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

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  #1  
Old 02-13-2009, 03:25 PM
ElaineF ElaineF is offline
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Default Private Corporate Asset protection

Dear members,

I recently discovered my Husband has been having an affair (he doesn't know I know yet), and have decided to pursue a divorce.

Fortunately, the children have left home and are independent.

Advice please...

I have an active private Canadian company with considerable assets. Although able, my Husband chooses not to work and we live a comfortable life off my companies income. The company shares are all held by me, but I do pay him a small salary for minor services.

1) Is spousal support based on the salary that my company pays me, or my salary plus annual profits retained / left in the company I control?

2) Given that I can 'put my affairs' in order before I pursue a divorce, what advice would you give me?
- What legal actions can I take to minimize the amount of assets he gets in a separation agreement?
- What legal actions can I take to minimize any spousal support I pay him?

3) How is spousal support calculated?
- He could work but chooses not to!
- Unless I find a way to avoid it, he will get a very large sum of money in asset division / equalization, can he still claim spousal support even after getting this amount?

Regards,

Elaine
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Old 02-13-2009, 05:34 PM
AtALoss AtALoss is offline
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Normally it would be based on your salary. You mention the company, Is it Incorporated? While it is an asset, if it is, it is considered to be an independant entity. Thusly stronger for basing spousal calculation on your salary alone. As you mentioned there are considerable assets and that will be the lump sum. 50/50 is standard. dont get caught in the trap of hiding/ getting rid of as it would only get you into trouble in the end. I would think that he has knowledge of alot of stuff. so best not to.

While he has chosen not to work that fact alone will be considered along with the length of time married. As you see there are many factors that come into play. As things crop up ask away here as there are alot who can help.
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Old 02-13-2009, 06:43 PM
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Hi Elaine,
There is a site at Family Law Toronto :: Family Law - Spousal Support :: www.familylawtoronto.com which should answer your questions about SS. However these are only guidelines and I have never heard of a case where the amount paid is as high as the guidelines suggest.

As for the company assets, I don't know the laws on that and I think you should take advantage of the 1/2 hour free consult with a Lawyer (many offer) to be sure.

Also be aware that he will be able to get 1/2 of all financial assets like RRSPs and CPP. They take your combined CPP accounts, and split it down the middle for the years you were together from wedding day to separation day.

Just a word of advice. Since he has not been outed yet, he may very suddenly clean out bank accounts and/or charge up credit cards for extra cash. So before you are ready to confront, talk to your bank about lowering the limit on your CC to the present balance and give them a notice that you will not be responsible for further charges. Open separate accounts and CC in your name only. Take exactly 1/2 out of your savings/chequing accounts. You get the idea. Don't count on him being fair once confronted. Have you got an accountant who can advise you? If so do it before confrontation.

Above all, before you confront him, make copies of every financial paper in your files, especially income tax statements, pay stubs, properties, vehicles, retirement savings, health plans, whatever.

Aside from the finances, as far as the affair itself..... For your own purposes be sure you have more than one source of proof so that if he denies you can reply.Cell records are usually a good source and print out emails. Never reveal your sources and trust your gut feelings. And most of all, take care of your health as you have a very stressful time ahead. Just know that you WILL survive this.
  #4  
Old 02-13-2009, 10:33 PM
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Quote:
Originally Posted by ElaineF View Post
1) Is spousal support based on the salary that my company pays me, or my salary plus annual profits retained / left in the company I control?

2) Given that I can 'put my affairs' in order before I pursue a divorce, what advice would you give me?
- What legal actions can I take to minimize the amount of assets he gets in a separation agreement?
- What legal actions can I take to minimize any spousal support I pay him?

3) How is spousal support calculated?
- He could work but chooses not to!
- Unless I find a way to avoid it, he will get a very large sum of money in asset division / equalization, can he still claim spousal support even after getting this amount?
1)Support will be based on the annual income you show on your personal tax return, not profits of the business.

2)Call the Law Society of Upper Canada and get the free half hour consultation. The retained earnings of the corporation will affect property division.

3)Search "spousal support advisory guidelines" and you will find the formulae. Just be aware that SS is more art than science, so the formulae will not necessarily yield the result that a judge might order.
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Old 02-16-2009, 01:02 PM
ElaineF ElaineF is offline
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Thank you very much for your helpful responses. I will follow the advise! I will only do things that legal, and have no intent to hide things. As a director, my husband is aware of my companies assets, profits, salaries, etc.

I am travelling a lot in the next few few weeks (I am sure that contributed to the staus quo!), but have booked an appointment to see a lawyer recomended by a friend at the end of March.

Meanwhle, rather than pay all of the money out, I leave profits in my Federally incorporated company to qualify for the lower 'small business tax' rates. Can't my husband claim that I could pay all of this money out of the corporation, and therefore my salary should actually be much higher than it currently is?

I seem to remember a friend a few years ago telling me that she got child support based on her husband's TOTAL income, which included not only his salary but the profit retained by a privately held company that he controlled.

As I control my own privately held company, can't my husband claim that any profits I leave in the company is really income?

I am fortunate to have a good group of female friends who I know will support me through the stressful time to come - although some of them are couples what my husband and I know, so I am sure there will be some 'falling away' of certain friends! Having helped a friend go through a similar event 2 years ago, I am under know illusiions of the difficulties ahead. I hope to keep things amicable, but am not afraid to fight for what is mine!

Again, thank you for the advice.

Elaine
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Old 02-16-2009, 10:10 PM
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Your total income on your personal tax return will form the basis for the SS, which includes the amount you have taken as salary from your corporation.

Profits left in the business are manifested as assets on your corporate balance sheet, probably cash or investments. They will affect the value of the shares, which in turn will affect the equalization payment. So they aren't ignored just dealt with in a different way.

Beware that all it takes for this to get ugly is a vindictive husband and/or a greedy lawyer. Be prepared for outrageous claims to be made as to the value of the goodwill in your business in which husband should be participating.

This will make it incumbent on you to make a reasonable offer of SS and equalization, and it will underscore the necessity to provide full and frank disclosure so that there can be no question as to your credibility.

Leave the infidelity completely out of it. It's irrelevant. Moreover, you don't want to be perceived as the bitter, vindictive spouse.

Last edited by dadtotheend; 02-16-2009 at 10:16 PM.
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Old 02-17-2009, 04:25 PM
ElaineF ElaineF is offline
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Again, many thanks for sharing your (I assume often hard earned!) experience and knowledge.

I assume the equalization payment is a one time payment, but SS continues indefinitely - we have been married 25 years!

If I was in my husbands shoes, I would try and claim that profits remaining in the corporation should be treated like income to me - the sole owner of my 10 year old active (federally incorporated) company! Of course, I am quite pleased that he cannot claim SS based on these retained profits, but it doesn't seem fair!

My income from the company has remained pretty stable for the last 2 years (gone down slightly due to a bad year last year), and I will probably want to increase my salary so that I can pay him his SS and my remaining salary. Having said that, it would probably be simpler to pay his SS as a salary from my corporation - If he agrees, I assume this is legal?

Personally speaking I would like a clean break, namely give him a larger equalization payment and no SS. Is there any precedence for this, and can he change his mind and come back and ask for SS later - he has never been too smart with money management / planning!

I know it is going to be hard to see past the betrayal but I want to try and be fair and not forget 24 of our 25 years together!

Regards,

Elaine
  #8  
Old 02-18-2009, 05:41 AM
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Quote:
Originally Posted by ElaineF View Post
Personally speaking I would like a clean break, namely give him a larger equalization payment and no SS. Is there any precedence for this, and can he change his mind and come back and ask for SS later - he has never been too smart with money management / planning!
It is possible to make an agreement for a lump sum payment as an alternative to continued SS. He would have to be in agreement and the agreement must clearly show that he is forfeiting any future claim to SS. It is my understanding that once he has agreed and the agreement is made into a final order he has no recourse to then seek SS in the future. However, the agreement MUST be fair, so that it could not be misinterpreted later as unjust/unfair, if it isn’t there may be a loop hole for him to seek to have the agreement cancelled. If you failed to provide info, or do not provide full financial disclosure these could be grounds to nullify the agreement later.

So it is to your benefit to be open and forthcoming with info to maintain credibility through the whole process to cover your preverbal butt and close all doors for future claims.
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Old 02-21-2009, 05:35 PM
ElaineF ElaineF is offline
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OK... I couldn't wait, and went to see a family lawyer yesterday. He seemed to contradict the advice below.

He said my husband could claim that as I have control over my private company, and the retained profits are not required for the success of my business, they should be treated as income and 'imputed' to me for the purpose of Spousal Support calculations!

This was what I would have expected as otherwise people would be able to protect income by setting up federal companies and leaving profits in them.

He also gave similar advice about NOT TRYING anything to hide assets or obstruct the spousal support calculation process! On the plus side he said that Spousal Support is often down to 'perceived fairness' and negotiations. He did warn me that if my husband gets an agressive lawyer to represent them, they may try tricks such as over inflation of corporate value.

It still seems unfair that my husband will walk away with 1.5 million in corporate assets AND almost 50 percent of my companies profit and my salary for the rest of his life - I am pretty sure his new found love will be happy (sorry for sounding bitter ). My lawyer did say at least I can choose the date of separation (unless my husband makes a decision first) which may be an advantage given the stock investments inside my company.

Elaine
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