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Divorce & Your Finances


There are some things to think about if contemplating getting a divorce, as the financial fallout of divorce extends far beyond legal costs, alimony and child care expenses. Canada Revenue Agency (CRA) considers you separated when you live separate and apart from your spouse or common?law partner for a period of 90 days or more due to a breakdown in your relationship. A separation of less than 90 days is not considered a separation for the purpose of Child and Family Benefits. Once separated for 90 days, the effective day of your separated status is retroactive to the day you both started living separate and apart.

Consider the Canada Child Tax Benefit (CCTB). If you, your new spouse or common-law partner have children who are residing with you, CRA will move all the children to the lower income earner’s account. If married or living common-law with a person of the same sex, one of you will receive the CCTB for all the children. To continue receiving the CCTB, you and your spouse or common-law partner are required to file a tax return every year, even if you have no income to report.

In addition to finding a new place to live, people displaced by divorce must deal with a wide range of financial and tax considerations, even when no children are involved. Many people are unaware that getting divorced will revoke any gifts specified in the will which were left to the divorced spouse.  If the divorced spouse was named as an executor, this appointment is also revoked. The will is read as though the divorced spouse had predeceased the deceased spouse.  Upon marriage, a will made prior to the date of marriage becomes invalid unless the will is expressly made in contemplation of marriage. So it’s important after a divorce, that if a spouse remarries, they need to update their wills, or draft new ones in contemplation of getting remarried.

Another stumbling block often overlooked on getting divorced is forgetting to change beneficiary designations on life insurance policies, RRSPs or segregated fund investments. Usually the last thing anyone wants is the life insurance or investment proceeds going to a former spouse unless specified in their divorce agreement.

If you receive benefits or payroll by direct deposit, be sure to inform CRA and your employers if your information needs to be modified. This is to prevent benefits from being deposited into the wrong bank account. If you are not on direct deposit with CRA, you may want to consider registering.

If you’re going through a marriage breakdown, the best advice is to wrap things up sooner, rather than later. Take the time to understand all of the tax, financial and family implications involved in splitting up.

This is just an overview of some of the issues, so if you are contemplating a separation or divorce, seek out a qualified legal divorce advisor to go over all the potential things you might not have thought about.
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