What is the Fate of a TFSA When Couples Separate – Divorce?

Description

The TFSA (Tax-Free Savings Account) program started in 2009. With it, people 18 years of age and older can set some money aside for the rest of their lives, tax-free (assuming they have a valid SIN number). TFSA contributions cannot be used as an income tax-deductible. Any money that is contributed – in addition to any income the account earns (for instance, capital gains and investment income) is typically tax-free, all the way to the withdrawal period. Other costs relative to the TFSA – such as administrative fees – aren’t deductible. Any money borrowed or interest earned for a TFSA cannot be used as a deductible, either.

Not all divorce or separations result in the equalization of TFSA's

In the province of Ontario, spouses are allowed to carry debts and own property in her or his personal name. However, when you wed someone that already has assets – including TFSAs – you don’t become the asset co-owner automatically. Ownership of an asset is attributed to the spouse. Conversely, if your partner had a TFSA before the marriage, their date of marriage deduction date will increase. It may also decrease the value of their net family property.

A net family property quantifies a marriage’s forward progress. It starts from the marriage date and goes all the way to the separation date.

The assets of a spouse – no matter which partner’s name is listed as the account owner – are regarded as matrimonial assets that are to be either equalized or divided. Be mindful that not all divorce or separations result in the equalization or division of those assets. Both partners could agree that debts or assets of equivalent value could to be swapped to cover any equalization owed. Alternatively, both partners could reach an agreement that nothing gets divided at all. The latter decision would not affect your assets if you owned them. Whatever the spouse agrees to do about assets, these decisions should be made based on a comprehensive series of facts (a.k.a. a disclosure).

Making a TFSA Disclosure

Disclosure of TFSA balance

With that said, you must offer a statement that reveals your TFSA balance, which should be listed on the marriage date. Documentation of your fiscal position – in addition to your spouse’s (both on the marriage date and separation date) – will simplify and expedite the process of calculating the net family property.

Where You Can Find Your TFSA

Your files, investment advisor, financial planner, web portals for online banking, and bank.

Who Has Document Ownership?

These documents are not shared by both partners – they belong to one or the other.

For what dates will the TFSA documentation be required?

You may need these documents inclusive of the separation date and the cohabitation/marriage date, among other periods.

TFSA Disclosure Documents Details

The statement is typically sent to subscribers on a quarterly basis, usually in March, June, September and December. If you have not received your statement for the period, you may need to conduct inquiries.

Obtaining a digital copy of this document:

Obtaining a digital copy of this document

Many online sources allow you to download a digital copy to the device.
Most up to date Web Browsers allow you the option of “Print to PDF”
Scan your hard copy to a pdf.

Note: This can be done on a personal (home or work) scanner, or can be done at a retailer such as Staples Business Depot

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