Canadian Divorce & United States Assets

Michael Kennedy featured in Shoreline Week
April 27, 2017
Show all

Canadian Divorce & United States Assets

Canadian Divorce & United States Assets

“Divorce, also known as dissolution of marriage, is the termination of a marriage, the canceling and/or reorganizing of the legal duties and responsibilities of marriage, thus dissolving the bonds of matrimony between a married couple under the rule of law of the particular country and/or state. Divorce laws vary considerably around the world, but in most countries, like Canada, divorce requires the sanction of a court in a legal process, which may involve issues of alimony (spousal support), child custody, parenting time, child support, distribution of property, and division of debt.”    

Divorce is a complex legal beast and there are a number of ways it can wreak havoc on a couple or family.  A cross border divorce only adds to the havoc.  Even when you think you have it handled, you hire a Canadian family lawyer to represent you and your interests in the divorce proceeding in Ontario.  You get everything you want, including all of his IRA and 401k plan in the United States.  All you had to give up was your family’s cottage in Michigan.  But overall, you’re happy, as the separation agreement is signed and in a few months the divorce will be final.  

But is that it?  Not if all you did was sign the separation agreement.  Sure, the separation agreement states that you get the IRA and 401k and he gets the Michigan property, but all that does is state a fact that you each are entitled to those assets between each other.  What about with respect to the public, the plan administration, the property tax collector in Michigan, the IRS or the financial institution holding the IRA?  You did everything you could from a Canadian perspective, but these are US assets.  You need or better yet your Canadian divorce lawyer needs to get a US lawyer involved, the sooner the better.    

  • Can you rollover the IRA?  Do you have to cash it out?  Who pays the taxes?  Were those considered in negotiation?  What you don’t know can hurt you.    
  • How does one go about transferring US real property?  Is there land transfer tax to pay?  What about income tax on the transfer, the property has appreciated over the years?  Was this considered in the negotiation?  If not done properly, you might be on the hook for a large tax bill.     
  • How do you access your newly owned 401k?  How do you get information on the account?  Why do the statements still show your spouse as the account owner.  How is that possible?  The separation agreement states he is to transfer it to you.  401k plans, among other U.S. retirement plans are heavily regulated by a U.S. law known as ERISA.  There are strict requirements that need to be met in order to transfer an interest in a 401k account.  If those are not met, and your spouse or you die, you may lose out.       

These are just some of the reasons why it is prudent to get a US lawyer with experience in cross border divorce and asset transfers involved as soon as possible before any separation agreement is signed.  

Even once these issues are considered and handled, you need to understand the cross border estate issues.  You now have assets in the US that you didn’t have before.  You must ensure you have the right estate documentation in place.  Should you have a U.S. power of attorney?  A U.S. will?  Maybe a trust?  All important questions to discuss with an experience cross border US estate planning attorney.  

We work with Canadian divorce & estate lawyers to effect the transfer of assets located in the United States incident to a Canadian divorce proceeding and ensure a proper cross border estate plan is in place.  Schedule a Consultation today or contact us at 519-252-3888 or by email at info@ingenuitycounsel.com.   

 

ABOUT INGENUITY COUNSEL

Ingenuity Counsel is a boutique cross border firm located in Canada providing United States tax and estate planning, probate administration, corporate, immigration and real estate legal services to Canadians, including in cross border divorce situations.    

Ingenuity Counsel is led by Michael Kennedy, an attorney licensed by the States of California and Michigan, with more than 15 years tax & legal experience.  Michael is permitted by the Law Society of Upper Canada to provide U.S. legal services in Ontario as a Foreign Legal Consultant and therefore provides legal advice only as it pertains to the United States of America.  Michael is also admitted to practice before the United States Tax Court.

 

Copyright © 2017 Ingenuity Counsel Inc., All rights reserved.  

 

Leave a Reply

Your email address will not be published. Required fields are marked *