Tuesday, November 2, 2010

TFSAs are another Tool for Balancing Assets between Spouses

The tax advantages of balancing assets between spouses aren’t as great as they used to be, but there is still some advantage to shifting assets (legally) from one spouse to another. For example, a couple can reduce their income taxes if taxable dividends are attributed to the lower income spouse.

To this end, my wife and I have been trying to increase her financial assets at the expense of mine. The main tool for doing this has been for all family expenses to be paid out of my income. She saves all money that comes into her hands.

Under the TFSA rules, one spouse can contribute to the other’s TFSA without the resulting income being attributed back to the contributor. This is explained clearly a few paragraphs into this CRA page on TFSAs.

So, I can fill up my wife’s TFSA from my non-registered account and she can leave her money in her non-registered account. This reduces the amount of taxable passive income I receive and increases hers.

Fortunately, new rules on income splitting with pension income and RRIFs make asset balancing between spouses less important, but there is still an advantage to balancing non-registered assets.


  1. I believe not many people will rush to comment on this one but some will think the same way, a sad thought: divorce. Yes, I know that the law will divide anything equally but there is a tiny difference. When it's in your RRSP, TSFA etc. the ex-spouse will have to fight a little bit to have it split. When it's in their RRSP, TSFA, they don't have to do anything. The effort, the thoughts of a delayed divorce etc. might have one or the other decide to give up. I am honestly sad I have to mention this. I was lucky and my ex, decently proposed, since I was the one contributing to her spousal RRSP, to deduct it from the home equity but truly it was her legal right to keep that one.

  2. @Andi: The state of a relationship definitely makes a difference on this one. In my case, my wife and I started together with nothing and had children. It's obvious that some assets should go with the kids and the rest be split. More importantly, though, I just don't expect to split up. But, I guess many people think this before the worst happens.