Weilers LLP

Tax Free Savings Accounts And Family Law

Tax Free Savings Accounts And Family Law

[vc_row][vc_column][vc_column_text]March 9, 2009

By Brad Smith

Most people have likely heard of the Tax Free Savings Account or TFSA. They became available January 1, 2009.

A Tax Free Savings Account allows you to deposit $5,000 per year and grow without paying taxes. The deposit is not tax deductible. But none of the money withdrawn from the TFSA is taxed. As a savings strategy, the TFSA could become very valuable over time.

Will a TFSA be an asset if a couple separates and should it be valued? Yes to both questions.

A TFSA is a new account and thus there is no indication by the courts, lawyers or other professionals on how to value the TFSA. Based upon the operating principles of the TFSA, a TFSA should be valued in the same way that any other savings account will be valued. The value of the TFSA will have to be identified on the date of marriage (if after January 1, 2009) and the date of separation.

Although the TFSA is a tax shelter, it does not attract taxes at any time. Thus the TFSA does not have to be valued like a pension or RRSP.

If you have a TFSA prior to the date of marriage, you should keep a permanent copy of your account statement on the date of marriage. This will allow you to prove the value of the TFSA on the date of marriage should you subsequently separate.

Similarly, if you separate, keep a permanent copy of your account statement so you can prove the value on the date of separation.

The TFSA can also be transferred to your spouse after the date of separation to assist in a settlement of the financial issues arising from your marriage and separation.[/vc_column_text][/vc_column][/vc_row]