The Money Smart
Divorce Solution

Legal, Binding & Enforceable Separation Agreements

Gail Vaz-Oxlade's Guide To

For more than 20 years you have witnessed Gail Vaz-Oxlade’s trademark straight-up money wisdom, both on Radio and Television, most notably as host of TVs Till Debt Do Us Part, Princess and Money Moron. Gail is a multiple time, best-selling financial author, and one of the top Canadian authors of the past decade. Gail brings her common sense wisdom to answer your questions about divorce & taxes.

 

Gail Vaz-Oxlade's Guide To

For more than 20 years you have witnessed Gail Vaz-Oxlade’s trademark straight-up money wisdom, both on Radio and Television, most notably as host of TVs Till Debt Do Us Part, Princess and Money Moron. Gail is a multiple time, best-selling financial author, and one of the top Canadian authors of the past decade. Gail brings her common sense wisdom to answer your questions about divorce and taxes.

Gail Smile Transparent
During and following a divorce, your tax situation changes significantly.

When it comes to Divorce and Taxes, when does Canada Revenue Agency consider you separated?

Canada Revenue Agency (CRA) considers you separated when you live separate and apart from your spouse or common‑law partner for a period of 90 days or more due to a breakdown in your relationship. A separation of less than 90 days is not considered a separation for the purpose of Child and Family Benefits when it comes to divorce and taxes. Once you have been separated for 90 days, the effective day of your separated status is the day you started living separate and apart.

Can we live in the same house and be considered “separated” by CRA?
Even though it may be legally possible to be separated and still live in the same house CRA will likely not consider a separation to have occurred if you continue to live together in the same household. The CRA has different standards when it comes to divorce and taxes as compared to the legal system. An exception to this may occur when separate living quarters are self‑contained in the same household. However, if you reside in the same household and continue to share parenting and financial responsibilities, CRA will not consider a separation to have occurred for the purpose of administering the Canada Child Tax Benefit or Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit legislation.

GENERATE YOUR SEPARATION ANALYSIS REPORT

Every couple faces unique challenges.
Understand how separation will affect you,
your children, your finances and your future.

DO NOT BEGIN NEGOTIATIONS UNTIL

Asset Transfers
When you and your spouse divide up your real estate, savings, investments and pensions, this is called the division of assets.  Paying your spouse their half of the assets is called an equalization payment and an asset transfer. Typically cash for equalization payments are not taxed during divorce because it is considered as money that you have already paid tax on. Cash is king, as they say.  But when you transfer other assets, such as a car or investments for example, they would normally be taxed at the difference between the current market value and the what you initially paid for them. However, during a divorce asset transfer in divorce there is a strategic financial option that allow you do use what’s called an automatic rollover provision that will delay any taxation on the transfer. Keep in mind, this doesn’t mean you will never be taxed on that asset, it simply means that a transfer done as part of the separation agreement will be temporarily exempt for now.  The transfer of assets is probably one of the biggest reasons that you want to involve a financial professional who works specifically with divorce.  Find out more about a certified divorce financial analyst.

Child Support
Child Support payments are not taxed… not taxed as income for the one who receives it nor tax deductible on the one who pays it. However this does not mean that there are not savvy financial situations that can be delved for your specific situations.  Involving a Certified Divorce Financial Analyst (“CDFA”) about your personal situation, means that they can check for deductions or tax credits related to Special and Extraordinary Child Care expenses.

Spousal Support
When it comes to paying Spousal Support, there are tax implications everywhere for everyone.  Spousal Support also comes with lots of wiggle room to be able to create savvy financial solutions. There are options like periodic spousal support payments (monthly) and a lump sum payment, or even options in between. Periodic (i.e. monthly) payments are taxed as extra income for the recipient and are a deduction for the one who pays.  Now think about this… this means that depending on how much you pay or receive, you might be bumped into a different tax bracket.  At the same time, lump sum payments are not taxable or deductible if and only if the support payments are made according to a properly prepared separation agreement. Again the importance of a Certified Divorce Financial Analyst who can help you to maximize and take advantage of the tax implications of support  payments.  Lastly beyond Taxes never forget that the amount of support paid or received can have detrimental affects on that person’s ability to qualify for a mortgage. For more information, please see Gail’s Guide to Spousal Support.

Is Divorce

When you divorce, there are real consequences attached to the transfer of assets between you and your Ex. NEVER FORGET that not all assets are created equally, and you need to be aware of how Canada Revenue Agency (“CRA”) treats each of them if you want the most financially savvy separation agreement:

Do I have to pay

Land transfer tax is payable on every single transfer of land in Ontario, with very limited exceptions. Fortunately, one of those exceptions is the transfer of the home between former spouses. This exception only exists when the transfer is done according to a properly prepared Separation Agreement.

If for no reason have your separation agreement done properly to avoid the land transfer tax. Don’t forget to designate your new home as your principal residence, as both spouses can now have a principal resident since they are two distinct family units.

What Do I Do First? What Do I Do Next?

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CONSULTATION
Free Telephone Assessment

Our telephone Assessment Consultation will help you better understand your situation, clarify information & help you plan your next steps.

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ORGANIZE
Prep & Planning Session

First meeting: a personalized Orientation & Prep Session to share your story, talk about your finances and get prepped to move forward.

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AGREEMENT
Mediation That Fits Your Situation

Numerous mediation bundles to fit your situation that include your mediator and the financial and legal services, to save you time, money and drama.

Will I be TAXED on our

You want to be really careful as to how and when you transfer any RRSP’s. RRSP's can be transferred from one spouse to the other without any tax consequences, again as long as they are transferred as part of a properly prepared separation agreement and they stay with the recipient. To avoid being nailed with taxes, don’t forget to sign and file the required T2220 form with CRA along with a copy of your written Separation Agreement.

How will a change in my marital status affect my divorce and taxes?

If your marital status changes, be sure to let the Canada Revenue Agency know, as this may change the way your divorce and taxes are handled. For example, an update in your marital status may affect the amount of UCCB (Canada Child Benefit) and/or GST/HST credit to which you are entitled. If you have registered with their “My Account” service, you can view the marital information CRA has on file for you and you can change your information online. If you are not registered online, inform CRA of your new status and the date of the change in a letter or by completing form RC65, Marital Status Change.

Universal Child Care Benefit (UCCB):

If you or your new spouse or common-law partner have children who are residing with you, CRA will move all the children to the female parent’s account. If you are married or living common-law with a person of the same-sex, one of you will receive the UCCB for all the children. To continue receiving the UCCB, you and your spouse or common-law partner have to file a tax return every year, even if you have no income to report.

GST/HST credit:

If you did not apply for the GST/HST credit on your tax return and your status is now separated, widowed, or divorced, you can apply now by writing a letter to your tax centre. Once they review your request, they will send you a GST/HST credit notice advising you of the amount of your GST/HST credit.

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Money Decisions
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Bag Lady Syndrome
(syn) or 'Street Guy Syndrome'
NOUN - The fear that one will become financially destitute after a divorce.
Family Mediation with a Financial Twist
“For most people divorce is less about legalities and more about finances, tax implications and making smart money decisions. This is why we started The Common Sense Divorce." – Gail Vaz-Oxlade

Working Income Tax Benefit (WITB) Advance Payments:

If your marital status has changed, you will need to file a new Working Income Tax Benefit (WITB) Advance Payment application. If you do not file a new WITB Advance Payment application, your WITB advance payments will be stopped until a new application is received. The application deadline date is August 31.

Direct Deposit:

If you receive your benefits by Direct Deposit, please inform CRA if your information needs to be modified. This is to prevent benefits from being deposited into the wrong bank account. If you are not on Direct Deposit, you may want to consider registering.

RESEARCHING?

Separation Agreements

Spousal Support

Family Mediation

Child Support

Divorce in Ontario

The Divorce Process

The Matrimonial Home

Certified Divorce Financial Analyst

Same Sex Divorce

Divorce And Your Money

Pension Valuations

Amicable Divorce