Unique issues in family property disputes

There are many financial issues that can arise in a family property dispute. Chris Goodburn will work with your legal and tax advisors to resolve these issues.

Some examples:

RRSPs

When you eventually cash in your RRSPs you will pay tax. Should that contingent tax liability be deducted from their current value? One solution is for the parties to equalize their plans as part of the property settlement.

Unreported Revenues

What happens if one party alleges that some revenues have not been reported by the business? This can lead to a number of issues, including:

  • Can it be proven?
  • If it can be proven, how will this impact the value of the business?
  • How should the risk that Canada Revenue Agency will discover the unreported revenues and issue a tax reassessment be factored into the property settlement?

Income Taxes

The sale of an asset may give rise to tax liabilities, such as capital gains taxes. If a company is wound up, taxes may be payable on any liquidating dividends. Issues that may arise include:

  • How much are the potential taxes?
  • If an immediate sale or wind-up is not planned, should there be some allowance for these contingent taxes?
  • If the asset must be sold to fund the settlement or the purchase of a home, should there be a provision for these taxes?

Guarantees

What if both spouses have guaranteed a debt, such as a business loan? If one spouse is to keep the business, can the other spouse be removed as a guarantor?

Contingent Liabilities

What if one party is disputing an income tax re-assessment? How should it be dealt with in the property settlement? Some options:

  • Leave it to the court to decide how the contingent liability should be treated.
  • Reach an agreement as to how it should be treated.
  • Agree on the amount of the deduction for settlement purposes, subject to an adjustment at the time the debt is finally settled.