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The RRSP factors in Divorce

RRSP in Divorce

  • The Income Tax Act provides tax-free rollovers of Registered Retirement Savings Plan (RRSP) between sposues.

  • It is the gain in these assets held by either spouse that is considered matrimonial and is to be divided or equalized

  • The forward gain of a family’s wealth is measured from the date of the marriage to the date of the separation.

  • It can also be agreed upon to not divide anything at all, leaving your assets unaffected in the separation.

  • Records of the couple’s Registered Retirement Savings Plan (RRSP) at the date of marriage and the date of separation will be required.

Registered Retirement Savings Plan in separation and divorce

What are the Registered Retirement Savings Plan factors?

In a marriage, each spouse can carry debts and own property under their personal name. So when you are married to someone who has preexisting assets, like a Registered Retirement Savings Plan (RRSP), you will not become the co-owner of these assets automatically. These assets will remain as property of your spouse, and coming into a marriage with a Registered Retirement Savings Plan (RRSP) holding, then it will increase their date of marriage deduction, as well as the possibility of a decrease in their net family property.

RRSP and Divorce The forward progress aka gain of the family’s wealth is measured from the date of the marriage to the date of the separation.

It is the gain in these assets held by either spouse that is considered matrimonial and is to be divided or equalized, regardless of who’s name the account is under. It is very vital to understand that not every separation or divorce will result in the division or equalization of assets between spouses.

It can be agreed upon between you and your spouse that other assets or debts with an equal value could be shared to cover what is owed. It can also be agreed upon to not divide anything at all, leaving your assets unaffected in the separation.

RRSP what-you-need-to-know

Tax-Free rollovers of RRSPs

The Income Tax Act provides tax-free rollovers of RRSPs, LIRA’s (Locked-In Retirement Account), and RRIFs (Registered Retirement Income Funds) between spouses in the situation where a court order or written separation agreement is in effect. The Income Tax Act allows for the equalization of registered assets without any significant tax implications.

Preparation of a separation agreement

In the separation process, financial disclosure refers to the act of which both parties receive information regarding the other’s assets, income, and debts. During separation, it is crucial that both sides are honest with this information to avoid an unfair divorce settlement.

The statement and records of your Registered Retirement Saving Plan (RRSP) will be used to validate the Savings, Securities, Bank Accounts, and Pensions section of your financial statement when you are in preparation of a separation agreement or for financial disclosure forms required in your jurisdiction.

Making an RRSP financial disclosure

Where is find a Notice of Assessment
RRSP factors in separation and divorce

With records of your and your spouse’s financial position at the date of marriage and date of separation, it will help greatly with calculating the net-family property.

The statement is typically sent to subscribers on a quarterly basis, usually in March, June, September and December. If you have not received your statement for the period, you may need to conduct inquiries.

What happens to RRSPs in a divorce?Ken Maynard CDFA, Acc.FM

n a divorce, each spouse’s RRSPs are considered part of the marital assets and are subject to division according to the value accumulated during the marriage. Parties can agree on a division or seek a court order if an agreement can’t be reached.

Can you have a joint RRSP?Ken Maynard CDFA, Acc.FM

No, RRSPs cannot be held jointly. Each spouse must have an individual RRSP account, although contributions can be made to a spousal RRSP which benefits the other spouse.

Who owns a Spousal RRSP?Ken Maynard CDFA, Acc.FM

The owner of a Spousal RRSP is the contributor, but the funds are intended to benefit the spouse for whom the account is set up. This arrangement can impact how these funds are treated in the event of a divorce.

What happens to a Spousal RRSP after divorce?Ken Maynard CDFA, Acc.FM

After a divorce, the Spousal RRSP remains with the spouse in whose name it is registered. However, the division of these funds in a divorce can be negotiated or determined by the court.

How does an RRSP rollover to a spouse work in divorce?Ken Maynard CDFA, Acc.FM

In a divorce, an RRSP rollover to a spouse can be used to equalize the asset division without immediate tax penalties. This allows one spouse to transfer a portion of their RRSP to the other spouse’s RRSP tax-free.

What is an RRSP account?Ken Maynard CDFA, Acc.FM

An RRSP (Registered Retirement Savings Plan) account is a tax-deferred retirement savings plan that allows individuals to save for the future while potentially lowering their tax burden during their earning years.

Can RRSP contributions reduce child support?Ken Maynard CDFA, Acc.FM

No, RRSP contributions do not reduce child support. Child support calculations are based on income after taxes and before RRSP deductions. Therefore, contributing to an RRSP will not affect the amount of child support owed.

Can RRIF withdrawals be split with a spouse?Ken Maynard CDFA, Acc.FM

Yes, RRIF (Registered Retirement Income Fund) withdrawals can be split with a spouse under certain conditions. This can be arranged during the divorce proceedings to ensure a fair distribution of retirement income.

What happens to investments in a divorce?Ken Maynard CDFA, Acc.FM

Investments, including RRSPs, are typically divided between spouses based on their value accumulated during the marriage. The division is subject to negotiation or court orders, ensuring each party receives their fair share.

What is a Spousal RRSP rollover?Ken Maynard CDFA, Acc.FM

A Spousal RRSP rollover involves transferring RRSP funds from one spouse to another as part of a divorce settlement. This is done to equalize the retirement savings of both parties without incurring immediate taxes.

How is an RRSP transfer to a spouse handled in divorce?Ken Maynard CDFA, Acc.FM

An RRSP transfer to a spouse in a divorce is typically done under a tax-free rollover provision. This allows one spouse to transfer part of their RRSP to the other’s without immediate tax consequences, aiding in the equitable division of assets.

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RRSP financial disclosure Documents Details

Where is find a Notice of Assessment

Locate your Registered Retirement Savings Plan financial disclosure

You will be able to find information on your Registered Retirement Savings Plan statement at your local bank, banking website, or through your investment advisor if available.

More about finding your RRSP financial disclosure

More about finding you Registered Retirement Savings Plan (RRSP):

RRSP Statement

Your Registered Retirement Savings Plan will be sent to you on a quarterly basis (March, June, September, December). The statement provided will summarize your investment holdings and will also provide to you the details of your transactions over said reporting period. There are multiple ways you can obtain your Registered Retirement Savings Plan statement and account statement for your financial disclosure requirements and most of these methods are quick and simple.

The majority of deposit-taking institutions will send your monthly statement by mail. The paper statement will contain all necessary account information such as your balance, transactions, and the amount of interest you have earned. These statements are made available at the same time every month so if you have not received your statement around this time, contact your financial institution to request a copy. Note that it is also important for you to inform your financial institution of any address changes so that they may send your statement at said new address.

E-Statements

Most financial institutions offer the option to not receive paper statements and instead opt for an E-statement instead. The financial institution will send you an email to your designated address instead of mailing you a statement in physical form. These emails will contain your statement as a downloadable attachment or a link to view your documents online. An E-statement will contain the same information as a paper statement.

Online Access Online

When you register for online banking with a financial institution, you will be able to access your current and past statements online. After logging into the lender’s website with your chosen username and password, you will find the option “View statements” which will have a list of all your available statements. From here you will be able to click on the statement you wish to view and this will open a new tab in your internet browser. More than often this statement will be in a .pdf file format, which you will be able to view, print, or save to your storage device. If this option fails, then you still have the option of visiting your nearest financial institution and requesting a copy of your statement in person. Be mindful that you will need to provide valid ID to prove that you are the account holder. Once your identity is verified by a representative, they will be able to print out a copy for you. While you are there, it would be mindful to verify the issue with the current delivery method of your statement and change it to better suit your needs.

Who owns this document:

Documents are owned on an individual basis between spouses and are not joint owned. Remember to include your date of marriage or cohabitation, as well as the date of separation and the current date of when your documents were provided.

How to collect and handle this document

Many online sources will allow you to download a digital copy in .pdf format to your personal device. Most modern web browsers also allow you to “Print to .pdf” which will allow you to create an electronic copy of your document to save to your personal device. You can do this with a scanner from home, an office, or businesses that offer this service such as your local or nearby Staples Business Center.

Obtaining a digital copy of this document:

what-you-need-to-know

Obtaining  a digital copy of this document

  1. Many online sources allow you to download a digital copy to the device.
  2. Most up to date Web Browsers allow you the option of “Print to PDF”
  3. Scan your hard copy to a pdf.   

Note: This can be done on a personal (home or work) scanner, or can be done at a retailer such as Staples Business Depot

Conclusion

Understanding how to treat your RRSP in the event of separation or divorce will be important to securing the future and welfare of your children. 

Are you having trouble reaching an agreement on your finances? Do you want to avoid going before the judge and asking for help? Consider working with a family mediator who can help you end your marriage in a way that is peaceful, cost-effective, and child-focused.

Would you like to learn more? Get in touch for a Get Acquainted Call to learn more about finding a separation agreement with a soft landing.

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RRSP in Divorce
About the Author:
Ken Maynard CDFA, Acc.FM

I assist intelligent and successful couples in crafting rapid, custom separation agreements that pave the way for a smooth transition towards a secure future. This efficient process is achieved in about four meetings, effectively sidestepping the excessive conflicts, confusion, and costs commonly linked to legal proceedings. Clients have the flexibility to collaborate with me either via video conference or in-person through a DTSW associate at any of our six Greater Toronto mediation centers, located in Aurora, Barrie, North York, Vaughan, Mississauga, and Scarborough.

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Ken Maynard CDFA, Acc.FM