Some of the issues and answers are not affected by
whether they are a spousal couple.
We deal with them
This question involves income splitting between unrelated
persons, income splitting between parents and children,
tax deferral and at least two non-tax issues.
the biggest question is whether Anita and Elizabeth
expect to live together for the rest of their lives.
they don't, then income splitting to reduce taxes
involves Elizabeth giving up money she won't recover.
On the other hand, Anita is providing a valuable service
by working in the home, but she isn't being paid for it.
In fact, her wealth is declining (she has less now than
Elizabeth's wealth is increasing.
If the instructor
places the students in the role of adviser to these
women, the issue of how to approach this question can
lead to an interesting discussion.
Assuming that they
plan to stay together, or at least to minimize taxes by
joint planning, there are the following issues: income
splitting; children’s education; tax deferral; and, tax
Furthermore, the answers are sometimes
different, depending on whether they are a spousal
couple or not.
First, I provide the answers that are
the same for either spousal or non-spousal couple.
If they want to put money aside
now for future post-secondary education, there are two
possible ways to do so with tax-minimization aspects.
One is an RESP.
This will defer tax on the income,
though no deduction is allowed for the principal.
addition, they will receive the CESG.
The income is
ultimately taxed in the child's hands; so this method
defers and splits income.
However, if the child doesn't
go to post-secondary education, the income may be lost
(depends on the plan), with only the principal being
If they plan to stay together indefinitely
(spousal or not), then they might want to designate each
other’s child as the alternative beneficiary.
deferral and splitting mechanism is to give money to the
children now, and have it invested (in trust) in growth