How to Avoid Paying Taxes on Property Division
Whether you are entering into a separation agreement or going to trial, it is very important to know tax complications on asset division. Many spouses enter into agreements but forget about taxes and how to avoid them. And that can cost you tens of thousands of dollars. It is very important to consult with a BC family lawyer to learn how to save on taxes. Here are a few tips on different assets and how to save taxes on them:
Table of Contents
Avoid Paying Taxes on the Family Home
If you are transferring the family home under your spouse’s name, it can trigger capital gains taxes to be paid by you. Sometimes he/she will be liable to pay taxes as well.
Here is what you need to do: designate the family home as your principal residence under the Income Tax Act. You will need to fill out certain forms to ensure CRA knows this transfer is between spouses at separation. This way neither one of you has to pay taxes. You will need a proper copy of your separation agreement to support why you should not be paying taxes.
Avoid Paying Taxes on RRSPs
If you have to pay a part of your RRSPs to your spouse as a part of a separation agreement or court order, you will need to do so by way of RRSP Spousal Roll Over which will ensure you will not have to pay income taxes by withdrawing RRSPs. You will need to fill out certain forms to ensure this is done properly.
Avoid Paying Taxes on Companies
If you have to transfer shares in your company to your spouse, the shares may first need to be valued. Once the value is determined, it will need to be transferred to your spouse. This can trigger taxes for both you and your spouse. You will need to transfer the shares based on their “adjusted cost base”. This means agreeing to value the shares at very low values to avoid having to pay taxes.
There are many other assets that need protection against taxes in case you need to divide them.
To set up an INITIAL CONSULTATION with our experienced family law lawyers, please contact us at 604-974-9529 or contact us.
This article is for information only and does not constitute legal advice. It does not create a lawyer–client relationship with YLaw or any of its lawyers. Laws and policies change, and information here may not reflect the most current legal developments. For full details, please contact us to obtain advice about your specific situation.