Offering money advice when millennials divorce

When Margot Keys and Todd Richardson (not their real names) decided to separate in 2017, he took the car and she took the dog. He moved out of the Toronto home they bought together in 2012 and rented an apartment; she stayed in the house and took over the mortgage payments. They agree that each retains a 50% interest in the home, but neither can afford to buy the other out. They don’t have kids, and neither pays spousal support.

“We have a loose arrangement, which we need to finalize, that we have to give the other six months’ notice if one of us needs to sell,” says Keys, 34, who works in television.

That agreement, though, isn’t in writing. Instead, the former couple has taken an informal approach to dividing assets, one that has not (yet) involved lawyers or financial planners. Keys isn’t sure it ever will.

“About a month after Todd moved out, I contacted a financial advisor. And when I told him that Todd had a pension, the advisor said, ‘You’re entitled to half of that,’” she recalls. “And my back went up. There didn’t seem to be any consideration for the idea that I might not want to take my husband to the cleaners and that he wouldn’t do the same to me. And if the advisor didn’t understand that, then how could I trust him to make financial decisions for me?”

Millennials tend to approach at least some aspects of separation and divorce differently than previous generations, says Toronto lawyer Alexa Turner, who has a full-time settlement practice in family law at Resolve Dispute Resolution. At age 31, she’s part of that cohort.

Millennials’ careers are often characterized by freelance and contract work, so their income can be difficult to determine and less secure, Turner says. Family law dictates that, for support purposes, each partner is required to maximize their income. But when one person is a yoga teacher who does some freelance copyediting, she says, and the other is in tech and takes three months off to travel every year, it can be difficult to establish a base income to maximize.

Turner says her millennial clients are loath to be chained to their desks, pursuing the highest-dollar-value work at the expense of more creative or fulfilling pursuits. “There’s a bit more of a feeling of, ‘What works? What’s my budget? What do I need to make? What are our goals for our children and for our family, and how are we going to make sure that we foster those?’”

Millennial mindsets aside, separation and divorce have different effects at a younger age. “People in their 30s usually haven’t been married very long, so there’s a lot less to disentangle,” says Jacqueline Peeters, a partner at Cohen Peeters Yates, LLP, a boutique family law firm in Toronto.

Millennials tend to have fewer assets to divide, and they’re more likely to have similar incomes, which means there aren’t spousal support issues. By virtue of their youth, they are less likely to have children—thus eliminating an often highly contentious topic from negotiations, says Peeters.

Under-40s living in major urban centres also face financial realities that require different approaches, Turner says. Many have student debt, and real estate prices are such that buying homes in the city is challenging without financial contributions from parents. When neither partner can afford to buy the other out of the matrimonial home, creative solutions—like keeping both parties on title while one moves out, or having one spouse live in the basement unit and the other on the main floor—become necessary.

“I think people my age feel like they’re barely saving any money,” says Turner, “so if it comes down to paying a lawyer tens of thousands of dollars or just figuring out something on their own and perhaps foregoing $5,000 or $10,000 of what they might be entitled to, the net difference to them is zero. They have bigger fish to fry.”

Those bigger fish include maintaining harmony and a sense of independence. When Hsu-Yin Boo and her husband separated in 2012, they negotiated support for their two young children without lawyers.

“For a while, he didn’t pay any child support,” says Boo, 36. “And then we agreed that he would give me an amount we could both live with, that I thought he wouldn’t begrudge me.” She and her ex eventually obtained a legal separation agreement when he needed one to buy a house.

“Lots of people thought I was bonkers,” says Boo. “They told me that I wasn’t taking what I was legally entitled to, out of guilt. But I felt that I chose to end the relationship and [that] I should be setting myself up at that point. […] I didn’t need to pay a lawyer to tell me that I was getting less than I was legally entitled to.”

Madhu Kanwar, a certified divorce specialist and financial planner based in Vancouver, says there are risks to a completely do-it-yourself approach, though—like not taking into account the cost breakdowns or tax implications of arrangements.

“You come up with a creative solution, but then you need to hammer out the details: Who’s going to pay to have the roof fixed? What if one party wants to buy another house and needs to sell? Whose primary residence is it for tax purposes? There’s no point in having an agreement that’s going to break down in a year.”

Kanwar works with separating couples (or just one spouse) and a team of legal, parental and financial mediators to ensure her clients’ creative solutions hold up under the stress tests of real life. She helps clients understand whether they can afford to stay in their home, how much they’ll need to budget for the kids’ education, and if and when they’ll be able to retire. She also helps determine the value of marital assets and how to split them, and the tax implications of various options. She charges a flat rate, bringing in appraisers or business valuation experts (and charging for them) as necessary.

Seeing the numbers within the context of their real lives, Kanwar says, can foster creativity. “We can say to people, ‘Here’s how you can still meet your goals. Here’s where you can maintain your lifestyle and here’s where some things may have to change.’”

It’s an approach that Boo says she might have appreciated. “I could see going to a lawyer for a consultation, like a therapist, where you pay a fee and a person tells you all your options and you make decisions from there.”

Keys concurs. She says she would welcome an exploratory, rather than prescriptive, approach from an advisor. “Instead of saying, ‘Oh, you’re getting divorced: here are the four things you need to know,’ ask ‘What are your goals? What do you want at the end of this? What do you hope will happen?’”

Millennials may get spoofed about their lifestyle choices, but Turner says many are being “really flexible and open about what ‘family’ means. A separation doesn’t necessarily mean that you’re no longer family. As a settlement-based lawyer, I’m seeing a lot of millennials choose to be smart about how they preserve their relationships, how they spend their money on legal fees, how they share their wealth and how they take care of each other and their children.”