It’s time again to dip into the mail bag and answer some long awaited reader questions. If you have a personal finance question, feel free to contact me and I’ll do the best that I can to find an answer.

This weeks question comes from “P”, who is newly married and is wondering how to structure the finances between the newly formed partnership. Here was the question:

Can you post about advice you would give to someone who is newly married (or about to be) about joining assest and savings? whether to keep separate accounts or joint accounts, etc.

I’ve done some research into this topic before I got married in 2005 and it seems as though keeping your finances separate may be the best bet for taxation and tracking purposes.

The strategy is for the higher income earner to pay for all the expenses, while the lower income earner does the investing. The reason being is that investment gains are taxed in the hands of the person that funded the account.  Thus, it would be best to attribute this money back to the spouse in the lower tax bracket for tax optimization.

When tax season comes along, CRA will expect there to be a paper trail for where the investment money originated from. This is where having separate accounts can be helpful, especially if you are audited. :)

Anyone have anything to add?

Note that I’m not a financial planner or tax expert so please do you own due diligence. My advice above is based on my own experience.

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Hi MDJ, there’s a great little personal tax book from KPMG called “Tax Planning For You and Your Family” that I have that I blogged about.

In the most recent edition, they also recommend what you’ve indicated. There are quite a few other useful things you can get out of that book, particularly if your marginal tax rate is significantly different from your spouse’s.

One thing that you can do is pay your spouse’s income taxes at tax time if you’re the higher marginal tax rate income earner. If your spouse can have their employer defer all taxes, then your spouse is receiving their full gross pay.

At income tax time, the higher income earner uses their saved money to pay their spouse’s income taxes. This is not considered attribution because the higher income earner is paying the income taxes by writing a cheque to the government directly. This frees up more of the lower income earner’s money for investing, and therefore a lower tax rate on interest, dividends, and capital gains is applied.

FT: if we have a joint bank account but different trading accounts, is there no way for my spouse to do all the investing even if we don’t have the different bank accounts paper trail?

Speaking of Mishmashed… Ever wonder why our politicians take surplus reviews generated through taxation and throw it into general revenues? It makes it easier to hide it from the Governor General auditing…

Sorry, I meant surplus revenues not… surplus reviews.

I have a joint account with my wife just so we can consolidate our incomes and expenses. However, we do have separate trading accounts with similar balances. As for tax saving, I allocate tax-heavy investments under her name. These include income trusts and high interest savings.

I handle things similar to FJ. One joint account the everything goes into and then from there it is moved around to the separate investment accounts.

FT: probably the “safest approach indeed”

FJ and CD: I am glad to hear that.. will be less trouble. I guess if I don’t invest more than my spouse’s net income in her investment account, CRA can’t really say anything. I’ll probably ask an accountant to be sure.

My husband and I have our own separate bank and IRA accounts and joint household, wealth and other savings accounts. We use quicken and keep all of our investments accounted for. When it comes to tax time; we let the CPA file for us. We still have our separate credit cards and the one duplicate card we have – I don’t use it at all. My husband just authorizes me on two of his cards.

Good eye opener…we’ve always had everything together where possible – (RRSP’s the obvious exception). Would the Smith Maneuver be an exception where the higher earner would want to own the investment and therefore the tax deduction?

Also (although I know rules change) would any of this be affected by the new income splitting rules in retirement?

Separate accounts, with a joint account for household expenses. I’ve always chosen to do it that way. It makes keeping a paper trail much simpler, and protects you from the spending habits of your partner. Rememeber not all couples are, or remain true to their goals. I have heard too many tales where an account has un-discussed expenditures, which can lead to a very rocky relationship.


Its sounds good for the tax. Although i have doubts of applying this to those couples who are not really in good terms:)

Advice based on “higher income earner” is often moot to my generation. My wife and I have incomes in the same tax bracket, and regularly swap position for top earner, depending on who most recently got a raise.

We do manage everything in a joint account, because our experiment with separate accounts usually lead to hard feelings that one person (me) was always on the hook for unusual expenses…the balancing act was also challenging, since this was early in our relationship when we had little-to-no savings.

Even now, though, virtually all of our investments are in tax shelters (TFSA or RRSP), and our excess cash that can’t be sheltered goes to paying down the mortgage. It’s hard to see a downside to our joint accounts.