Untangling merged finances in a divorce is always challenging. It can be an especially complex undertaking when you and your spouse have amassed substantial wealth.
Work with lawyers knowledgeable about the tax implications of divorce for high-net-worth individuals in Ottawa. The high-net-worth divorce attorneys at The Riley Divorce & Family Law Firm have the experience to oversee complex property division negotiations and the knowledge to anticipate and address the tax consequences.
Wealthy couples typically have a wide range of assets, including business interests, real property, and investment accounts, which can have significant tax implications in the event of a divorce in Ottawa. The transfer of these assets to your spouse to satisfy equalization or your agreed property division scheme is typically tax-neutral at the time of transfer. However, a later sale can be a taxable event.
It is critical to understand these potential tax liabilities while negotiating your separation agreement. Our lawyers have a broad network of tax specialists to consult with, ensuring you fully understand your tax obligations under various property division scenarios.
High-net-worth couples in Ottawa often hold significant wealth in pensions and registered retirement savings plans (RRSPs) that could be taxable when they separate. Couples typically divide these accounts when they divorce. The transfers usually do not implicate immediate tax liability if the individuals roll the money over into another RRSP.
If a spouse has a U.S. pension or retirement plan, a lawyer could draft a qualified domestic relations order (QDRO). This document authorizes the plan administrator to pay a portion of the funds to the other spouse.
The recipient of a pension, RRSP, or QDRO-directed transfer does not pay tax on the funds until they withdraw them. At that time, the withdrawal is subject to income taxes.
Child support payments are tax-neutral, but that is not necessarily the case with spousal support. Spousal support is taxable as income to the recipient and deductible to the payer when the payments are made periodically in accordance with a court order or separation agreement. The recipient can deduct legal fees associated with obtaining periodic spousal support.
Spouses do not need to pay spousal support periodically. Some couples prefer a lump sum payment. Support paid in a lump sum is not deductible to the payor, and there is no income tax liability to the recipient. The recipient cannot deduct legal fees associated with obtaining the lump sum payment.
In Ottawa, high-net-worth spouses must consider the tax consequences of divorce, such as paying spousal support periodically versus a lump sum. Our lawyers could work with tax professionals to ensure your separation agreement reflects the tax implications of your decision.
Failing to accurately assess the tax implications of divorce for high-net-worth individuals in Ottawa can lead to unexpected liabilities. Avoid this issue by working with the experienced lawyers at The Riley Divorce & Family Firm.
We are available 24 hours a day and devote our careers to helping wealthy individuals meet their personal and financial objectives in divorce. Contact us today to discuss the potential tax consequences of your divorce.
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