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It’s Tax Time! Some Tips About the Canada Child Tax Benefit

CCTB

It’s Tax Time! Some Tips About the Canada Child Tax Benefit

It’s tax season in Canada, which means that many of us are toiling and agonizing over our personal Income Tax returns, which for most people are due to be submitted to the Canada Revenue Agency (CRA) on April 30, 2015.

Among my clients, questions sometimes arise about how taxes are to be filed after a separation and divorce, especially the question of who is entitled to claim the Canada Child Tax Benefit (CCTB). While I emphasize that it’s important to get solid tax advice that is customized to address your specific scenario, there are a few general and basic tips that I can offer about the CCTB:

• The CCTB is a tax free, monthly government benefit payable to eligible parents for each child who is under the age of 18. It is designed to help families with the cost of raising their children.

• Generally speaking, the CRA determines the amount of eligibility for the CCTB by looking at the prior year’s tax returns for each of the parents.

• When parents have separated or divorced, the provisions of the federal Income Tax Act and its regulations govern the determination of which of the two parents is eligible for the CCTB.

• The baseline test for CCTB eligibility is this: The parent who resides with the child and who primarily fulfills the responsibility for the care and upbringing of the child is the one eligible for the CCTB.

• If due to the breakdown of the marriage or relationship the parents have separated for a period of more than 90 days or have divorced, and where the child spends considerable periods of time with each parent at their respective residences, the CRA will review the circumstances to determine which of them is entitled to the CCTB.

• Among the many factors considered by the CRA in this shared-care situation are the following: 1) whether the child actually resides with both parents; 2) who is primarily responsible for his or her care and upbringing; and 3) whether there is a court order in place.

• In cases where custody of the child is equally shared, both parents may fully satisfy the threshold “resides with” and “primary care” requirements. In such cases, the CRA splits the annual benefit by giving each parent 6 months’ worth of the CCTB (subject to the recipients’ own individual income-based eligibility determinations).

It’s important to emphasize that the Income Tax Act and its regulations contain the governing provisions, definitions, and rules that determine CCTB entitlement in favour of parents generally. The question of precisely how those rules apply to separated and divorced parents can get a little complicated, and even more so where the parents have struck an agreement between them that contains CCTB-related clauses. This is because the contract provisions may contradict or purport to countermand those that are set out in the legislation, or may reflect circumstances that have changed since the agreement was reached. In such cases it is especially important to consult an experienced lawyer for tailored tax advice.

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com

Recurring $50,000 Annual Gift – Should it be Included in Husband’s “Income”?

recurring gift

Recurring $50,000 Annual Gift – Should it be Included in Husband’s “Income”?

In a recent decision called Horowitz v. Nightingale, the key question for the court was whether, in calculating the husband’s annual “income” for equalization purposes, the total should include a regular gift of $50,000 he received each year from his wealthy parents.

The couple had been married about 16 years when they separated. They had three children together, each of whom had special needs. The wife was looking for about $35,000 per month in spousal and child support, based on the husband’s income which her experts estimated was about $1.7 million for 2013, and over $3 million for 2014, including certain withdrawals the husband made from his RRSP. The husband, in contrast, claimed that his overall income for 2013 was under $600,000, and that his support obligation should be adjusted downwards accordingly.

As part of the task of ascertaining the husband’s true income for these purposes, the court was accordingly asked to characterize the $50,000. The parties were at odds on whether the annual cash gifts were regular enough to be counted: The wife claimed that they had been consistently given in the past, and could be counted on to recur in the future. To bolster her position, she produced an excerpt from an e-mail she received from the husband in which he confirmed that the gift was regularly given each year. It read:

It’s a good thing my father gave me $50,000 each year to help with all your expenses (my parents have the cancelled cheques). Don’t expect to see that anymore. And the money many years I had to take out of my RRSP to pay for everything. Don’t expect that to happen anymore.

The husband refuted that the gifts were regular; moreover he pointed out that his father had had passed away recently. Since the gifts had come from both parents (rather than from either of them individually) there were no guarantees, he said, that his widowed mother would keep up the generosity now that the father was gone.

The court started the examination by pointing out that in law, both child and spousal support was governed by the provisions of sections 15.1 and 15.2 of the federal Divorce Act. Those sections provides a list of factors that the court must consider whether ordering the amount of temporary support the husband had to pay the wife in this case. One of them was the consideration of the husband’s means, and his corresponding ability pay support in all the circumstances.

Next, the court observed that for child support purposes, gifts received by a parent are not presumed to be part of part of his or her presumptive annual income; however, under the Child Support Guidelines, the court had discretion to impute income if it was considered appropriate in the circumstances. However, “gifts” was not among the non-exhaustive list of amounts/items a court could impute.

The court then considered prior law on this issue, which confirmed the receipt of gifts was not generally an appropriate circumstances in which to impute income to the recipient. However, that precedent also established a list of other factors, all of which could be considered in this case, including: how regular the gifts are (or whether there were circumstances that made them exceptional); how many years they had been given by the parents to the husband; whether they were part of the family’s income and lifestyle while the couple was together; the income generated by the gifts relative to the husband’s entire income; their true purpose and nature; and whether they are likely to continue.

With this in mind, the court turned to the present facts: The $50,000 gift had been given by the husband’s parents in each of the prior 8 years, since 2006, as confirmed in the husband’s e-mail. He testified that “every dollar” had been used for family purposes, which meant the funds were part of the family’s overall income, and contributed to the lifestyle they came to enjoy. Finally – while conceding that there was no obligation on the husband’s mother to continue making the gifts at all, in the same amount, or with the same regularly – the court concluded that they were likely to continue in the immediately foreseeable future. (Incidentally, the husband had given no specific evidence as to how his father’s death might affect whether there would be future gifts, nor had he presented to the court any copies of the cashed cheques, even though they were available to him. The court drew a particularly negative inference from this latter omission on the husband’s part).

The court therefore concluded that the annual $50,000 annual gift should indeed be considered part of the husband’s income, for the purposes of calculating both spousal support and child support.

For the full text of the decision, see:

Horowitz v. Nightingale, 2015 ONSC 190

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com

How Long Does Child Support Continue in Ontario? – video

 

Wednesday’s Video Clip: How Long Does Child Support Continue in Ontario?

In Ontario, child support must be paid as long as the child remains a dependent.

In this video, family lawyer Russell Alexander discusses how long child support continues and when a court, or parents, should consider stopping or terminating child support payments.

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

How Long Does Child Support Continue in Ontario? – video

 

Wednesday’s Video Clip: How Long Does Child Support Continue in Ontario?

In Ontario, child support must be paid as long as the child remains a dependent.

In this video, family lawyer Russell Alexander discusses how long child support continues and when a court, or parents, should consider stopping or terminating child support payments.

Husband Does Some Sleuthing on Wife’s Facebook Apps – Is the Uncovered Evidence Admissible?

FB spy

Husband Does Some Sleuthing on Wife’s Facebook Apps – Is the Uncovered Evidence Admissible?

We wrote earlier about the decision in Rossi v. Spanier, [2014] O.J. No. 4880; 2014 ONSC 4984, which considered the issue of whether a support-paying husband should be indirectly footing the bill for his ex-wife’s financial irresponsibility post-separation.

But another aspect of that case is equally interesting: As part of the evidence that was put before the court on the question of how much spousal support he should pay, the husband had managed to do some sleuthing. On the morning of the trial, he had input some credit card information disclosed by the wife as part of their family litigation, to uncover various charges she had incurred on Facebook for an on-line gaming App known as “Slotboom”. He brandished this late-breaking evidence as a sort of “smoking gun”, to suggest to the court that the wife had a gambling problem. As the court explained:

A number of entries on [the wife’s] Visa statement denoted “Facebook” with invoice numbers beside them. On the morning of the commencement of trial, [the husband] advised that he had entered these invoice codes on Facebook, along with the last four digits of [the wife’s] credit card number (which appears at the top of all the disclosed statements). Facebook then returned details of the purchase which, in this case, included the name of the game for which the purchases were incurred, which was “Slotboom.” [The wife’s lawyer] objected to the admission of this evidence on a few grounds. First, she objected that this was too late, being the beginning of trial. …

The court adjourned briefly to allow the wife’s lawyer to review the documents and make further submissions; eventually the lawyer objected on the basis that the invoices should not be admitted because they amounted to “unauthorized use of [the wife’s] private credit card information and thus are unwarranted violations of her privacy interests.”

(And by way of explanation, the wife initially claimed that the Facebook invoices were for “games that were helpful for memory” at an average cost of $5 per day. However, when pressed, she conceded that they included charges for a game called “Slotboom” which featured an online slot machine, but maintained that it was skill-based. She later admitted to having done some online gaming in the past, but had not done so for the past year. Unfortunately, this testimony was undermined and proven untrue by the Facebook invoices, which for example showed 12 separate transaction in a single 5-hour period, totalling $435.)

The lawyers for each side could not come up with any precedent law on the issue of whether these invoices should be admitted as evidence, but after some reflection the court found that they should.

In this particular case, the information in the invoices was relevant to the family law matter – and spousal support in particular – because the husband had alleged that the wife had been dissipating her assets, and that a gambling addiction is at least part of that problem. (And this allegation was not a surprise to the wife, since the husband had made these claims right from the beginning). The documents would have been something the wife was required to produce in the course of the family litigation any case, had she been asked to by the court. The husband had uncovered the Facebook invoices using only the credit card information that had been properly disclosed to him; moreover there was no allegation that he had done anything with either the credit card number nor the Facebook invoices beyond what was directly relevant to the litigation.

Finally, the court noted that in the common law (as opposed to criminal law) there is no general power by the court to exclude evidence on the ground that it was wrongfully obtained. To the contrary, there is a general rule of inclusion, i.e. that the trier-of-fact should have the benefit of all relevant evidence, no matter how it was obtained. Nor does the Charter have any application between these kinds of disputes between private individuals.

The Facebook evidence was therefore ruled admissible.

Do you think this was the right outcome? What are your thoughts?

For the full text of the decision, see:

Rossi v. Spanier, [2014] O.J. No. 4880; 2014 ONSC 4984

 

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com

More on the Splitting the Costs of Kids’ Hockey

tape

More on the Splitting the Costs of Kids’ Hockey

A few weeks ago I wrote about how courts allocate the costs for kids to play hockey, and as an example put forward a case where only certain hockey-related costs were considered “extraordinary expenses” that were subject to division between the separated parents, pursuant to s. 7(1)(f) of the federal Child Support Guidelines.

However, it is important to point out that there are no absolute rules in this regard – the treatment of hockey and other activity-related costs can vary even in terms of how they are categorized for child support purposes. Depending on the situation, they might be classified differently from one family to the next: – in some cases being classified as an “extraordinary expense”, while in others being included as a component of the monthly child support amounts.

This surprising dichotomy can occur because in some families, everyday, “ordinary” expenses associated with sports and other extracurricular activities are contemplated and anticipated because of the family’s overall lifestyle and means, and are therefore simply funded from the child support that is paid in connection with the child. This was the outcome in an Ontario decision called Watt v. Watt, where the costs for the children’s hockey and dance were not considered to be extraordinary expenses in the overall context of the particular family’s lifestyle.

In any event, the point at which hockey or similar costs stop being “everyday” expenses and start being “extraordinary” ones is a difficult one to identify. Fortunately, the Child Support Guidelines do offer some guidance in his regard, stating that the question of whether an expense has become “extraordinary” (for the purposes of s. 7(1)(f)) involves the court considering several things, (set out in s. 7(1.1)) namely:

1) whether the expenses exceed those which the support-paying parent can reasonably cover, bearing in mind his or her income and any child support received by him or her; or

2) if these first considerations are not applicable, then the court can consider:

a. the amount of the expense in relation to the income of the spouse requesting the amount, including the amount that the spouse would receive under the applicable table or, where the court has determined that the table amount is inappropriate, the amount that the court has otherwise determined is appropriate,

b. the nature and number of the educational programs and extracurricular activities,

c. any special needs and talents of the child or children,

d. the overall cost of the programs and activities, and

e. any other similar factor that the court considers relevant.

As a final point, it should be noted that in making the assessment the court will not consider the merits of the proposed extracurricular activity; rather, the court will look only at financial aspects, measured against the various family-specific factors set by the Guidelines.

For the full text of the decision, see:

Watt v. Watt, 2011 ONSC 1279 (CanLII)

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com

What is a Retainer Agreement? – video

 

Wednesday’s Video Clip: What is a Retainer Agreement?

Ontario family lawyer Russell Alexander talks about retainer agreements between client and lawyer. These agreements set out the scope of services provided by your lawyer and defines the contractual relationship between you and your lawyer.

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

5 Divorce Questions — Coast to Coast (Canadian Edition): Interview of Lawyer Jacqueline Boucher

NB

5 Divorce Questions — Coast to Coast (Canadian Edition): Interview of Lawyer Jacqueline Boucher 

This week we interviewed Saint John, New Brunswick lawyer Jacqueline Boucher. Jacqueline Boucher attended the Schulich School of Law at Dalhousie University and was called to the Nova Scotia Barristers Society in 2009. She transferred to the Law Society of New Brunswick in 2012. She practises law at Mosher Chedore in Saint John, New Brunswick, primarily in the area of family law.

Russell Alexander: “How often do people ask you for advice or guidance about separation and divorce and in which jurisdictions do you practice in?”

Jacqueline Boucher: “Myself and my colleagues at Mosher Chedore are consulted on a daily basis with respect to separation and divorce. My practice is almost entirely comprised of family law clients located in the Saint John region of New Brunswick, although we do practice in other judicial districts around the New Brunswick, including Moncton and Fredericton”.

Russell Alexander: “What are the biggest concerns people raise with you about separation and divorce?”

Jacqueline Boucher: “Children, money, and time. Generally, the people I consult with are very concerned about how to resolve their separation in the most cost-effective and expedited manner. The difficulty can lie when we have to explain to clients that these processes take time (particularly if custody of children is in issue) and may not be resolved overnight without significant compromise”.

Russell Alexander: “What advice do you have for people looking for a family lawyer?”

Jacqueline Boucher: “You should ensure that you are comfortable with your lawyer. Family law sometimes requires discussing very sensitive and emotional matters and you should ensure that your lawyer is someone you are comfortable being completely forthright and honest with”.

Russell Alexander: “What are the top 3 tips you have for people going through a divorce?”

Jacqueline Boucher:

1) Have legal advice from a qualified profession at an early stage. This does not necessarily mean go to Court right away nor retain a lawyer, but people should know what their rights and obligations are at an early stage. This helps manage expectations and, particularly if mediation or other informal means of resolution is being used in first instance, also ensures that both persons are bargaining from a knowledgeable position. Legal advice will outline where you may want to negotiate versus the areas you should not. Keep in mind that many people that have been through a separation or divorce may have very strong feelings about the way the law works but that they are not lawyers so any advice received about the law from non-lawyers should be taken with caution.

2) Be organized and provide documentation when asked. This will save a lot of headaches. At the initial meeting with a prospective client, I always ask that they bring in their last three years tax returns, notices of assessment, and a recent pay statement. Full and frank financial disclosure is a very important part of sorting out the financial issues related to marriage breakdown. This information should be provided quickly and easily when requested by your lawyer.

3) Seek therapeutic intervention if necessary. If you (or the children) are struggling with separation or divorce, seek the advice of a trust counsellor or even an impartial friend. Keep in mind that lawyers are not counsellors and, while we do our best to use interpersonal skills appropriately and try to be sensitive to our clients emotional needs, we are not mental health professionals. This is also important in managing expectations as it keeps clients focused on the legal matters as opposed to the emotional response to marriage breakdown.”

Russell Alexander: “What do you envision for the future of family law?”JB 2

Jacqueline Boucher: “This is a very difficult question to answer. There a lot of calls for an overhaul of the family justice system and something certainly needs to be done to make it easier for self-represented litigants to access the Courts while still maintain some procedural fairness and rules of evidence. I also think that lawyers play an important role in family justice as an understanding of legal rights and obligations are very important in managing people’s expectations. So, ensuring that everyone (regardless of income) has timely access to legal advice is important and I see this as an expansion of government services (i.e. legal aid or duty counsel). I envision more tools to try and “standardize” the law, such as the Child Support Guidelines and the Spousal Support Advisory Guidelines. This may include legislated or mandated use of parenting plans which are common in the United States. There are many pieces to “fixing” the puzzle that is family law and these would just be two of them”.

Should Support-Paying Ex-Husband Be Saddled with Ex-Wife’s Financial Irresponsibility?

wife gamble

Should Support-Paying Ex-Husband Be Saddled with Ex-Wife’s Financial Irresponsibility?

The couple – both musicians in their 50s – separated after 23 years’ marriage. They had a wedding/corporate events band together for which the husband was the keyboardist and manager, while the wife was the lead singer. However, the wife had been diagnosed with Multiple Sclerosis during the marriage and her health was in significant decline. This had translated into them having fewer and fewer gigs for the band; this affected the net income for both of them, and by extension the calculation of support after their split.

Their matter came back before the court to determine how much spousal support the husband should pay, particularly in light of the wife’s ongoing illness-related need. While he conceded that he owed her spousal support, he took issue with the $1800 per month she was asking for, insisting that a figure of $700 was more appropriate in light of his income, her ability to earn at a reduced level, and the fact that she had dissipated a large chunk of her capital assets since the separation.

In particular, the court heard that shortly after they split up, the couple had come to an agreement: The wife was paid $371,000, with 2/3rd of that representing a buy-out of her interested in the matrimonial home, and the remainder being certain RRSP rollovers and the returns on certain investments the couple had made during the marriage. However, within two years after separation, she had already spent or squandered $170,000 of that money, mainly through gambling and making questionable financial decisions. These included her extending a $20,000 undocumented loan to a friend, buying a new car for that same friend to use on a regular basis, and losing $20,000 on the rash purchase of a co-op condo that – it turned out – had no elevator and did not permit dogs, both of which were deal-breakers for her.

The husband said that in light of the wife’s gambling and poor financial decision-making, both of which led to her squandering the capital she was supposed to use for day-to-day living, he should not be held accountable to pay higher support payments to compensate. At the least, her income for support purposes should include those amounts that she could have earned had she invested the $371,000 wisely.

The court considered these arguments, and pointed out that in some sense the wife’s mis-spent capital was irrelevant to how much support the husband should pay because no matter what the amount, it would be insufficient to meet her living expenses and she would have to keep encroaching on the capital regardless. Still, the court agreed that when determining the amount, the wife should be imputed to have earned a reasonable amount of investment income; the effect of her failure to invest should not now be visited on the husband.

In the end, the court determined that under the circumstances the wife should have been earning $2,000 per year through investments, plus another $6,000 from mentoring young musicians and other various pursuits that she could be earning even despite her medical limitations. After scrutinizing the husband’s income and assets in detail as well, the court arrived at a figure of $1,000 per month that he was ordered to pay her in spousal support.

For the full text of the decision, see:

Rossi v. Spanier, [2014] O.J. No. 4880; 2014 ONSC 4984

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Ontario Wills & Estates: What Is A Power Of Attorney – video

 

Wednesday Video Clip: Ontario Wills & Estates: What Is A Power Of Attorney

In Ontario, a Power of Attorney is a legal document that gives someone else the right to act on your behalf.

In this video we examine  the importance of a Power of Attorney and what options and decisions you should consider when deciding who should be your power of attorney.

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.