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My spouse (soon to be ex) is incorporated. I am a shareholder of that corporation. Much of the marital assets that we have are inside an investment portfolio/brokerage account in the name of my spouse’s corporation. My spouse and I have agreed (per law) that half of the investment portfolio is mine when we divorce. Cashing out half the investments to satisfy is going to be a big hit tax-wise. So I thought some of you here may have some ideas on the following.

My spouse will be the recipient of a sizeable personal injury case payout (cash) in mid-2021. That payout will be tax-free to my spouse. My understanding is that no "gift tax" in Canada and that any resident of Canada who receives a gift of any amount from almost any source (except from an employer) will not have to include this in their income. So what my spouse and I are considering is that instead of cashing out half the corporate investment account to settle matters with me that I will receive a gift in 2021 that will settle matters.

Do you see any problems with this idea - accounting/tax-wise or anything else I am missing?

Also, any ideas how to “secure” the amount I am owed/will get in 2021. Our one year separation will be up in early 2021, after which I guess either my spouse or I could apply for divorce (we are in Ontario). “Secure” both in terms of preventing my spouse from reneging on what we agreed and (to a lesser extent) secure upon my spouse’s death.

Thanks!
 

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is The investment portfolio mostly non-reg? Are the investments in a gain position? Assets can be transferred without being sold. This may help mitigate taxes depending on the account type.

in terms of the settlement.......could you not just draw up separation papers outlying how much you are owed...and then wait to finalize the divorce once the settlement is paid.
On the other hand, take advice from your from lawyer above all else.
 

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As Money suggests, an in specie division should be possible without triggering any tax consequences. The device of a "spousal rollover" might be available. Any lawyer doing family law will probably be able to give some advice specific to your situation. Ditto for a tax accountant or lawyer.

As for security, if in the end you decide to receive a "gift" of the pi settlement, you could ask spouse to execute an irrevocable direction to pay, instructing her solicitors to pay you out of the settlement funds and to accept that direction as a first charge after payment of legal fees (I say that because I know they will not get paid before settlement/payment of judgment and there is no way they will agree to subordinate their claim to yours.) My guess is they are in line for a contingency fee of about 33.3%.

As an aside, I find it interesting that you seem to know with some precision just when spouse will receive the PI payout. Is it a payment under a structured settlement? Otherwise, these things are hard to predict. Even if the matter is set for trial in mid-2021, trials can always be adjourned, like it or not, and judgment does not always quickly follow trial. And that's assuming that liability is not in issue, only quantum of damages, and assuming that the plaintiff and the defence recognize entitlement to a large award and the only bone of contention is how large.
 
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