A few days before Valentine’s Day, we probably don’t have the mind to discuss the division of RRSPs in the event of separation. But it is about doing the exercise carefully in order to avoid hassles if the relationship were to deteriorate. Financial planning experts explain the main elements to take into consideration and above all insist on the importance of providing for sharing.
de facto spouses
PHOTO CHARLES WILLIAM PELLETIER, SPECIAL COLLABORATION
Audrey Bellefeuille, tax specialist and financial planner at Desjardins Wealth Management
For people living in a “common-law” type union, the thing is very simple. If a separation occurs, each spouse keeps their RRSP account, explains Audrey Bellefeuille, tax specialist and financial planner at Desjardins Wealth Management. “A division of RRSPs between the two spouses could have been possible in the event of separation if the spouses had wished it,” she adds. But it should have been established within the framework of a cohabitation agreement signed by the two spouses when things were going well.
married people
For them, the assets accumulated during the common life will have to be shared also during a separation, and the RRSP are part of it, explains Nathalie Bachand, financial planner at Bachand Lafleur, consulting group. “But if the spouses were each already contributing to an RRSP before the marriage, the division could become extremely complex,” she says. Indeed, it could be very difficult, if not impossible, at the time of separation to establish whether the income and capital gains in the RRSPs come from the assets already in the account at the time of the union or rather from those coming from the contributions made while living together. The solution to this problem is for the spouses to each have a new RRSP account, which will make it easier to establish the value of the contributions and the income earned during the life together, explains Ms.me Bachand.
PHOTO MARTIN TREMBLAY, THE PRESS
Nathalie Bachand, financial planner at Bachand Lafleur, consulting group
Partnership of acquests
There is a peculiarity here. Spouses without a marriage contract, and therefore united under the partnership of acquests, will have to deal with a particularity in the case of a division of RRSPs following a separation. The income, i.e. interest and dividends, earned on the sums accumulated in the pre-marital RRSP that do not have to be shared in a union in separation of property will have to be in the case of a union in partnership of acquests, explains Nathalie Bachand.
A sometimes complex sharing
Sharing assets can become a complex exercise when there are many assets and some of these may be accompanied by a debt and others, such as an RRSP, have a tax impact. Agreements can then be made. For example, one spouse keeps the house and the other the RRSPs. It will then be necessary to make sure to transfer the RRSP in the name of the right person and to properly assess and process the tax impact on separation, explains Audrey Bellefeuille.
The message
As you should not wait for the fire to catch before taking out insurance on the house, it is advisable to plan the division of property well when all is well inside the couple. This is the message that most planners will outline in broad strokes. The equitable sharing of RRSPs can become complex to determine after a certain period of living together. It is better to establish precisely what each held in RRSPs at the time of the marriage.