How Are RRSPs Divided on Divorce in Alberta?

Retirement savings accounts can be worth a great deal, and they are often held in one spouse's name. People commonly worry about two things: whether the account will be shared at all, and whether moving money out of it will trigger tax.

This article explains how Alberta's Family Property Act approaches these accounts. The tax side is technical, so it is worth speaking with an accountant as well as a lawyer.

This article covers the law of Alberta.

Is an RRSP shared on divorce

The Court may divide all property owned by the spouses or adult interdependent partners, whether owned jointly or individually. An account held only in your name can therefore be considered.

Property acquired during the marriage that is not exempt is distributed equally between spouses, and adult interdependent partners have the same equal rule for property acquired after their relationship began. The Court can depart from equal sharing if an equal split would not be just and equitable after considering the section 8 matters.

What may be left out of the division

Some property is exempt from distribution. That includes property acquired before the marriage or before an interdependent relationship began, and property received as a gift from a third party or by inheritance. The exempt value is fixed at the later of the marriage date (or date the relationship began) and the date the property was acquired.

Growth in the value of exempt property is not itself exempt. The Court distributes it in a manner that is just and equitable after considering section 8, so it is not automatically shared equally. If part of your account was built before the relationship, a lawyer can help you sort out what is exempt.

Locked-in accounts and valuation

Locked-in retirement accounts cannot be transferred or paid out where the governing retirement legislation does not allow it. The Court must still value them and distribute their value under the Act in the family property order.

Unless a written agreement that meets section 38 provides otherwise, the valuation date is the date of the trial. The Court's orders can include payment of money or transfer of an interest in property.

How tax is considered

One of the section 8 matters is tax liability resulting from a transfer or sale. That means the Court can take into account that withdrawing or moving funds may carry a tax cost when deciding what is fair.

Whether a particular transfer between spouses can be made tax-free depends on federal tax rules and on the type of account. Ask an accountant to confirm this before you agree to a transfer, and make sure any agreement or order is worded so the transfer can actually be carried out.

What to do next

• Gather the most recent statements for every registered account, yours and your spouse's.
• Note which contributions were made before the relationship began.
• Prepare to disclose all property in a sworn statement, including property disposed of within one year before the application.
• Ask an accountant about the tax effect of any proposed transfer.
• Have a lawyer review any proposed agreement, because an agreement meeting section 38 can displace the Act's division rules.

Spouses must generally apply within 2 years after separating or after the decree, and adult interdependent partners have 2 years from when they knew or should have known the relationship ended. Do not wait.

Frequently asked questions