Whether you’ve separated or your partner passed away, raising children as a single parent isn’t always easy. Anthony Okolie speaks with Nicole Ewing, Director, Tax and Estate Planning, TD Wealth, about some of the first steps to consider taking to ensure your finances are in order.
- Raising a family is no easy task. Finding yourself in a position where you're suddenly raising your children as a single parent can be even more challenging. Here's Polly's story.
- I came from India with a master's degree in 1987. But the reality was very different than my dreams. I got a job in the factory. There was no other choice. I have done two jobs, even. So I was working like, seven days a week. But then I was determined, this is not the place where I would stay. I need to go up.
Building a successful business with my husband was very tough. We worked hard together. But in 2005, my husband passed away. All my dreams-- they were shattered. And those were the days I think I had no idea what to do.
- Joining me now to discuss where to start as a newly single parent is Nicole Ewing, director of tax and estate planning with TD Wealth. Nicole, thank you very much for joining us today.
- It's my pleasure.
- So what are the first steps you want to take to ensure that your finances are in order if you find yourself a newly single parent, whether it's planned or not?
- And so certainly, if it has been planned or not will create different options for you, of course, depending on the circumstances of the separation, or perhaps there's been a death. But in any event, we really want to acknowledge that we're in a different situation than we were before and reassess where we stand. So we'll look at all of our assets, our liabilities, our income, the outflows, which ones are discretionary and non-discretionary, and is there anything that we can do to tweak that. But having that overall view is going to be very important.
I suggest working with a financial planner who can sit down and walk through these steps with you and educate you, perhaps, on the things that you're not as comfortable with and let you know what your options are. And then the things you're not comfortable with-- it might be because somebody else was taking care of those. And that's very natural. In any family, there's a bit of a division of labor. And if finances have been largely dealt with by the other individual, we really do need to step up now and start learning about some of those, getting comfortable with some of those issues-- so thinking about your retirement savings, any other type of expenses that you have, taking the car in for an oil change. You're really understanding what your new obligations are and how you're going to be dealing with that as a single person.
- Because these are things that you weren't thinking about as a couple?
- Exactly. So other people would be dealing with that. And you've dealt with this. And now, really, you have to look at the full picture.
- The full picture. What kind of financial support can you seek out as a single parent in Canada because, as you mentioned, the challenges of taking on this cost burden to yourself is quite a burden?
- It can be significant. And I would suggest, of course, we want to ensure that any child support is being addressed. Then there are government benefits that might be available. So at a federal level, we have the Canada Child Benefit that allows for there to be a payment to individuals. Depends on your family circumstances and depends on your income about how much you might be receiving. But that is something to definitely look into. And then the Workers Benefit, the Canada Workers Benefit, might also be an option that you can think of if, as a lower income individual, that might be a support that's available.
But there's other things that we want to think about as well. Perhaps there might be provincial benefits that you could be looking into and receiving. We think about for children's education, looking into RESP grants. There's a lot of different government programs that we should really try to reach out. There's excellent information on the Canada government website about that. And again, a financial planner would be able to help you navigate some of that as well.
- Because it's hard to find this as a single person, certainly, having a financial planner to support you in that is definitely a benefit.
- Well, they will know your circumstances. You can ask the questions. And they've worked with other people who are likely in the same circumstances. So they'll also know what you don't know and can anticipate some of those questions and share that information.
- And they understand the scenarios and the things that you're going through. In the event that your partner passes away in particular, leaving you a single parent, what are some of the moves you might want to consider making, because everything is coming at you at once? So it's hard to keep track of everything and manage all of it.
- Different people react to grief differently. And for some people, they are charging ahead and making very-- that's the way that they're going to deal with it, is by going straight in. Other people-- that's just not an option.
So we need to be honest about our ability to manage our financial affairs while going through that grieving process. Again, working with professionals is going to be very important because they can give you that advice. But on a immediate basis, when it comes to finances, things we want to think about are any employer benefits that might be available, survivor benefits from the government of Canada for CPP. So again, there's some options to be thinking about.
But if there has been a death of your partner, or even your child's co-parent, we need to then think about what position are you going to be in if something happens to you. So we need to update our estate documents. We need to have our powers of attorney documents updated, our wills, making sure that we have established any trusts for any minor children and, really, guardianship for the children being addressed. So I would suggest that we need to do that, that full review, and ensure that your estate documents are up to date while your new financial plan is being developed.
- And again, that's going to give you a full overview of all of your financial situation?
- Now, when it comes to taxes, what are you able to claim as a single parent? So for example, can you claim your child or children as dependents?
- Well, so it depends. It really depends, again, on what your separation agreement might say. Oftentimes, these issues are addressed there about who will be able to claim certain benefits. If the separation agreement says anything other than if you're between 40% and 60% having shared custody or co-parenting, then the Canada Child Benefit, for example, you can apply for it and each receive 50/50. No other calculation is going to be used. They are not interested--
- They're pretty strict about that.
- It's 50/50 or-- and we then have to think about if you have anything less than 40% of primary custody, then you would not be able to access that. So it will very much depend on the types of arrangements that you have in place and then what the government rules are for accessing certain things. But child support is generally not going to be taxable. It's not going to be deductible on your taxes. So that's off the table.
- So again, there's a lot to consider, a lot to manage for one person. Where should people go to get help to manage all of this?
- And it's so important to get that help, to reach out to others who have the expertise or the experience. So working with your financial advisor, who can help you navigate some of these questions, who can help you develop that new financial plan, that holistic financial plan, help you identify issues that-- new gaps that you may have in your planning that you didn't have before, and bringing all of the experts that you're working with to the table together-- so if you have your lawyer, perhaps you have an accountant, they should all be working with your financial advisor, as well, so that as a team, they can help develop a plan for you as you move forward in this new reality.
- Nicole, great information, as always. Thank you very much for joining us today.
- My pleasure.