BC Taxes at Divorce or Separation in BC
Our BC Family Law Tax Lawyers know that there are tens if not hundreds of different taxes out there. At separation or divorce, you may not even know they even exist. And they can cost you a fortune.
One of the biggest mistakes in family law is how people only focus on dividing property and not debt or the tax consequences that follow from property division. If you fail to tell the judge to take family debts and tax consequences in to consideration before ordering a 50/50 division, then you risk having to pay for all the taxes and letting your spouse fly free with half of your assets.
Spouses are Generally Responsible for 50% of BC Taxes at Divorce
The new BC Family Law Act made sweeping changes to how assets and debts are handled upon relationship breakdown for our Family Law Tax Lawyers.
Previously, debts which included taxes were not always considered and could not be divided if there were no assets. So for example, if upon the marriage break down, you and your spouse did not have any assets, the responsibility for taxes was usually borne by the person whose name was on the debt. This included businesses.
The BC Family Law Act changed this rule and now states that regardless of whether spouses have or do not have assets, debts and taxes are generally equally shared by spouses.
However, if you do not tell the judge about family debts or taxes, you risk being 100% responsible for them and not having a remedy.
Types of BC Taxes at Divorce or Separation
There are many different types of taxes that you should look out for and we will go through 3 main types below. However, you should always consult with a BC Family Law Tax lawyer to know whether there are past present or future taxes you may not even know about. But must be aware of.
BC Taxes at Divorce or Separation on Real Estate
The biggest tax immune real estate in family law is your family home or matrimonial residence. As long as you and your spouse lived in your home for more than 1 year prior to separation, neither one of you has to pay capital gains taxes if one of you buys the other out. However, let’s say you moved out at separation and for one year you and your ex lived in different homes. Which ones is the family home and exempt from taxes? You’ll be surprised at how many conflicts there are over exactly which real estate is family home.
Real estate assets that usually attract taxes, whether capital gains or income tax are as follows:
- Vacation homes
- Rental homes
- Investment properties
- Real estate owned by your spouse’s or your companies
- Commercial real estate, etc
BC Taxes at Divorce on Companies
So let’s say your spouse is a doctor and has a few clinics around the City. You on the other hand stayed at home and raised children. After a long marriage, you want to obtain your share out of your spouse’s company because you say you contributed to her success through household duties.
If the companies are valued based on their current share value, then either you or your spouse may have to pay taxes on transferring her 50% interest in the companies to you. And it’s only fair that you both equally bear the tax burden. But BC Family Law Tax Lawyers know how to do it so you both avoid having to pay any BC taxes on transfer of shares in a company.
- If the companies are valued based on their assets such as equipment and real estate, again BC tax may be triggered and both should be responsible for it.
- If the companies are valued based on their shares or going concern approach, then there will be distributive taxes to pay for, and you must know how much they are.
Make sure you consult with a BC Family Law Tax lawyer regarding valuations and taxes. It is crucial specially if companies are worth a substantial sum and taxes can be a fortune. Why not avoid them if you can?
BC Taxes at Divorce on Investments & RRSPs
Transferring RRSPs can be tax free. You can apply for a tax exemption on RRSP transfers through the RRSP Spousal Roll Over. You will need to sign certain RRSP transfer forms to ensure you are fully protected. If you forget to do that, you may have to pay fortunes in BC taxes.
Investments such as stocks, mutual funds, etc can attract substantial taxes on transfers. It may be a good idea to consult with a financial planner or BC Family Law Tax lawyer to know how to reduce taxes payable at separation as much as possible. Contact Us.
BC Taxes at Divorce Can cost a fortune. Contact our experienced family lawyers to find out about your tax rights and obligations by calling 604-974-9529 or get in touch.