From: email@example.com (David Osterman)
Subject: Re: NEW RULES BAR MEN FROM COURT
To: firstname.lastname@example.org (Eric D. Tarkington)
Date: Mon, 21 Apr 1997 19:29:54 -0400
The forms are not included within the online HTML package. These coments are conjectured.
Perhaps the following points should be made.
1) Financial Matters, Equalization Payment (This will likely show up in the financial statement form)
a) Pre/Post tax dollars The current financial form valuates RRSP dollars and dollars in a savings account at the same value. Since RRSP dollars have not had any tax dedecuted from them, this is an inaccurate rendering of the financial resources available to the person. A simple rule should be used: The value of RRSPs and similar untaxed investments should be applied with as though the entire investment was withdrawn from the tax shelter. The applicable marginal tax should be applied.Note 1. This is a similar principle used for the valuation of chattel (furniture and the like): it is valuated at current market value rather than original purchase price.
Note 2. Divorcing people are often forced to withdrawal funds from tax sheltered investments to pay for legal expenses. Withdrawn funds are taxed at the current maginal tax level; this often HALVES the value of the tax sheltered investments.
b) Use of Constant dollars. The current practice is to sum all financial resources and subtract the financial resources at the time of the marriage in order to determine the "net family assets". Dollars from 20 years ago are treated as equal to todays dollars. No economist or business accountant would make this comparison. A simple table, published yearly, could be used to translate "old dollars" into current dollars.
c) Treatment of Negative net family assets. Current practice is to set negative values of net family assets to zero. This often leads to one of the two parties bearing a significant share of the debt acquired during the marriage. As a hypothetical example, a couple split up, with the husband driving off the car (registered in his name) while the wife is left with the bank loan (in her name, a personal loan since she is also has a car load for the other car) used to pay for the car. Since the couple had been in financial straits (a frequent cause of divorce), the net family assets for the husband is -$1000, by the wife -$21,000. It would appear unjust in this example that no equalization payment was considered.
d) Treatment of Loans near the time of Separation. It is important, however, to ignore loans made near the time of separation. One spouse could easily borrow money, pay it out as a retainer to the divorce lawyer, and thus lower his/her net family assets while simultaneously increasing real assets. I suggest that personal loans obtained soley by one of the parties, within one year prior to separation, should be excluded from the liabilities section of the financial statement unless an explicit "purpose for the loan" is included within the financial statement.
e) Treatment of Pre-paid Services Pre-paid services, such as automobile insurance (often paid for once a year) should be treated as an asset. Reference should be made for common prepaid amounts (last months rent, property tax paid, retainers for a divorce lawyer, ... )in the booklet describing the financial statement. Notice that the initiator of the divorce frequently has the upper hand in this form of transaction. The initiator may pre-pay a number of services with community assets, and then walk out.
2) Financial Statements -- Frequency of Update. The frequency of financial statements, which for complex cases can consist of many pages, may be a form of harrassment. It may be impossible to provide financial statements that are within one week of being up-to-date. Similarly, the requirement to update the financial statement during a case on short notice or whenever circumstances change is too broad. Technically, financial circumstances change daily (e.g., stocks go up and down, payments for food/rent etc.). There should be some measure to indicate that a change is sufficient to warrant a new financial statement (e.g., a change of more than 3% of earned income or change of more than 10% of assets?).