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  • Severence pay

    Hi!
    I'm told there is a tax liability on Severacne Pay. Dose this or is it common practice to adjust when a Settlement offer is been proposed. The ex will not be retiring for 4 yrs. Could this not be adjusted then?

    TKU
    F_P

  • #2
    Adjust what?

    Comment


    • #3
      It's just like any other income - you pay taxes on it. The equalization should account for this, just as it accounts for future taxation of RRSPs.

      If you are just agreeing to split the severance payment when it is received, then you need to indicate that it is the after-tax amount that is beng split (i.e. you cannot demand 50% of 50K when only 24K is received after tax).

      If you are trading off a current asset against the future severance payment, then you should use the after-tax amount.

      It seems there are some pretty specific (and logical) tests to determine WHETHER *future* severence pay should even be included as property to be equalized - do you meet these criteria?
      http://www.mpllp.com/articles/georgi...n/osgoode.html
      Last edited by dinkyface; 08-07-2012, 05:24 PM.

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      • #4
        Yes, this is common. HR provides the severance estimation and that needs to go on asset but since this is gross amount, there is taxes to considered.

        There is nothing to adjust later. The severance amount is base on what accumulated during the years of mariage till separation and the tax is on tha amount at rate that would have been if that happened at separation.

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        • #5
          Ok Thank you I ubderstand.

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          • #6
            Wait and see

            My lawyer is not sure what the other side has done with the Severance pay. So he is going to wait it out till we have the next settlement conference. They should have more info then. If not then he'll ask for the info.

            F_P

            Comment

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