What Happens to the RRSP and Pension When You Separate in Ontario?

You have separated, and one of you has been paying into an RRSP or a workplace pension for years. It is natural to wonder whether your spouse can claim part of that money, or whether you can claim part of theirs.

In Ontario, the answer depends mostly on whether you were married and on how the value of everything each of you owns compares on a key date. This article explains the general rules in plain language. Pension plans differ a great deal, so the details are worth confirming with a lawyer or accountant.

Equalization: sharing value, not cutting up accounts

When married spouses separate, Ontario law looks at the value of what each spouse owns, after debts. The spouse whose net family property is smaller is entitled to one-half of the difference between the two net family properties.

This is called equalization. It is a calculation of value, and it results in a payment from one spouse to the other.

Retirement savings generally count as property a spouse owns, so they usually form part of the calculation. How the value of a particular pension is worked out depends on the plan and its terms, which is why a lawyer or accountant should confirm it.

The valuation date and net family property

Net family property is the value of property a spouse owns on the valuation date, after deducting that spouse's debts and other liabilities. The valuation date is the earliest of several dates, the first being the date the spouses separate and there is no reasonable prospect that they will live together again.

Ontario's guidance explains that property you owned at separation is valued as of the day you separated, and property you owned on the wedding day is valued as of the date of marriage. So the balance in an RRSP on the separation date matters, not what it grows to later.

• Credit card balances, car loans and the remaining mortgage at separation reduce a spouse's net family property.
• Debts at marriage are subtracted from property owned at marriage, except debts tied to the family home, such as a mortgage.
• Each spouse's own figure is calculated first, and then the two are compared.

What may be left out or treated differently

Some property is not included in net family property. This covers property acquired during the marriage by gift or inheritance from a third person, personal-injury damages, and property the spouses agreed in a domestic contract to exclude. The exclusion does not apply to a matrimonial home.

A court may also award a spouse more or less than half the difference if equalizing would be unconscionable. One factor it considers is a spouse's intentional or reckless depletion of their net family property. If you are worried that savings may be drained, a court may make a preservation order restraining the depletion of property and providing for its safekeeping and preservation.

Whether a particular pension or RRSP fits any of these exceptions depends on the facts, such as when and how it was built up. A lawyer can confirm this for your situation.

If you were not married

Equalization is a rule for married spouses. Ontario's guidance says common-law couples are not legally required to split property acquired while living together, and items generally belong to whoever bought them. A partner who contributed to the other's property may need to go to court to recover that contribution.

If you were common-law, the ownership of each account and any contribution you made become the main questions. Get advice before assuming that you have or do not have a claim.

Deadlines, agreements and what to do next

An application for equalization cannot be brought after the earliest of three dates: two years after the day the marriage ends by divorce or judgment of nullity, six years after the day the spouses separate with no reasonable prospect of resuming cohabitation, or six months after the first spouse's death. A court can extend a time limit in the Family Law Act on a motion if there are apparent grounds for relief, the delay was incurred in good faith, and no person will suffer substantial prejudice.

If you reach a deal, a separation agreement is unenforceable unless it is in writing, signed by the parties and witnessed. A court may set aside a separation agreement if a party failed to disclose significant assets, debts or other liabilities. That makes full disclosure of retirement accounts important for both of you.

• Write down the date you separated and your reasons for treating it as the date there was no reasonable prospect of reconciling.
• Collect statements showing RRSP and pension values around that date, and around the date of marriage.
• List your debts as of the separation date.
• Ask the plan administrator what documents you can get about the pension, and how it is valued.
• Note any gifts or inheritances you received.
• Speak with a lawyer or accountant before signing anything.

Frequently asked questions