This week, we review the sensitive issue of divorce and the division of RRSPs.
According to the latest Statistics Canada data, approximately 38 percent of all marriages end in divorce.
So what happens to RRSPs at the time of divorce? Fortunately, CRA permits RRSP amounts (in whole or in part) to be transferred on a tax deferred basis between spouses as described in a separation agreement. The partner receiving RRSP money does not need to have RRSP room to accommodate the transfer. Both RRSPs and Spousal RRSPs will be considered when dividing the couple’s assets. As will RRIFs, LIFs, TFSAs, and non-registered accounts.
Determining how much to transfer can be a very complicated procedure. Consideration of after-tax income should be reviewed. If one spouse needs money immediately, transferring a TFSA may make more sense than transferring an equal amount inside an RRSP.
Registered Education Savings Plans are also matrimonial property and thus can be split up at the time of separation. This seems punitive for the children, as the original intent of the money was for post-secondary education. However, it can be done.
I understand this is a delicate subject, but we are here to help should this type of event occur. Best to leave the details to the lawyers and follow the orders within the separation agreement.
As always, I look forward to hearing from you.
THIS ARTICLE IS PROVIDED AS A GENERAL SOURCE OF INFORMATION ONLY AND SHOULD NOT BE CONSIDERED TO BE PERSONAL INVESTMENT OR LEGAL ADVICE. READERS SHOULD CONSULT WITH THEIR FINANCIAL OR LEGAL ADVISOR TO ENSURE IT IS SUITABLE FOR THEIR CIRCUMSTANCES.