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December 19, 2016 | Intimacy

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.


If you don’t trust your spouse, stop reading. Ah, did I just detect a slight hesitation? Careful.

Marriages are not just to share joint custody of the dog, buy bulk at Costco or spoon in January. This is serious. It involves money. Successful couples are almost always economic units, sharing assets, debts, budgets plus retirement, investment and tax strategies. It’s always a surprise how many young hooked-up people I talk to whose intimacy stops when it comes to a joint chequing account. He has his money. She has hers. They actually don’t know what assets and liabilities the other one has – and they never asked before getting hitched. Scary.

Now, would you buy a sexy semi without a home inspection? See what I mean?

Fusing with another person brings not only emotional benefits, but financial ones, too. The sooner new couples learn this, the better. Eight of ten divorces happen because of money – since lots of people think finances trump compromise. Maybe so. But you can also get over that by being transparent. And a joint account is a good place to start.

“You had indicated in a recent post about the need for a joint account between spouses,” writes Keith. “I figured the reason would be income splitting but a quick search seemed to dismiss that idea. It would be great if you could elaborate or explain any benefits on having a joint bank account.”

Well, Keith, a joint bank account does have some pluses – like lower bank fees, easier budgeting, accomplishing joint goals and nipping secret spending. But the real benefit probably comes with a joint investment account.

For most couples the best financial structure is a joint non-registered account (also called a ‘cash’ account), plus two individual TFSAs, two separate RRSPs and probably an RESP for the kids. All of these accounts should be managed in a holistic fashion – in other words, constituting a balanced, globally-diversified portfolio when they’re all lumped together. Also, assets should be moved around between spouses for tax efficiency. Put bonds into RRSPs (since they pay interest), with dividend-producing stuff in the non-registered account (to reap the tax benefit) and fast-growers in the TFSAs, for example.

If you and your squeeze maintain separate accounts, you probably have duplication, overlap, inefficiency, lack of balance and – without a doubt – you pay too much tax. No joy there.

There are two big advantages to a joint investment account. First, you pay less tax if the two of you are in differing tax brackets since half the gains made can be attributed to the less-taxed person. Second, if you croak then your spouse gets instant ownership of all assets. No legal costs. No delay. No probate. It’s the responsible thing to do, especially if you have kids.

To achieve this, ensure the joint account you open has “joint rights of survivorship”. If you check out early, your death won’t be a taxable event (which is normal, when all assets are deemed to have been sold and tax is payable on the gains), but everything in the account simply carries on as the property of the surviving spouse.

Of course, income-splitting can be accomplished in other ways, too. For example the higher-income earner can pay family expenses while the less-taxed spouse devotes all of his or her income to investing – with gains taxed at a lower rate. Or the person making more dough can stop contributing to an RRSP and divert the money to a spousal plan. That way the contributions are still deducted from the bigger income, but the money (after three years) becomes the property of the other spouse, cashable at a lower rate. Voila. Less for Justin.

So why would you not have a joint investment account?

Some people think the CRA meanies will squish the tax advantage by insisting the source of the funds be traced back to the contributing spouse, and taxed accordingly. Of course, that’s impractical in any marriage that’s lasted longer than a week.

And then there’s the problem of marrying an evil person, since either spouse can remove money without consent, or give trading instructions to an advisor. A joint account can also be frozen or raided by creditors like the CRA if your hubby turns out to be a criminal, terrorist or Trump supporter. So watch that.

On balance, the benefits of integrating your finances outweigh the risks. Exactly. So, what’s love got to do with it?

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December 19th, 2016

Posted In: The Greater Fool

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