Breaking up
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Breaking Up is Hard To Do - Planning issues when untying the knot - presented by lawyer Jane Shanks, VP Assante Wealth Management to the Estate Planning Council of Abbotsford on September 17, 2014.
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Breaking up
- 1. Breaking Up is Hard to Do Planning Considerations When Untying the Knot Abbotsford Estate Planning Council Jane Shanks, BA, LL.B, TEP Regional Vice President, Wealth Planning
- 2. Agenda Overview Divorce Models Divorce Professionals Untying the Knot
- 3. Divorce: the numbers 43% of marriages end in divorce before the 50th wedding anniversary 70% of men and 58% of women will remarry 35 year itch: “grey divorce” is a growing trend Increasing number of clients in 2nd and 3rd marriages Divorce rates of 2.5 times higher for people in remarriages
- 4. Fears among Baby Boomers Being alone Failing again Becoming financially destitute Never finding another to live with or marry Staying angry or bitter over time Depression Not seeing children
- 5. It is common for divorcing clients to ask for your help
- 6. Divorce Models Which one is right for your client?
- 7. Kitchen Table Do-it-yourself Couple mutually agree on settlement Once in writing must seek independent legal advice
- 9. Litigation Each party hires a lawyer to advocate their positions Lawyer’s duty to get best deal for client If agreement can’t be reached then court will decide
- 10. Litigation
- 11. Mediation Couple meet with mediator to discuss issues and negotiate settlement Mediator doesn’t take sides, make decisions or give advice Still need independent legal advice
- 12. Mediation
- 13. Collaborative Each party hires a lawyer specifically trained in collaborative process All formally agree to work together in a respectful and honest manner Encourages an understanding of each party’s interest and concerns
- 14. Collaborative
- 15. Divorce Professionals Mediators Business Valuators Accountants Financial Divorce professionals (FDS/CDFA) Family law lawyers Collaborative lawyers Family Health professionals Child counsellors
- 16. Role of Financial Divorce Professionals Examines financial issues, does not provide legal advice Assists spouses in gathering documents Provides financial analysis taking into consideration inflation and tax consequences Helps each spouse establish needs and hopes for the future Counsels clients on developing realistic budgets
- 17. Role of Financial Divorce Professionals Provides insight into pension plans, investments and insurance Determine assets that may not be divided Educates clients about tax and other financial consequences of retaining or giving up certain assets Assists lawyer in designing a settlement proposal that will maximize both spouses satisfaction
- 18. Role of Financial Divorce Professionals Provides unbiased presentations that show short-term and long-term financial impact of a proposed settlement Offers insight into pros and cons of various settlement proposals Hands back clients to their other professionals for implementation of settlement and future planning
- 19. Untying the knot • Most people only fight about two issues 1. Their children 2. Their money • Tips: • Avoid getting in the middle of a fight • Suggest counsellors and child specialists to help clients move along with minimal damage
- 20. Non registered investment holdings Employment benefits Automobiles Family business Retirement assets Saving for children (RESP’s) Home & recreational properties Typical Assets
- 21. Attribution on Property Transfers between spouses and common-law partners
- 22. Property Transfers after Separation or Divorce
- 23. Property Transfers - residential real estate
- 24. Property Transfers: Who gets the Principal Residence Exception A family is allowed to designate one property as a “principal residence” Vacation property may qualify as the principal residence: “ordinarily inhabited” Can only claim one property as the principal residence for the same years of ownership Separated couple is not automatically entitled to two principal residence exemptions Must be living separate and apart for a full calendar year
- 25. Property Transfers: RRSPs and RRIFs Transfers as a result of separation or divorce can be tax deferred if: Transferred Transferred directly to another registered plan directly to another registered plan Transfer is made pursuant to a court order or written separation Transfer is made pursuant to a court order or written separation agreement agreement FFoorrmm TT22222200
- 26. Property Transfers: RRSPs and RRIFs Planning Point If there is a significant difference in marginal tax rates, effective way to satisfy equalization If there is a significant difference in marginal tax rates, effective way to satisfy equalization obligations obligations
- 27. Property Transfers: TFSAs Direct transfers as a result of separation or divorce are classified as “Qualified Transfers” if: Living Separate and apart Living Separate and apart Transfer is made pursuant to a court order or written separation Transfer is made pursuant to a court order or written separation agreement agreement No impact on either person’s No impact on either person’s ccoonnttrribibuuttioionn rroooomm
- 28. Deductibility of support payments Periodic Periodic payments made pursuant to a separation agreement or court order are payments made pursuant to a separation agreement or court order are generally deductible generally deductible Lump sum support payments generally not tax Lump sum support payments generally not tax deductible deductible
- 29. Deductibility of support payments James v. The Queen, 2013 TCC 164
- 30. Resources and references • Child Support Tables, custody definitions and online lookup, www.justice.gc.ca • CPP Credit Splitting Upon Divorce or Separation (forms and rules) and request for CPP Statement of Earnings www.hrsdc.gc.ca • www.DivorceFinancialPlanners.ca • Provincial Maintenance Enforcement Program
- 31. Thank you . Assante is an indirect, wholly-owned subsidiary of CI Financial Corp. (“CI”). The principal business of CI is the management, marketing, distribution and administration of mutual funds, segregated funds and other fee-earning investment products for Canadian investors through its wholly-owned subsidiary CI Investments Inc. If you invest in CI products, CI will, through its ownership of subsidiaries, earn ongoing asset management fees in accordance with applicable prospectus or other offering documents. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see your Assante advisors for individual financial advice based on your personal circumstances.
Hinweis der Redaktion
- Fastest growing segment is age 55+
- Positive Quick, inexpensive and less outside influences Private Negative May be giving up valuable rights May be abuse of information sharing and power
- Positive Quick, inexpensive and less outside influences Private Negative May be giving up valuable rights May be abuse of information sharing and power
- Point 2: regardless of other party’s situation
- Positive Resolution for people who can’t settle Negative Court proceedings are public Can be very expensive and create emotional distress and mistrust Positive – court system forces reluctant party to deal with family law issues Negative – often adds or increases emotional distress and mistrust, breakdown communication
- Positive Both parties have opportunity to be heard and are assisted by a neutral party Usually less expensive then litigation Negative No advice from mediator Couples who don’t want the courts to decide their futures Negative – one party may not realize what they are giving up
- Positive Both parties have opportunity to be heard and are assisted by a neutral party Usually less expensive then litigation Negative No advice from mediator Couples who don’t want the courts to decide their futures Negative – one party may not realize what they are giving up
- Point 2: And disclose all documents and information Point 3: And doesn’t include adversarial techniques or tactics Participate in the process in good faith
- Often include other team members: Family health professional Financial divorce professional Positive: Resolve rather than fight over family issues
- Point 2: for financial disclosure Point 3: analysis of assets, liabilities income and support payments
- Point 2: such as inheritances and gifts
- Point 3: e.g.: insurance needs, transfer of assets
- General Rule: where an individual transfers or loans property to or for the benefit of a spouse or common-law partner, any income or loss from the property and any capital gain or loss on the disposition of the property will be attributed back to the individual.
- Section 73(1) of ITA Joint and several tax liability on transfers between spouses. For any tax on attributed capital gains or income arising from the transfer Point 1: Provided both parties are Canadian residents when the property is transferred
- Issues such as: Often the most significant family asset Family circumstances – emotional attachment; shared memories If it is a recreational property, issues wrt shared use, multi generational Will it be tax free or will there be tax consequences Any liabilities attached affordability
- Should fix a date of separation, and stipulate the date of separation in the agreement/order Point 5: and be separated pursuant to a court order or written separation agreement, then each party can claim exemption, but only for the years after separation
- Transfers between parties resulting from a relationship breakdown are classified as Qualified Transfers and as a result will not reduce the recipient’s unused TFSA contribution room. Because the transfer is not considered to be a withdrawal, the transfer will not be added to the unused TFSA contribution room for the party making the transfer. Caution: If the party making the transfer does not make a direct transfer to the receiving individual, but rather withdraws and then pays the dollar amount, then the amount of the withdrawal is added to their unused contribution room and the can re-contribute the following year. The receiving individual will only be able to contributed the received payment up to their personal limit on unused TFSA contribution limit. This type of transaction would benefit the transferring individual and would be to the detriment of the receiving individual.
- James v. The Queen, 2013 TCC 164 – court ordered increase in monthly support that resulted in a lump sum payment was deductible. A lump sum payment to fulfill the court order did not transform a periodic obligation into a one-time settlement.