Tag Archive: child support

1. Tax Tips for Separating Spouses

   February 20, 2013 1:40 pm Leave a Comment

   By Bronwen Bruch

   

   Financial Professionals on a Collaborative Team provide expertise around the financial ramifications of separation.

   Since we are approaching tax time, I thought I would provide you with some tax tips.

   1.  Spousal support and your pay cheque: If you are employed and you make spousal support payments, you can ask the Canada Revenue Agency (CRA) to authorize the reduction of the amount of income tax that your employer is deducting from your pay.  Instead of waiting until April of next year for the government to send you a refund cheque, you can have a significantly higher monthly net pay now.  Send a completed Form T1213, Request to Reduce Tax Deductions at Source, to you tax services office.

   2.  Shared Custody and claiming your children on your income tax return:  You may have heard that if you are the payor of child support you are not entitled to claim the Amount for Eligible Dependent (or the old Equivalent to Spouse credit).  This is sometimes true.  However, when there is shared custody and both spouses have sources of income, it may not be the case.  This credit could provide you with a refund of over $2,000 each year, so it would be in your best interests to discuss this with a Financial Divorce Specialist.  And if you find out that you are entitled to claim the Amount for Eligible Dependent for one of your children, you may also be able to claim the Child Amount.

   3. Tax implications when separating spouses divide their assets:  Separating spouses go through a process of dividing their assets.  Listing the values of each of their assets is just the first step int he process.  They also need to take into consideration the tax that would need to be paid if the asset were sold.  For instance, if one spouse kept a house worth $400,000, this would not be equivalent to the other spouse keeping the RRSP’s worth $400,000.  Why?  Because when the RRSP’s are withdrawn, tax has to be paid on them, so in essence, they are worth $400,000 less taxes.  Since taxes are not paid when the house is sold, the house is actually worth more than the RRSP’s.  And to complicate things more, there is the question of what tax rate should be used on the RRSP’s?  There are many more questions around dividing investments or pensions and the tax implications. Again, a Financial Divorce Specialist could guide you through this process.

   Separating clients are served very well when they decide to negotiate a separation agreement the “Collaborative” way.  Collaborative Family Lawyers know the law, and are trained to advocate for their client with a collaborative approach.  Family professionals are called upon for their expertise around parenting plans, and Financial professionals are called upon for their expertise around separation finances.  Collaborative Professionals feel that 3 heads are better than one, and the best part is that the couple are not paying 3 times the cost.  It will often be less than the alternative.  Each member of the Collaborative Team will take on the pieces that they have expertise in.  And the ultimate goals is that the couple and the collaborative professionals will create a quality separation agreement that will serve the couple well in their future separate lives.

   Brownwen Bruch, BMath, CMA, FDS

   Certified Management Accountant
   Financial Divorce Specialist
   Financial Family Mediator
   

   THE TAX MANAGEMENT CENTRE
   14-2530 Sixth Line, Oakville, ON L6H 6W5
   T: 905-257-6528  F: 905-257-4221
   bbruch@taxmanagementcentre.com
   www.taxmanagementcrentre.com

    

    

    

    

    

    

    

2. The Emotional Divorce

   October 3, 2012 11:13 am Leave a Comment

   by Fareen Jamal

   “What separates those who can obtain a smart divorce from those who can’t is this quality of being prepared to move on. They’ve done their mourning, to the extent that mourning is involved. And they have come to recognize that they are not victims. ‘This is what life has to offer. So let’s move on.”

   ~ Jeffery Wilson, cited in Deborah Moskovitch, The Smart Divorce, (Chicago: Chicago Review Press, 2007).

   Often, couples fail to properly address their grief following the breakdown of their relationship and the loss of their marriage. The grief of losing a life shared, your identity as a couple, your security and even your beliefs  If you fail to come to terms with the fact that you are divorcing emotionally from life as you know it, the legal process of divorce can become almost impossible. I have had many a file where the parties’ inability to let go of their anger blinded them from noticing the damage their decades of litigation had on their children and personal lives. They were going through the legal divorce failing to address their emotional divorce.

   Failure to identify this grief and to deal with it constructively can result in a long, arduous and expensive legal process.

   Arnold Schwarzenegger comments on the emotional impact of his divorce from Maria Shriver, after he fathered a love child with the couple’s housekeeper, in his upcoming book, Total Recall: My Unbelievable True Life Story. The New York Daily News revealed that Mr. Schwarzenegger continues to believe that he is in denial and still hopes for a reconciliation with Ms. Shriver.

   Divorcing couples must acknowledge that a divorce can divide assets and liabilities, and arrange for child or spousal support but it cannot punish your spouse for his or her bad behaviour during or after the marriage. It cannot guarantee that your support payments will be made or that access schedules will be smooth and problem-free. It cannot make your spouse change, nor will it return your life to the way it was.

   Collaborative family lawyers recognize and address the grief. Perhaps you need to give yourself a period of mourning. Then focus on how you want your life to look. Create a strong support network and recognize that you are not alone. Professional help through parenting experts, financial specialists and therapists can also help regain control of your life. Collaborative family lawyers routinely draw on other experts to assist in the process.

   As you deal with your grief, it will become easier to make legal decisions that are in your best interest. Divorce with dignity, and move on. And find a process that will support you in doing so.

   Fareen Jamal
   Bales Beall LLP
   2501-1 Adelaide Street East
   Toronto, ON
   M5C 2V9

   Tel:  416-203-4538
   Fax: 416-203-8592
   fjamal@balesbeall.com

    

3. Finances go beyond Valuation Date

   April 10, 2012 2:02 pm Leave a Comment

   By Bronwen Bruch

   It seems so simple! Divide the property in half, use the guidelines to calculate spousal support, and use the tables to calculate the child support. How difficult could that be?

   Unfortunately it is like when you are told that all you have to do to lose weight is to “diet and exercise.” Again, the concept seems simple enough. But as many of us know, you quickly find out there are obstacles that get in the way of your success when you go at it alone.

   The same goes for separating couples and their finances. The good news is that they don’t have to go at it alone. In the last decade, a different kind of financial professional has come on to the divorce scene. They are Financial Divorce Specialists (FDS) or Certified Divorce Financial Analysts (CDFA). Applicants for either accreditation must already have a recognized professional designation in accounting or financial planning. Financial professionals that have an affinity to conflict resolution may also choose to be trained as mediators. And financial professionals that would like to be part of a Collaborative Law Practice Group are required to take the same courses on collaborative procedures that are required of the collaborative lawyers. However, what all of these financial professionals have in common is that they are all able to provide clients with a thorough evaluation of the financial ramifications of divorce settlement options. This is of benefit to the process because the client is being asked to make irrevocable financial decisions during an emotional roller coaster ride.

   That is why more and more lawyers, call on these financial professionals to assist their clients in arriving at a settlement. The lawyer may not feel comfortable giving out some types of financial advice. And it isn’t always cost effective; or they aren’t always able to take the time to analyze the future financial impact of alternate proposed settlements, or educate a client that has less financial knowledge.

   These financial professionals:

   1) Can work with the spouse that is less knowledgeable financially, so that they come into the negotiations on equal footing
   2) Organize financial data that comes in from both spouses and prepare various financial documents, and
   3) Prepare financial scenarios around future cash flows and net worth

   Financial issues in a divorce can be a challenge. This is exaggerated by the emotional turmoil the couple is experiencing. They say that for married couples, financial stress will magnify any bumps in the road ten-fold. So for separated couples, it follows that the financial stress, will be that much worse.

   When trying to put together the “dreaded” financial statements or budgets for your lawyer or looking at your spouse’s financials, it can trigger feelings of anger, mistrust, fear and inadequacy. This explains why a client may freeze in the middle of this process. The financials then go on the shelf until the client is ready to face those numbers or “emotional triggers” again.

   Individuals, couples, lawyers and family professionals that are interested in “collaboration” enlist these financial professionals. Their approach to a legal settlement includes the usual analysis of the “Valuation Date Needs.” However, there is an additional component which is the analyses of future financial needs. We know that financial stress is compounded by fears about your financial future. In a separation, there is the added resentment that the other spouse will be unduly better off. Adding this future component to the analysis can reduce these fears and resentments, which will help bring the settlement to resolution sooner, which in turn will save time and money for all involved.

   Bronwen Bruch, BMath, CMA, FDS
   Certified Management Accountant
   Financial Divorce Specialist
   Family Mediator

   The Tax Management Centre
   14-2530 Sixth Line, Oakville, ON L6H 6W5
   T: 905-257-6528 F: 905-257-4221

   bbruch@taxmanagementcentre.com
   www.taxmanagementcentre.com