lot less stress for the extended family. When the children ask questions, what's going to happen? The parents have answers because they worked through it all.

Vanessa Hui (21:44):

So

Anna-Marie Musson (21:44):

It's not for everybody and certainly not if you're dealing with a very emotional breakdown and you need the support of your friends and family, et cetera. But in the right cases, and we are seeing it more and more and we're seeing it more and more with the high net worth individuals who really want to make sure they're in control of their financial future. They've made the decisions, they're not going to court, they don't want everybody in their network to know what's happened. So when they do announce their divorce, there's no volatility. And this is especially true with business owners who really don't want there to be any disruption or you don't want, you're an executive and you don't want anyone else on the board to think there's going to be any disruption in your life because it's all done.

Vanessa Hui (22:34):

Why do you think that this is a trend that's emerging now? What's driving? Is it just because people are talking about it and it's become something more people are aware of as an option? What's driving this trend towards the quiet divorce?

Anna-Marie Musson (22:50):

I think there's been a shift overall as well where, first of all, I think there's less stigma getting divorced than there were years past. Couples now very much focus on co-parenting and working together as families. So we're seeing more and more even in say the celebrity world where you will see divorced parents together going on vacation with their children, co-parenting, doing things like that, bringing their new spouses, new partners involved. And so there's really been a focus on the children and making sure they still see the family unit, albeit it's restructured now. And so I think that trend has sort of also made its way to some degree, into the financial settlement. There's also a lot less of a trend, I'll say, to just file and go to court. So I think in years past, everybody just practiced, I'll call it in a traditional way. And the traditional way was, okay, you're getting divorced, you hire a lawyer, you file in court, you go fight and probably settle before you reach trial. But that's the process and that's the only process. Well now there's been a shift in family law to do things collaboratively, to stay out of court, to work with mediators, to work with arbitrators, to do everything in a way that is so much less litigious because A, it's more cost effective, but more important than that, it actually is better for the family.

Vanessa Hui (24:24):

Yeah, absolutely. So I'd like to end our conversation on talking about conflict prevention or conflict anticipation. So one topic that comes up a lot with our clients is prenuptial agreements. I think that the stigma around prenuptial agreements has really kind of waned over the last few years, but can you talk about when someone should think about getting a prenup and what are still some of the misconceptions around prenups?

Anna-Marie Musson (25:00):

So if you are looking to get married, so right around the time you're getting engaged, I know it doesn't sound romantic what I'm about to say, but that's the time when you really want to start having these conversations. I personally believe, and this is from my perspective as somebody who's been married before, the sooner you talk about money with your partner, the better it's going to be. You're going to build a better foundation for you and your partner. I've often seen with my prenup clients, many of them have never even had a single conversation about money with their partner. And it's concerning because this is something that they are going to have to manage and navigate through their marriage. Financial goals can be so critically important. Financial decisions being made including work, starting businesses, generational wealth, and there's just a complete lack of communication and it takes a long time to build that back up.

(26:00):

So the sooner you have these meaningful conversations, the better in my view, shifting to how do you bring up the conversation of a prenup? We really tend to focus and coach our clients on discussing it as another tool in the financial toolkit. So it's not as though I don't trust you. You're a gold digger. My mother says, I have to get you to sign this prenup because you're going to take everything of mine. That's not the conversation anymore. The conversation is we're going to work at this collaboratively. We want to set our financial goals, this is what the goals look like. We also have to talk about the what ifs in life, and this is where the estate planning comes in, the tax and frankly the family law conversations, which is obviously we're not planning for divorce, but we do need to have some conversations on what would happen.

(26:54):

How will you know that you are going to be financially secure? I'm going to be financially secure that we're both going to be able to reach our financial goals as best we can. How are we going to preserve the wealth for our children? Having clarity on these points also means you're going to spend a lot less money on lawyers. So again, more wealth preservation you can use exactly. The couples who have prenup agreements, their divorce and separation obviously gets much smoother. Conversations are a lot easier. Faster signing of the separation agreement much easier. It's all provides clarity. That fear of what's going to happen to me? Am I going to lose everything? Is she going to take everything from me? Those conversations are all gone because we have now clarity on what would happen. And the other thing about prenups too is there are living document. So as your life evolves and changes, you can go back and update it. So it's not as though it's a one and done and one person's going to take all the wealth and the other person's going to be left destitute. No, the idea here is we're going to create something that's fair for the family.

Vanessa Hui (28:11):

That's really interesting. I would've thought that the name implies that you have to, this is an agreement that only is valid before marriage happens, but it's not. You can update a prenup five years into marriage.

Anna-Marie Musson (28:26):

Absolutely. In fact. Interesting. We also can do a postnup agreement. They're called marriage contracts, but you can do it at any time. And we've had clients who have done it when they've set up family trusts because that is a really important time when a marriage contract might make sense, people who are building a business another time that you'd want to have conversations about a postnup agreement. We want to be able to preserve the business, ensure that we're not going to put it at risk, especially if you have partners or investors, oftentimes they will insist on some form of domestic contract, which makes sense. So again, the conversations, however, really are no longer from the days past where you have the two lawyers duking it out over a conference room table. Now what we really do is work collaboratively with the couple and the lawyer. And in some instances we've brought in tax experts or other accountants, financial advisors, and really the team works to gather to help the couple with their financial plan. So it's a really great process.

Vanessa Hui (29:34):

Yeah, I mean many of our clients at forthlane are entrepreneurs that spend their whole building their business, not even imagining that one day they'll have the wealth that they have once they have a liquidity event. So the marriage contract concept is very relevant. Would you say that there is a better time to enter a marriage contract like pre-liquidity or post

Anna-Marie Musson (29:59):

Liquidity? It really could be either time. It really just depends on what information you have at the time. What you really want to avoid is a situation where you are putting together an agreement and then it is later found that perhaps the business is sold at a much higher value than both people initially thought. And so now that contract maybe at one point seemed fair and reasonable, but now it no longer is because that then can lead to it being challenged. So again, this is where we talk about updating it. And an update doesn't mean you do the whole agreement. Again, it's a one page amendment. It just provides clarity. But again, that's why transparency, collaborative discussions are so critical and important when doing these agreements.

Vanessa Hui (30:47):

Okay. So outside of prenuptial agreements, marriage contracts, transparent conversations, is there anything else that you'd like to leave our listeners with in terms of important steps for high net worth individuals or families to take before conflict arises?

Anna-Marie Musson (31:05):

Right. And to me it's really the value is in the marriage contract. It's such an incredible tool prenup, a postnup agreement if you're living with someone, a cohabitation agreement. It is such a valuable tool, but it is so extremely underutilized, and I understand why it has a little bit of a, I'll call it ick factor,

(31:28):

Talking about contracts in a romantic relationship. But the clients of clients we're working with, and you as well, these are sophisticated individuals. And so avoiding an awkward conversation could cost millions. And that's just something you don't want to do. You don't want to leave yourself in a position as well where you're fighting over money and going to court and having all of these difficult situations being put before a judge, when basically having the conversation doing it in a respectful way can have such great benefits at the end of the day. And so I am on a mission to educate as many people as possible on the value of marriage contracts. And as I had said, we are seeing a lot of conflict over trust, family trust being set up. And it always, again, one of my top tips is when you're working with a trust lawyer to set up the trust, that's another great time to bring in the conversation on the marriage contract because let's right away figure out what the trust is, what it's designed for, what we're going to do with it, and let's put that in writing because the last place you want to be dealing with dividing the assets in the trust or figuring out who's the beneficiary of the trust, who unquote owns the trust, is in family court.

(32:57):

It's a nightmare. So let's get clarity now. Let's put it in writing. Let's work together as a team. And really the benefit's going to be to your children because most people will say, well, I'm trying to build a legacy for my children.

Vanessa Hui (33:12):

Okay. Well, I like to end our podcast with one question that I ask all our guests, which is, what is one lesson you learned early on in your career that has stuck with you and continues to guide you today?

Anna-Marie Musson (33:27):

I think one of my earliest lessons was people just want to be heard.

(33:34):

And maybe it's the line of work I'm in, people just want to be heard. They want to tell their story and they want to matter. So one of the things I've always liked to do, I'm a very curious person, so I do love to hear people's stories. And I really legitimately do like to ask questions and hear about people's life experiences. But something as simple as having a couple together and having one person be heard can be so incredibly powerful and surprises, maybe it's not surprising, but gets them across the finish line in terms of settlement. So sometimes I'll even argue many times it's not even about the money, it's about being heard. So I always now try to make sure everybody feels as though they've been heard.

Vanessa Hui (34:28):

I

Anna-Marie Musson (34:28):

Love

Vanessa Hui (34:29):

That. Well, thank you for giving me the opportunity to hear you and your story and your clear passion for really trying to anticipate and minimize the conflicts that can arise upon relationship breakdown. So thank you Anna Marie for being here. If there's any other questions that I haven't asked you, please let me know. If not, I will say thank you and I look forward to working together on our mutual clients. Thanks, Vanessa. This is great.