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Date: 1/2/2009 9:15:48 AM
Author: Billiam Country Flag
Subject: 3296/9305 - Who's name to use...?
 
 
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DS on 1/2/2009 5:07:12 AM

I'm new to DRiPing, Stocks,...self investing.
Like Spousal RRSP's, I'm thinking it only makes sense to do all of my/our DRiPing in my wife's name, as well as setting up the Discount Brokerage account in her name as well?
My income is 3x my wife's and I will have a pension after 30yrs. She will have a tiny, if any pension, as she will retire when I do.

So as I ask ?'d in the beginning, should we do all of our DRiPing and Investing in my wife's name as her income is substantially less than mine? Tax's now and Retirement?

Thanks, Dave.

nic1 on 1/2/2009 6:17:17 AM

It would make sense at this point to have your wife collect revenues if her tax rate is lower than yours. But keep in mind that for retirement, it is now possible to split income.

My 2 cents

Garnet on 1/2/2009 7:53:47 AM

Our outside RRSP investments are Garnet JTWRS Queen Bee (Joint transfer with right of survival) this way it's in both are names and if one passes the other is not broke.

Everything we have is the same way, early in my investing career I ran into a person who had everything in one spouse name and the bad happened in this case the wife was broke until bank account's and investments could be changed. She couldn't even borrow money for funeral expenses. Basically it was a mess.

I just took my 32 and out and understand that both retiring at the same time would be tough and that's what I read over and over.

CIBC Mellon has the same requirement JTWRS and I'm not sure were DRiP's are going to fit in I just know that I have 2 single shares on the way in each name. If they go in TFSA I use both, if we DRiP outside RRSP in will be joint.

Another thing Queen BEE gives me that blank stare when I talk about investments but I still try.

Garnet


nic1 on 1/2/2009 7:58:37 AM

Queen Bee?

Billiam on 1/2/2009 8:15:48 AM

If your looking to have your wife registered as the sole owner of the accounts as long as she is the contributor to the funds for investment there should be no issue. This is actually a strategy widely used for effective income splitting.

However, if you plan to fund the contributions on her behalf for accounts in here name soley then the attribution rules under the income tax act will apply so best to be aware of their implications.


OperaBob on 1/2/2009 8:43:19 AM

I'm with Billiam on this one.

Put them in JT TEN but make sure you can justify that it was your wife's income you invested. Then she can claim 100%.

OB

DS on 3/11/2009 4:35:05 PM

As for justifying that it is my wife's income being invested.....isn't half of our combined income justifiably hers to invest with?

So far, the share's/DRiP's are registered in her name with myself as "JT TEN". She will be the one to claim the dividends on her tax return?

If we/she were to do a HELOC to invest with, can she do this in her name, again, as she is @ 1/2 of my income, and it would be better to be done through her tax's?

If I'm way off,please explain.

Thanks, Dave.

Billiam on 3/12/2009 5:58:08 AM

"isn't half of our combined income justifiably hers to invest with?"

If only life was that simple, short answer no. Read this link for income tax position:

http://www.cra-arc.gc.ca/E/pub/tp/it511r/it511r-e.html

"So far, the share's/DRiP's are registered in her name with myself as "JT TEN". She will be the one to claim the dividends on her tax return?"

Same as above, funds gifted or loaned to a spouse are subject to attribution meaning they are your dividends to report, excepting secondary income stream (dividends from dividends).

Also there is a legal question as to whether a joint tenancy even exists given the requirements (four unities) in order for a joint tenancy to exist, at best you have tenants in common if the courts were asked to rule on its form, see this link:

http://www.duhaime.org/LegalDictionary/J/JointTenancy.aspx

I suspect that others reading this last point will be equally surprised but this is the reality of these terms and concepts.

Hope this helps.






DS on 3/12/2009 9:17:20 AM

Holly !@#?

I'll work with short answer, "NO"

So who claims the dividends on their tax return?

Dave.

Steamer on 3/12/2009 10:02:11 AM

"So who claims the dividends on their tax return?"

In a nutshell it is whoever earned the money contributed to earn the dividends.

My wife and I opened one joint account specifically for DRIP investing. We contribute equally and plan to each claim half of the dividends. I will be keeping all of the bank statements showing the movement of money from our individual accounts to the joint account in case CRA wants proof.


DS on 3/12/2009 10:10:51 AM

Ok....
Do you think it is acceptable for me to pay for all living expenses and she invests all of her income? Hypothetically!

Dave.

Billiam on 3/12/2009 6:47:32 PM

"Do you think it is acceptable for me to pay for all living expenses and she invests all of her income? Hypothetically!"

Yes, absolutely... in fact this is one of the often recommended approaches for couples in your situation.

other possible options you may want to consider for income splitting are:

contributing cash to wife's TFSA (attribution rules are specifically excluded for this),
contributing to a spousal RRSP, and
loans for value (see Get_Rich_DRiP's post from earlier today).

DS on 3/13/2009 4:51:29 AM

Well alrighty then, I pay for everything, leaving her to invest an amount equal to her annual income.

I'm happy with this. Now let's explore this a bit further.

Let's go to the HELOC mortgage then. Home is paid for. Lets modify things a bit then. Been married for 12 years. She invests an amount equal to her annual income, minus the amount required to service the interest on the HELOC. Income from investments pays down the principle on the HELOC. (Smith Manoeuver).
This is just exploratory conversation. Yes I realize it is getting aggressive, we still have 10-15 yrs. before retirement. And, yes, I'd keep enough of my income annually to cover the HELOC for a worst case scenario. Just thinking out loud, for maybe once the economy has changed course in a year or two.

Ok, let er rip.....

Billiam on 3/13/2009 5:21:20 PM

This isn't really a Smith Manoeuver because your not replacing bad debt (non-deductible mortgage) with good debt (tax deductible investment loan) but rather just taking out an investment loan secured by your principal residence which is currently debt free. Kind of a big jump in your income splitting line of questioning, if you don't mind me asking what is your end objective by potentially leveraging your home?

DS on 3/15/2009 7:34:25 AM

Quote: “if you don't mind me asking, what is your end objective, by potentially leveraging your home?”

Starting with a small amount, takes quiet some time for the compounding effect to gain momentum. By leveraging, a greater bulk of capital/equity, one is cutting down on the time require for compounding to do its thing.

Another one of my questions is whether the lower income spouse is allowed to do a leverage against the paid for home, entirely in her name, in the eyes of CRA. Again, with the idea that the lower income spouse has as much as possible in the lower income spouse’s name, thereby paying less tax’s.

I’m trying to think out-loud. If the higher income spouse is able to provide the safety net/cover the servicing costs in a worst case scenario, am I missing anything obvious?

I still have 1-2 years of contemplating the idea, waiting for the economy to heal.

Thanks for your time and input,
Dave.

drppingsoprano on 3/15/2009 10:51:34 AM

Interest for investment purposes is tax deductible, which will be lost if the lower income spouse doesn't pay any taxes. You'd have to calculate whether that will offset the benefit of having the investment income taxed in his/her name.

Steamer on 3/15/2009 10:54:02 AM

"Another one of my questions is whether the lower income spouse is allowed to do a leverage against the paid for home, entirely in her name, in the eyes of CRA. Again, with the idea that the lower income spouse has as much as possible in the lower income spouse’s name, thereby paying less tax’s."

No guarantees, but if your wife takes out a loan to make qualifying investments and you can demonstrate that she is the one who makes all of the payments, you should be OK with the CRA.

I wonder though, if a financial institution would allow her to take out a loan against a house that is jointly owned.

DS on 3/16/2009 7:43:30 AM

I guess that would be part "b" of my last question...does anyone know if a bank will allow a HELOC in only one spouses name?
Also does anyone see a issue: I originally bought the house @ 1yr. before getting married, 10+ yrs ago. The mortgage has never had her name on it. I am with the understanding that after a short period, it doesn't matter, legally is is entitled to half. So in going to the bank, the lower income spouse's name isn't actually on the title/deed to the paid for home. Does the title/deed need to be changed to include both name's before the bank may consider a HELOC in one person's name?

Dave.

gator on 3/16/2009 8:51:07 AM

I recently took out a HELOC on my(our) house and both my wife and I had to sign the agreement, since the mortgage is in both of our names (Scotiabank).

Only the bank can tall you for sure but,I don't see how they could allow your wife to borrow against an asset she does not own. The title is in your name, so legally it is your house. The issue of joint ownership(or the size of her share) would probably only arise in the event of a marriage breakdown.

Hope this helps

Gator

Derrico on 2/3/2014 10:58:08 AM

I know this is an old thread but I'm new to this style of investing and have a question for the more experienced. The share certificates are in my wifes name as in theory I'm paying for living expenses and she's investing the money but will be taxed at a lower rate. If God forbid (knock on wood) she unexpectedly dies, the shares would just transfer over to me, being the husband, correct?

Wayneman on 2/3/2014 12:29:46 PM

If God forbid (knock on wood) she unexpectedly dies, the shares would just transfer over to me, being the husband, correct?

No.

The DRIP will end and they will issue a certificate, in the name of the person or in the name of the estate, and a cheque for fractions, to the executor.

Derrico on 2/3/2014 12:39:50 PM

Whoa. Thanks for the response. We don't even have a will set up yet, so I had better look into that.
 
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