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Canadian Divorce Glossary
If you're considering ending your marriage, learning to speak the "language" of divorce in Canada is an important first step. Below you will find a brief glossary of terms related to the separation process. These definitions are overviews, provided to help you begin to understand what is involved in ending a marriage.
Income Tax - Income tax must be considered when resolving the financial issues arising upon separation. Child support payments are not taxed, nor are they tax deductible. Spousal support payments are taxed in the hands of the recipient and tax deductible by the payor. Matrimonial homes can generally be transferred without tax consequences. So can RRSPs, provided certain formalities are followed. However, the tax consequences of transferring other property must be carefully considered, especially for unrealized capital gains as well as attribution of income from the property. Finally, in certain cases, part of your legal fees for your divorce may be tax deductible.
Indemnity Clause - An indemnity clause provides for someone to be reimbursed if they have suffered because of someone else's act or failure to act. So, for instance, normally a separation agreement will state that your spouse indemnifies you against certain loans your spouse has. If for some reason you end up being required to pay these loans, the indemnity gives you the right to be reimbursed by your ex.
Indexing - Normally spousal support payments of indefinite length are indexed for inflation – to the consumer price index in your city or province. Child support is normally not indexed, but rather adjusted annually based on changes in the parents’ incomes.