How Mediation Can Help You Protect Your Wealth

28 November 2023

Getting divorced? Here’s a list of things you need to do and think about to protect your finances in a divorce:

financial pie

Do you want to split your financial pie in two or three?

People always ask whether I should use mediation or hire a family lawyer?

Always start with mediation; if that fails, hire lawyers to argue. Highly qualified divorce mediators will have extensive knowledge on family law, spousal and child support, property division and the contents needed in your separation agreement.

If you decide to hire a family lawyer right out of the gate, you should understand that your financial pie will not be split in two, as a lot of money will go to your legal bills. Consider how hard it was to accumulate your wealth.

Consider all the Financial Aspects that need to be in your Separation Agreement when working with your divorce mediator.

Navigating the financial aspects of divorce requires careful consideration of various factors to ensure a fair and equitable division of assets and liabilities. Here are some of the top financial issues you need to consider during a divorce:

Asset Division:

  • Identifying and valuing assets: Make a comprehensive list of all marital assets, including real estate, investments, retirement accounts, personal property, businesses, etc. Do not consider who owns what – make the list. Your divorce financial mediator will help you decide who gets what and how.
  • Third-party valuations may be needed: Consider them for businesses, private equity, and real estate.
  • Division of Assets: Different jurisdictions have different rules for dividing assets.


  • Identifying and classifying debts: Just as with assets, it’s essential to create a list of all debts, such as mortgages, credit card balances, and loans.
  • Responsibility for debts: Determine which party will be responsible for each debt. This can be negotiated between spouses with a mediator decided by the court.
  • Consider those not-so-obvious debts: family and friend loans, student loans, shareholders loans, gambling debts, etc.

Alimony and Spousal Support:

  • Determining the need and ability to pay: Alimony, commonly known as spousal support, is often awarded to the spouse who earns less or has a lower earning capacity. Assess the financial needs of both parties and the paying spouse’s spouse’s ability to provide support.
  • All Provinces, Lawyers and mediators adhere to Federal Child and Spousal Support Guidelines.
  • Calculating income can be tricky. Even for those with T4s, it might be problematic. It would be best to consider base salary, bonus, health benefits, life insurance payments, etc., for the payer; uncertainty around bonuses can be very stressful when calculating support. The best approach is to use the base salary and include a top-up for when and if bonuses or dividends are paid. Expect your financial divorce mediator to give you lots of options.
  • For the self-employed, it is even more complex. Usually, a business owner will do their best to minimize personal tax by using hold cos or simply reducing the amount they withdraw and leaving it in retained earnings. This is why business valuations are fundamental. Remember to look at dividends and hold co for building the correct formula for calculating income.
  • Tax implications: Alimony is tax-deductible for the payer and taxable income for the recipient. Understanding the tax implications is essential for proper financial planning.

Child Support:

  • Capital gains and losses: Consider the tax consequences of selling or transferring assets, especially those subject to capital gains taxes.
  • If there is any share transfer, be sure to get tax advice. Be careful about the wording in your separation agreement. Transferring shares at an adjusted cost base vs fair market value can significantly impact taxes.
  • If there is an outstanding tax, ensure it is either paid or set out in your separation agreement who will pay it and when.

Insurance: A very complex but important topic:

  • Life insurance is often overlooked or not considered. Make sure you commit the time and effort to consider its application in your divorce.
  • Is the life insurance that you or your spouse own through your employer? If so, who is the beneficiary?
  • Do either of you have personally owned insurance? The owners can change beneficiaries at any time unless it is irrevocable, which is rare. Who is paying the premiums?
  • Assess the need for life insurance to protect alimony or child support obligations.
  • Sometimes, owning insurance on your spouse and paying the premiums makes sense.
  • There are three types of insurance: Term, whole life, and universal. It is essential to understand the differences concerning longevity, cost, beneficiaries, value, etc.

Retirement Accounts:

  • Valuing and dividing retirement assets: Understand the rules for dividing retirement accounts, such as RRSPs.
  • Remember to consider Tax implications. For example, if your house is worth $200,000 and you have $200,000 in RRSPs, that is not an equal split.
  • If you are taking the RRSPs, consider if you need them and the tax implication if you take them out before you retire.
  • You can transfer retirement funds between divorcing couples with no tax triggering.

Business Interests and Complex Assets:

  • Valuation of business interests: If one or both spouses own a business, determining its value can be complex. Professional appraisers may be needed.
  • Division of complex assets: Consider how to fairly divide complex assets, such as stock options, intellectual property, or real estate.

Future Financial Planning:

  • Budgeting: Create realistic post-divorce budgets for both parties based on their new financial situations.
  • Updating estate plans: Revise wills, trusts, and beneficiary designations to reflect the changed family structure.

Preparing Financially for after your divorce as a single parent as you transition from family income to a single income.

a laptop and a journal on a bed table

How the 70/20/10 Budget Rule Work

The 70/20/10 budget rule is a simple guideline for managing your finances and allocating your income to different categories. It suggests dividing your income into three broad categories: 70% for living expenses, 20% for savings, and 10% for personal or lifestyle choices.

It is prudent to set out your post-divorce budget during your mediation process or at the beginning. These numbers will be significant when you are making decisions on property division and spousal and child support for our separation agreement.

When Not to Use Mediation in Divorce

While mediation is always the first choice, it may not always be appropriate. It is important to know when not to choose divorce mediation. If you decide to mediate your divorce disputes, you want to feel generally confident about the successful outcome of your mediation. Consider:

  1. Safety Concerns: In cases of domestic violence or abuse, alternative dispute resolution methods may not be suitable.
  2. Power Imbalance: Mediation may be unfair if there is a significant power imbalance between the parties, such as one party being much more dominant or controlling. In such cases, seeking legal representation or alternative dispute resolution methods might be more appropriate.
  3. Lack of Good Faith: Mediation may be ineffective if one or both parties are not genuinely committed to the mediation process or are using it as a tactic to delay legal proceedings.
  4. Complex Financial Issues: You can still use a divorce mediator. However, ensure they are financially astute and know when it is appropriate to ensure you get legal advice and bring in other financial and tax experts.
  5. Unwillingness to Cooperate: If one party is unwilling to participate, then mediation will not be appropriate.

Some common complaints and mistakes about family Mediation that may or may not be true.

Lack of Legal Advocacy

  • In mediation, there may not be individual legal representation for each party. This could make one party feel disadvantaged if the other is more assertive or has a stronger negotiating position.
  • Getting independent legal advice before you sign your final separation agreement

Power Imbalance:

  • If there is a significant power imbalance between the spouses, it might affect the fairness of the process. Using the INR (Independently negotiated resolution )mediation process will give you the space to make informed financial and parenting decisions without any pressure or the other person’s presence in the room.

Incomplete Information:

  • Mediation and arbitration rely on the voluntary disclosure of information by both parties. If one party withholds information or is not forthcoming, it may lead to an unfair resolution.

Emotional Challenges:

  • Ensuring you have the emotional space to make decisions in your best interest is vital.

Unenforceable Agreements:

  • In mediation, the outcome is an agreement between the parties. While this mediation agreement is not legally binding, it forms the basis of the legal separation agreement, which is enforceable by the courts. This gives you the space to make decisions rather than the court.

Complex and Conflicted Cases:

  • In highly complex legal or financial cases, mediation may not work. If it does not, you can proceed to legal action. At least you will have tried the less expensive and less adversarial approach first

What is the downfall of a Divorce Mediation/Arbitration process for Divorce Property Division?

Mediation/Arbitration (Med/Arb) engagements are becoming more popular. This process is not recommended by the author of this paper. It can be costly both financially and concerning the outcome. With this approach, you hire a mediator or lawyer to start with mediation, and then if you cannot agree, they get to be the judge and jury and make all final and binding decisions. This is extremely dangerous. The entire reason you mediate is because you can have open, honest communication without the risk that what you cannot risk being honest, as it will be held against you if it moves to arbitration where the person you were open with gets to now use all the against you. In addition, most arbitrators are not skilled at mediation, so over 80% of med/arb result in Arbitration. So, the person you were open with is now acting as the judge and jury. This process is not in anyone’s best interest.