Splitting a Pension and a Practice After 31 Years in Ottawa

The situation

Zofia and Tomasz separated in their early sixties, after 31 years of marriage. Zofia had spent her career as an investment advisor, building her own RRSPs and a non-registered investment account alongside the couple's joint savings. Tomasz was a specialist physician who, like most physicians in Ontario, ran his practice through a professional corporation rather than as an employee. For close to two decades, instead of drawing a large salary and investing personally, he had left much of the practice's earnings inside the corporation, where they had grown into a substantial portfolio of stocks, bonds, and a small commercial property the corporation owned outright.

By the time the couple separated, their matrimonial home in Ottawa was worth roughly $1.1 million and was mortgage-free. Between the home, Zofia's personal accounts, and the value sitting inside Tomasz's professional corporation, the couple's combined family property came to somewhere between $2.5 million and $3 million, depending on how the corporation was valued. Zofia came to our office a few weeks after they agreed to separate, wanting to understand what she was actually entitled to and worried that the money inside the corporation would be treated as untouchable business assets rather than as retirement savings the marriage had helped build.

The legal problem

Ontario does not divide property on separation the way some people expect. Spouses do not each walk away owning half of every asset. Instead, under the Family Law Act, each spouse calculates their net family property, the value of everything they own on the date of separation minus what they owned on the date of marriage and certain other deductions, and the spouse with the higher net family property pays the other an equalization payment so that both end up with the same net value. The matrimonial home gets special treatment: unlike most other assets, its full value on the date of separation is included even if one spouse owned it before the marriage began, because the home the family actually lived in is treated differently from other property.

The complication in Zofia and Tomasz's case was that their family property was not sitting in one simple pool of cash. It was spread across very different kinds of assets with very different characters. Zofia's RRSPs and non-registered account could be valued to the dollar and split with a phone call to her brokerage. The professional corporation was a different problem entirely. Its value depended on the market value of its investment portfolio and the commercial property, both of which needed proper appraisal, and on how much tax the corporation would eventually owe when that money was eventually paid out to Tomasz as dividends or salary. A dollar sitting inside a professional corporation is not worth the same as a dollar in Zofia's personal RRSP, because the corporation's dollar still has a future tax bill attached to it that has not been paid yet.

There was a real risk of two mistakes. Treating the corporation's assets at full face value, with no discount for the tax that would eventually come due on withdrawal, would overstate what Tomasz actually had available and push the equalization payment too high. Ignoring the built-in tax liability entirely, on the other hand, would leave Zofia short-changed on retirement savings that the marriage had genuinely helped build, even though her name was never on the corporation.

What we did

1. Identified the valuation date and pulled a full asset picture. Ontario's equalization calculation is anchored to the date of separation, so the first task was establishing that date clearly and gathering statements, account balances, and corporate financial records as close to it as possible for every asset either spouse held, including the home, investment accounts, and the corporation.
2. Retained a business valuator experienced with professional corporations. Rather than accepting a rough estimate of what the corporation's portfolio and commercial property were worth, we arranged for an independent valuation that accounted for the corporation's investment holdings, the property's appraised value, and a reasonable discount for the future personal tax Tomasz would owe when funds eventually left the corporation. This discount is standard practice in Ontario family law valuations and is what keeps a corporate-held asset from being overvalued relative to cash held personally.
3. Calculated each spouse's net family property and the resulting equalization payment. With the home, personal accounts, and the discounted corporate value all captured, we prepared Zofia's net family property statement and reviewed Tomasz's, so both sides were working from the same numbers before negotiating how the equalization payment would actually be satisfied.
4. Negotiated how the payment would be funded without forcing a fire sale. Tomasz did not have enough personal cash outside the corporation to pay Zofia's full equalization amount immediately, and neither of them wanted to trigger a large, avoidable tax bill by pulling money out of the corporation all at once. We negotiated a structure that combined an immediate payment from personal assets and the sale of the matrimonial home, with the balance paid over a defined schedule secured against Tomasz's remaining corporate assets, so Zofia was not left waiting indefinitely or relying on an informal promise.
5. Used a tax-deferred RRSP transfer where it fit. Where the settlement called for money to move from Tomasz's registered retirement savings to Zofia's, we structured it as a direct transfer between their RRSPs under a written separation agreement, which the Income Tax Act permits without immediate tax being triggered on either side, rather than paying it out as cash and taxing it twice over.
6. Documented everything in a separation agreement. The final agreement set out the equalization calculation, the payment schedule, the treatment of the corporation going forward, and a release of further claims once the payments were complete, so both spouses had a clear, enforceable record rather than a handshake understanding of who owed what.

The outcome

The independent valuation put the corporation's after-tax value at roughly $1.4 million, once the discount for future personal tax on withdrawal was applied, down from a face value closer to $1.8 million if the tax liability had been ignored. Combined with the matrimonial home and both spouses' personal accounts, the equalization calculation left Zofia owed a payment of roughly $650,000 from Tomasz. Under the negotiated structure, about $250,000 came from the sale of the home and division of proceeds, a further $150,000 moved by direct RRSP-to-RRSP transfer, and the remaining roughly $250,000 was paid over three years from Tomasz's corporate distributions, secured by a formal agreement rather than left to trust.

Zofia ended up with a retirement position that reflected her real share of what the marriage had built, including the portion that happened to sit inside a corporation rather than a personal account. Tomasz avoided being forced to liquidate the corporation's investment portfolio or sell the commercial property under time pressure, which would have triggered a larger tax bill than the structured payout did. Both spouses left with a written agreement that answered the questions that tend to resurface later, what happens if the corporation's value changes, what happens if a payment is missed, rather than a settlement that looked fair on paper but left loose ends.

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