How are RRSPs and TFSAs treated in Ontario equalization?
RRSPs and TFSAs are assets included in net family property at their account balance on the valuation date. For RRSPs, the value included is typically the fair market value of the account, not the after-tax value — meaning the future tax liability on RRSP withdrawals is not automatically deducted unless the parties agree or the court makes an adjustment.
Courts and negotiating parties sometimes apply a "tax-affected" value to RRSPs to reflect the reality that the RRSP owner will eventually pay tax on those funds. This is an area where parties often negotiate or where expert evidence may assist.
TFSAs are simpler: contributions and growth are tax-free, so the balance at the valuation date is included at face value with no tax adjustment required. RRSP-to-RRSP transfers between separating spouses can be arranged on a tax-free rollover basis under federal tax rules, which is a practical tool for settlement.
Key takeaways
- RRSPs and TFSAs are both included in net family property at their valuation-date balance
- RRSP values may be tax-affected in negotiations to reflect future tax liability
- TFSAs are included at face value with no tax adjustment
- Spousal RRSP rollovers allow tax-free transfers as part of a settlement