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Dividing Assets in Divorce: Investments, Pensions and RRSPs

The federal and provincial governments heavily regulate investments, pensions and RRSPs. The division of these assets during separation can be very challenging as the parties do not want to engage in any transfer with tax implications that reduce the overall value of the assets, but also want to ensure that they are divided fairly.

Pensions, RRSPs & RRIFs

Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) are considered just like any other asset, to be divided 50/50. However, there is some concern about the tax implications of any division and complications about what notional tax rate to apply. Fortunately, the Government of Canada ensured that the Income Tax Act provides tax-free rollovers between spouses where there is a court order or written separation agreement. This way registered plans can be split evenly and the taxes can be dealt with separately when each party decides to deregister the assets.

The Ontario Government, which regulates pensions, updated the governing legislation in 2012, to make the division of pension assets easier for divorcing couples. Under the new legislation, pension plan members who have to pay their former spouse a settlement based on the value of their pension are able to make some or all of the payment from the pension itself. The onus is on the pension plan administrator to value the pension plan properly, so that divorcing spouses do not have to hire an actuary to do this for them.

The division of pension plan benefits is made more complicated when some of the pension’s fund value comes from contribution before the marriage and some of the value is from contributions during the marriage. As discussed previously, usually only the value created during the marriage is relevant to the division of assets during separation. However, pensions are treated a bit differently.

The very issue of splitting a pension was recently addressed by the court in Armstrong v. Armstrong 2016 ONSC 126. In this case, the husband had retired on a military pension valued at approximately $1.8 million, but only 50 percent of that value was attributed to their marriage.

In its decision, the court recognized that pensions are treated differently than other property and the court could order the premarital value be included in the property to be divided. The decision outlined that this should only be done in exceptional circumstances and that this particular case was not an exceptional circumstance given the parties’ other assets. 

Contact Epstein & Associates, Divorce Lawyers in Barrie and Aurora

As dividing assets during divorce proceedings can be complicated, it is important to consult with a trusted lawyer with a family law practice before proceeding. Your family lawyer in Barrie can work with you and your spouse’s lawyer to try resolve matters amicably. Our law firm in Barrie can also prepare documents needed for court, such as a court application, notice of motion, and your financial statements. If your spouse does not cooperate in provide his or her information, you may need to obtain an order for financial disclosure. Visit Epstein & Associates at our Barrie location or call Epstein & Associates at 1-866-463-2266.