Divorce Considerations in the Medical Community

When divorce is looming, it is essential to pay close attention to the financial repercussions.
Several essential questions deserve to be examined in this context.
The reality of marriage can move away from the idyllic image of fairy tales.
Statistically, nearly 40% of marital unions in Canada end in separation.
It is noteworthy that, despite the constraints inherent in their profession and the extended hours of work, physicians do not seem to be as prone to divorce as one might assume.
With specific data on the divorce rate among physicians in Canada lacking, a recent study by the BMJ in the United States indicates that the divorce rate among physicians is lower than that observed among lawyers, nurses, and other health professionals.
However, it is clear that divorce is rarely synonymous with financial benefit.
Adequate preparation is therefore essential before embarking on the separation process.
There are several things to consider.

Seek expert advice

In the emotional turmoil leading up to a divorce, making smart financial decisions can be complex.
However, a divorce can have a major impact on an individual’s net worth.
The assistance of a lawyer is invaluable, as they support you every step of the way.
Your lawyer will analyze various aspects of your situation to facilitate the fair division of your property.
Questions will include the future of your principal residence, your ability to support yourself independently, the tax consequences of separation, and steps to take to ensure the financial security and protection of your children.
Your lawyer can also work closely with other experts, such as your accountant or lawyer, to ensure a consistent strategy and protect your financial interests.

Valuation of your medical professional corporation

For physicians with their own professional corporations, determining its value is a major financial challenge.
The valuation of society is a complex process, influenced by many factors.
There are two main valuation methods: the first is based on the current value of the company, while the second focuses on its potential to generate future revenue.
It is often necessary to establish the market value of the corporation’s shares by taking into account assets, liabilities and goodwill, with the aim of incorporating it into the calculation of equalization of property or support payments.
When both spouses are doctors and shareholders of the same professional corporation, the situation is even more complex.
Generally, a shareholders’ agreement will have been drawn up beforehand to define the terms of the separation.
Issues to be resolved will include determining the future owner, possible changes to the company’s name, and the creation of a new company by the departing physician.

Family Residence Management

Under Canadian law, the value of property acquired during marriage must be divided equally upon separation.
Personal property prior to marriage remains the property of its holder, although any appreciation of its value during the marriage must be divided.
The family residence is an exception to this rule.
In the context of a divorce, each spouse has the right to reside in the matrimonial home.
Unless a court order has been made, it is forbidden to sell, rent or mortgage the residence without the agreement of the other party.
If the spouses agree to sell the home and share the profits, the costs associated with the sale should not be overlooked, including the mortgage prepayment penalty, which can run into thousands of dollars if the mortgage contract is breached.

Definition of Parenting and Financial Contributions

During a divorce, the parents’ major concern is often the future of the children, a legitimate concern.
A friendly separation and collaboration focused on the well-being of the children simplifies decision-making about them.
Regarding parenting arrangements, these determine, among other things, where the children live, the distribution of time spent with each parent and the decision-making that affects them.
These arrangements may be agreed informally, incorporated into a separation agreement or decreed by a judicial body.
As for child support, once custody of the children has been defined, it must be calculated.
Canada’s child support legislation states that children must continue to enjoy the financial resources of both parents after they separate.
Four elements are taken into consideration for the calculation:

• Income
• The custody agreement;
• The number of children;
• The province or territory of residence.

The amounts are based on Canadian government scales, which take into account the contributoring parent’s gross income, cost of living, provincial tax rates, and the national average expenses for the maintenance of a child.
Parents can establish a support agreement by consensus or it can be imposed by a court.

Assessing debts, including student loans

Doctors, compared to other professions, are likely to accumulate significant debts.
It is not uncommon for a practising doctor to have incurred more than $200,000 in debt, not to take into account any debts incurred by his or her spouse.
To determine who will be liable to repay these financial commitments, it is essential to distinguish between premarital debts and those contracted later, as well as those arising from joint consolidated loans.
It is also essential to inform credit agencies of any changes in marital status.

Updating your will and mandates

It is crucial to review your inheritance arrangements, especially with regard to your beneficiaries.
It is worth reconsidering the choice of your executor and your mandatary.
If your ex-spouse held this position, it would be wise to appoint new people of trust.
They will be responsible for implementing your final arrangements or managing your financial affairs and care decisions.
Our team can advise you in the choice of these people or act as an agent for the management of your property.
A review of your estate plan is also recommended to ensure that your assets are distributed according to your guidelines and to minimize post-mortem tax burdens.
We can guide you on when and how to transfer your assets to best limit taxation.

Re-evaluation of your insurance coverage

Before your divorce, your insurance needs were likely assessed based on marital income.
If you relied on your spouse’s income in the event of disability, you may not have taken out disability insurance.
Similarly, you may have a life insurance policy of which your ex-spouse is the beneficiary.
In your new situation, it is essential to define your current needs and make the necessary adjustments to your life and disability insurance policies.
It will also be necessary to re-examine the designated beneficiaries and appoint new ones if necessary.
It may be appropriate to review or increase your insurance coverage.

Consideration of the tax implications inherent in divorce

The tax implications of a separation or divorce may remain hidden for the time being, yet its impact on personal finances is often significant. Asset Sharing. When allocating assets, it is important to decide on the ownership of the assets and to opt for sound tax decisions.
Let’s take the example of Dr. Tremblay and her husband Joseph, who chose to separate.
They agreed that Joseph would keep the family home while in return, he would give his RRSP to Dr. Tremblay.
This transfer, commonly referred to as a “spousal rollover”, does not generate any immediate tax consequences.
However, when she makes withdrawals from the RRSP, Dr. Smith will be taxed on these amounts, while Joseph, if the house remains her principal residence, will not be taxed on the capital gain when it is sold.

Child Support Benefit. Child support cannot be deducted from the income of the person who pays it, and is not considered income for the person who receives it.
These are just a few of the many aspects to consider when reviewing your investment, estate, and insurance strategies.
It is therefore essential to surround yourself with a team of specialists to best navigate this complex period.
Rights of common-law spouses in the event of separation The 2021 Canadian census reveals that Canada has the highest rate of common-law couples among G7 countries, at 23%, a figure that jumps to 43% in Quebec. The federal government recognizes a common-law relationship when two people have shared a common home for at least one year in a conjugal relationship.
However, legislation varies between provinces and territories, particularly with respect to the length of time it takes to establish a common-law relationship and the rights of partners upon separation.
In Ontario, for example, only married couples are covered by the property division rules set out in the Family Law Act, excluding common-law partners.
In Quebec, the rights of de facto spouses in the event of separation are not systematically equivalent to those of married couples.
It is therefore essential to find out about the specificities of the de facto union in your region and to consult a competent lawyer to understand the consequences of a separation on your situation and that of your family. Self-care Doctors, often inclined to put the needs of others, sometimes neglect their own post-divorce emotional recovery.
It is important to allow yourself the right to mourn, to take care of your mental and physical health and to be open to the support of loved ones.
By putting yourself at the forefront, you can achieve personal growth at the end of this ordeal.
A divorce disrupts all spheres of life, requiring a reassessment of financial and personal goals.