Are RRSPs and Pensions Included in Ontario Property Equalization?

Retirement savings are often one of the biggest assets a couple has. When you separate, you may wonder whether an RRSP or a workplace pension is shared, and how anyone puts a number on money you cannot yet spend.

This article explains the Ontario equalization framework for married spouses and the points where retirement assets raise special questions. Valuation is technical, so it is a topic to settle with professional help.

How equalization works

Each spouse values the property owned on the separation date, less debts and excluded property, then subtracts net property owned on the marriage date. The spouse with the larger net family property pays half the difference as the equalization payment, and a negative share counts as zero.

The result is a single payment that evens out the difference. It is not a division of each separate asset.

Where RRSPs and pensions fit

Equalization is built around property owned on the separation date.

Two questions usually come up. First, how is the value fixed, particularly for a pension that pays in the future? Second, should the value be reduced to reflect tax payable when money is eventually withdrawn? Neither has a one-size answer. A lawyer, and often an actuary or accountant, can confirm the approach for your plan.

• Get the statement or pension valuation as of the separation date, not just the latest one.
• Ask the plan administrator what information it can provide.
• Ask whether the figure is before or after tax, and whether an adjustment is appropriate.

What is not shared, and the family home

Some property is excluded: gifts or inheritances (other than the family home), life insurance proceeds received because someone died, personal injury money, and property excluded by agreement.

The family home is treated differently. Its full value must be shared even if it was owned before marriage, gifted or inherited, and a court can divide it differently only in very special situations where an equal split would be extremely unfair.

Moving retirement assets and timing

If you settle by moving an asset rather than paying cash, tax rules matter. RRSP property can be transferred tax-free to the spouse's or former spouse's RRSP or RRIF if you live separate and apart and the transfer is made under a court order, judgment or written separation agreement. Capital property transferred to a spouse or former spouse in settlement of rights arising from the relationship rolls over at adjusted cost base if both are resident in Canada, and the transferor may elect out in their return.

A court claim for an equalization payment must be started within six years of separation or two years after the divorce is final, whichever comes first. Common-law couples are not legally required to split property acquired while living together, though they may recover contributions to the other's property.

What to do next

• List every retirement asset: RRSPs, RRIFs, workplace pensions and any spousal plans.
• Gather statements for the marriage date and the separation date.
• Note which assets might be excluded property and keep records that show it.
• Ask a lawyer how each asset should be valued and whether tax should be considered.
• Have an accountant review the tax effect of any transfer before you sign.

Frequently asked questions