By Gigi Suhanic
National Post
FP Money
Saturday, May 10, 2003
Question: I am unemployed and have an outstanding
tax bill. If my wife claims me on her tax
return does she become liable for my debt?
Answer: Responsibility for personal taxes
isn't transferable to another individual, says
Sam Papadopoulos, a spokesman for the Canada
Customs and Revenue Agency (CCRA). Regardless
of whether your wife claimed you as a dependent
on her tax return, she wouldn't take on your
tax debt, Mr. Papadopoulos says.
But your wife may still feel the effects of
your tax debt.
Adrian
Mastracci, president of Vancouver based ‘fee-only’ KCM
Wealth Management, says, “If only one
member of the couple is actually borrowing
the money then the spouse shouldn't sign
on the dotted line for the money.”
According to Mr. Papadopoulos, if the debt
remains unpaid, CCRA can go after, for example,
a joint bank account to get what it's owed.
The taxman can go after half the account because
the contents are considered owned 50-50.
A spouse could also be on the hook for unpaid
taxes if the CCRA uncovers fraud or efforts
to intentionally hide assets by shifting them
to the other person. "Ultimately," says
Adrian Mastracci of KCM
Wealth Management in
Vancouver, "if you have an interest in
something they can put a lien on it and prevent
you from dealing with that asset until you
deal with them."
Where marital finances in general are concerned,
David Ingram wishes more couples would arrange
their affairs to be as separate as possible.
A shared credit card, for example, can really
trip up couples in the debt department.
"One spouse gets a Visa card and a card
for the other spouse. The person using the
second card could become responsible for that
person's debt," he says.
"If I charge just $15 on the second copy
of that Visa card I have made myself liable
for an outstanding balance."
Another arrangement many couples have that
Mr. Ingram labels "dumb" is to register
a car in both names because it makes both people
financially vulnerable should an accident occur.
An area where Mr. Mastracci advises couples
to act more scrupulously is where loans are
concerned. If only one member of the couple
is actually borrowing the money then the spouse
shouldn't sign on the dotted line for the money.
"Second thing, don't give a guarantee," he
says. Or at the very most, try to limit the
amount guaranteed.
Of course most couples largest asset -- their
house -- is usually owned in joint tenancy
or tenants in common.
Because of this there will always be the possibility
someone can put a lien on the marital home
if one of the owners is being sued for debt
repayment.
To mitigate this, Mr. Mastracci says couples
should strive to keep other investments distinct.
"If you can keep your finances separate
you are not responsible for your husband or
wife's debt," Mr. Ingram says.
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