Family Law And Taxes

• Published date: 14 November 2020
• Subject Matter: Tax, Family and Matrimonial, Family Law, Income Tax, Capital Gains Tax
• Law Firm: Cox & Palmer
• Author: Ms Jacqueline Boucher

The area of law where family and taxes cross paths can be difficult to navigate. This article will outline the most relevant income tax issues facing couples who are separating or people considering separation.

Child Related Tax Issues

The Canada Child Benefit

• This is a tax-free benefit paid to parents monthly, available to both separated and intact families In intact families, where both parents live in the same home with the child, the Canada Revenue Agency ("CRA") usually considers the female parent as being primarily responsible for the care and upbringing of the child.
• On separation, it is important that the parties update their marital status with the CRA in order to ensure the correct benefits are calculated. In situations of shared parenting (or where the child or children spend approximately equal amounts of time in each home), the CRA will calculate the amount each parent will get separately, using their respective adjusted family net income and then each parent will receive 50% of that amount on a monthly basis.
• Many parents try to maximize benefits during the separation process and may agree that one party will continue to receive the full amount of the Canada Child Benefit This is a risky venture as the CRA is not bound to comply with these arrangements. A word of caution can be found at paragraph 52 of the Honourable Justice Morrison's decision in (S.L.) v A.(B.A.), 2013 NBQB 372:

52 Even if there was such an agreement, I would refuse to grant the petitioner's request on public policy grounds. The petitioner had a positive obligation to advise CRA if any information in her application for benefits was inaccurate or changed (see Exhibit P-1, page 275). Clearly, the petitioner did not meet that obligation. She continued to receive tax benefits at the expense of the taxpayer for children whom she knew were not in her care. She knowingly failed to report accurate information to CRA and as a result the benefits she received were improper. Even if I accepted that the respondent acquiesced in this arrangement, the petitioner cannot transfer her liability to the respondent. Simply put, the petitioner received financial benefit from the taxpayer under false pretenses and is obligated to repay the funds. The petitioner's request that the respondent indemnify her in this regard is denied.

The Child Disability Benefit and Disability Tax Credit ("DTC")

• The Child Disability Benefit is a tax-free monthly payment made to families with a child under...