Dividing assets during a divorce can be particularly difficult when a couple owns a lot of land, or if they have a shared business. For Alberta farming families, both are often in the mix, making for complex asset division. When splitting family assets, one common question among both rural and urban families is which avenue or steps can be taken to minimize taxes, such as capital gains when transferring property ownership.
There are many things that must be clarified before considering the issue of taxes. In some cases, the most "tax-friendly" option may not be possible as a prenuptial agreement, trusts, inheritance and incorporation will direct the complex asset division. Those who do wish to consider tax implications even after all this is considered should do so before the divorce is finalized, as little can be done in this regard after the legal conclusion.
It is common for divorcing couples to sell their home and, in some cases, buy two separate new homes. This sale can result in capital gains taxes if the home has increased in value, unless it is a principle residence which is exempt from this under Canadian law. If there are multiple properties, as is often the case with Alberta farming families, it may be worthwhile to discuss which should be named as a principal residence in light of this exemption.
Other tax implications that consistently come up in divorces is who can claim children as dependent and how to include spousal support payments on income tax. Understanding these details before finalizing a divorce is wise to ensure each party is clear on how things will end up. Along with financial support, getting trusted legal counsel is a must for Alberta divorcing couples facing complex asset division.