Last updated: September 18 2019
Christine Steendam
Last week, we covered *Divorce: Minimizing Set-Back Through Tax Efficiency. However, there is another piece to the financial puzzle that divorce introduces: division of assets. This article will explore the division of common assets upon divorce; a process legal, tax and financial advisors will want to be up-to-speed.
Assets referred to as “marital assets” will have to be split between the partners. However, what qualifies as a “marital asset” depends on the province and, in some provinces, the nature of the relationship (married or common-law) will also be a factor. In most cases, assets owned prior to the marriage and assets received by gift or inheritance will not be considered marital assets. In some provinces, a spousal agreement may allow some assets that would otherwise be considered to be “marital assets” not to be.
Assets that need to be divided can include non-financial assets such as real property and business assets, as well as the division and transfer of investments in registered and non-registered accounts. In most cases, divorced or separated spouses are able to transfer assets between the two of them on a “rollover” basis – that is, without a tax hit. Here is how that works:
2019 Changes to the Home Buyers’ Plan (HBP). The March 2019 Federal Budget introduced changes to the Home Buyers’ Plan that allows couples who suffer a relationship breakdown to participate in the Home Buyers Plan’ as individuals even if they don’t otherwise qualify as a first-time buyer.
To qualify, the taxpayer must be living apart from their former spouse or common-law partner at the time of the withdrawal and the separation began in the current or four preceding years. In addition, the taxpayer may not make a withdrawal if they move into a home owned and occupied by a new spouse or common-law partner.
The HBP may be used to buy out the share of the residence owned by the former spouse or common-law partner, however, if it is used to purchase a new house, the former principal residence must be disposed of no later than two years after the HBP withdrawal. Taxpayers who have an existing HBP balance may not make a new HBP plan withdrawal until the former plan withdrawal is repaid.
* Divorce: Minimizing Set-Back Through Tax-Efficiency
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