Ottawa Divorce .com Forums


User CP

New posts

Advertising

  Ottawa Divorce .com Forums > Main Category > Financial Issues

Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

Closed Thread
 
Thread Tools
  #1  
Old 02-07-2011, 01:50 PM
shellshocked22 shellshocked22 is offline
Senior Member
 
Join Date: Jan 2011
Posts: 323
shellshocked22 is on a distinguished road
Default Lump sum for Child Support ?

Hi Folks:

New here but would appreciate any comments...

My wife has requested a divorce and while I was pretty shaken up initially, she has been quite reasonable and we're striving for an amicable break up for both our benefit and especially two young children. We've agreed in principle to spousal support arrangement and while we were thinking of going with the "tables" for child support, I was thinking as a possible alternative of going with a "lump sum" RRSP transfer (from me to her).

I own my own business and the child support would be roughly $2,000 a month for about 10 years assuming status quo on everyone's earnings. I'm wondering about perhaps giving her a a lump sum rrsp transfer of about $250,000 instead.

I realize she would have to pay tax on any withdrawals but...

-her tax rate would be much lower than mine
-she would have comfort of money up front
-could earn investment on the lump sum to lessen tax hit
-if my business suffers, she is protected
-gives me freedom to run my business as I want without potential
potential from conflict (ie. arguments about inputing income, etc or if I want to retire early).

I think this might be a "win win" for us both. Assuming my wife is OK with it, any pros/cons members could offer me ?

Thanks !
  #2  
Old 02-07-2011, 02:07 PM
KeepSmiling KeepSmiling is offline
Senior Member
 
Join Date: Dec 2009
Location: Dorking
Posts: 347
KeepSmiling is on a distinguished road
Default

A couple of questions....

You would like to propose that you transfer 250,000 in lieu of child support or in lieu of spousal support?

Have you worked out the division of assets already and have an extra 250,000 to transfer?

I will go no further with my opinions until I know what exactly the 250,000 is for.
  #3  
Old 02-07-2011, 02:08 PM
dadtotheend's Avatar
dadtotheend dadtotheend is offline
Senior Member
 
Join Date: Jul 2007
Location: Toronto
Posts: 3,644
dadtotheend will become famous soon enoughdadtotheend will become famous soon enough
Default

Run from that idea. NOW.

There's nothing to stop her from pissing it all away on hookers and blow and then turning around and applying to the court for CS based on the children's need. And she will get it because the court gives primary weight to the chidren's best interest.

Instead do the transfer on a/c of property or SS is applicable.
  #4  
Old 02-07-2011, 02:16 PM
shellshocked22 shellshocked22 is offline
Senior Member
 
Join Date: Jan 2011
Posts: 323
shellshocked22 is on a distinguished road
Default

To answer "Keeponsmiling" questions...

-thinking about transferring $250,000 in MY RRSPs to HER rrsp as lump sum in lieu of CHILD support (we have agreed in principle to a separate deal for spousal support so the $250K RRSP transfer has nothing to do with spousal support)

-we had a pre-nup which protected RRSPs in my name so yes, I do have the $250,000 in RRSPs which I could transfer to her.

-my preference is to have a "clean" lump sum settlement for child support. My concern is there could be future problems regarding on how I run my business (ie. conflict over "inputed income", etc.). Plus, this way my wife doesn't have to worry if my business suffers (which normally would lessen her child support).

-however, I just noticed "dadto the end" comments....
Is that correct that if for whatever reason the funds were exhausted I could have to pay more ? That is, it could cost me more than the "table amounts" ?

Again, comments appreciated !
  #5  
Old 02-07-2011, 02:25 PM
KeepSmiling KeepSmiling is offline
Senior Member
 
Join Date: Dec 2009
Location: Dorking
Posts: 347
KeepSmiling is on a distinguished road
Default

OK - then - I totally agree with DTTE!

Not a good idea!

You would be better off trying to set an amount for child support - as opposed to "per guideline".

You could make it close to guideline and just stick with it if you don't want to have to disclose income information or be burdened by her questions about running your business.

But, if she doesn't agree - the default is guideline support adjusted annually to actual income.

So .... you better make that pot sweet if you have other motives that you want satisfied

And - as well, if you don't want to have to exchange financial information then you should set any extraordinary expenses or section 7 expenses (like university tuition, medical, activities, sports, etc etc etc) at a set split - like 70/30 or 60/40 as opposed to "proportionate to income".
  #6  
Old 02-07-2011, 02:33 PM
shellshocked22 shellshocked22 is offline
Senior Member
 
Join Date: Jan 2011
Posts: 323
shellshocked22 is on a distinguished road
Default

HI Guys:

Thanks for advice. So, I guess the concern is that if the money was used up prematurely, the court would likely order me to pay more.

Assuming that happened, would the worse case be that the "new" child support payments would be from the time of the court order onwards (ie. could they impose retroactive child support over and above the proposed lump sum if I paid that ?).

Do the other members concur with this advice ? I was really hoping to go the "lump sum" route for child support !

Thanks
  #7  
Old 02-07-2011, 02:47 PM
KeepSmiling KeepSmiling is offline
Senior Member
 
Join Date: Dec 2009
Location: Dorking
Posts: 347
KeepSmiling is on a distinguished road
Default

I can only tell you what I would do ... woman here ....

Unless this lump sum is A LOT more than what I would be expecting to receive via CS payments ... then I wouldn't touch it with a ten foot pole!

And ... I have an aversion to accepting a pre-tax item when I could get a "tax paid" item.

As well - she would have to report the income on her taxes as she withdraws the money - thus reducing CCTB's, GST credits, etc etc etc. Whereas CS is tax free and doesn't affect other government credits.

What would happen if she re-opened the whole business and went after CS and retro CS? Who knows .... a lawyer may have an argument that she thought it was a gift?

CS is for the benefit of the child, and neither parent is allowed to screw with that.
  #8  
Old 02-07-2011, 05:34 PM
NBDad's Avatar
NBDad NBDad is offline
Senior Member
 
Join Date: Dec 2009
Location: New Brunswick
Posts: 2,734
NBDad is on a distinguished road
Default

If you are going to be paying BOTH CS AND SS....

Create a separate account if you need to and arrange for monthly payments through it. If you are self employed, then as you indicated, it'll be hard to pin down your income, and by agreeing to a set amount each month you'll minimize any issues.

DO NOT DO LUMP SUMS. Period, end of story.

1. Lump Sum CS is a horrible idea, as DTTE pointed out, she can ALWAYS go back after you for more at any point.

2. Lump Sum SS is a bad idea as well, just in case you had that thought in your head.

Reasoning: a SET AMOUNT OF SS paid MONTHLY is a tax write off (as long as CS is also current). A LUMP SUM payment of spousal is NOT.

You are FAR better off withdrawing the RRSP monies, taking the tax hit and having it put into a trust account of some sort for her and allowing a monthly draw against it. Perhaps a lawyer/financial advisor could assist in setting it up so it lessens the tax impact AND protects you both.

As long as things are amicable, you may be able to work WITH your ex and get something setup that minimizes the losses and maximizes the gains for the children.
  #9  
Old 02-07-2011, 08:08 PM
dadtotheend's Avatar
dadtotheend dadtotheend is offline
Senior Member
 
Join Date: Jul 2007
Location: Toronto
Posts: 3,644
dadtotheend will become famous soon enoughdadtotheend will become famous soon enough
Default

You can also manage the withdrawal of the RRSP money each year so as to not take a huge tax hit by withdrawing it all in one year.
Closed Thread


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Children's bennefits Wiser2008 Financial Issues 21 05-03-2019 06:21 AM
The suit against FRO moves forward part1 AtALoss Divorce & Family Law 51 09-30-2013 11:01 AM
press release: Ontario's Family Responsibility office Peggy Parenting Issues 8 10-22-2010 10:20 AM
Child Support / Early Retirement, Lump Sum Payout mgh Financial Issues 10 04-12-2006 10:28 AM
The Concept: Standard of living gooddadgoingmad Divorce & Family Law 7 02-20-2006 10:59 PM


All times are GMT -4. The time now is 07:30 AM.