Divorcing couples generally do not need to be concerned about immediate tax impacts that the dissolution of their marriages may cause. Nonetheless, over the longer term, proper planning can help them to manage the tax implications of asset division in Ottawa.
The property division lawyers at The Riley Divorce & Family Law Firm advise everyday families, business executives, and high-net worth individuals on tax issues related to their divorces. The tax planning and divorce team regularly monitors changes in tax laws and shapes their advice to give clients the most tax-preferred arrangements as they move forward following their divorces.
Married couples who are separating should report their separation to the Canada Revenue Agency (CRA) no later than the end of the month after they formalize their separation. A couple may deem separation formal after they have lived in separate locations for more than 90 consecutive days.
The Agency requires the filing of a separation report to establish changes in tax benefits and other credits that may be different for individuals than for married spouses. If you have questions about reporting obligations or how any subsequent asset division may be affected by these tax laws, please call the Ottawa offices of The Riley Divorce & Family Law Firm.
Although the tax implications may be minimal, divorcing couples in Ottawa should understand how the CRA treats certain asset divisions. If a couple sells real estate during divorce proceedings, the capital gains from the increase in value of a primary residence will likely be exempt from taxation, but capital gains from sales of vacation properties or second homes will be taxed.
Spouses can transfer Registered Retirement Savings Plans (RRSPs) without a tax penalty, but the couple’s final separation agreement must memorialize the transfer. Additionally, couples can divide stocks, bonds, mutual funds, and other investment security assets without tax effects, but if they sell these assets, the proceeds of the sale will likely be subject to taxation
Lastly, transfers of ownership interests in a privately-held business can have substantial tax implications unless the business has adopted certain rollover provisions in its by-laws or operating agreement.
Our divorce and tax lawyers appreciate that every client’s financial situation is unique, and each client has unique assets to divide with circumstantial impacts when it comes to taxes. Our lawyers tailor their advice to address those issues that reduce the erosion of asset value due to unexpected taxes.
The tax consequences of property division in Ottawa will be different for married and unmarried individuals. For example, tax laws do not allow one partner in a marriage to give a gift to the other partner for purposes of lowering tax liabilities. When the couple is no longer married, however, tax laws allow these gifts, subject to certain limits.
Furthermore, the tax implications of certain types of assets, such as RRSPs, can affect the current value, and the parties should consider the difference when negotiating asset divisions. An experienced lawyer could identify these issues in your asset inventory and recommend how you should address them.
If you are in the process of a divorce, you need up-to-date information about how tax laws may affect you. At The Riley Divorce & Family Law Firm, we have multiple lawyers who offer 24-hour availability to support you through the legal process. For clear explanations, please call a seasoned lawyer today for details about the tax implications of asset division in Ottawa.
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