Division of marital assets in Canada via RRSP and home equity.
January 4, 2013 1:44 PM Subscribe
Division of marital assets in Canada via RRSP and home equity. What are the pros and cons and what should be considered?
Hi. If someone is separated in Canada, it is possible to divide the marital assets and use home equity or RRSPs to do so, including, I think, a lump sum or substantial lump sum for spousal support.
Would there be any downside to accepting an RRSP rollover and then withdrawing a certain amount each year? This is from the POV of the person receiving the rollover.
For example, let's say that $200k was to be paid as a lump sum upon division of assets. If the spouse had $100k rolled over into their RRSP, they could then withdraw $10k a year for 10 years. Whereas, if they had it go into the home equity, they might be able to eventually refinance and obtain the money, but it isn't as readily available. The RRSP withdrawal would be taxed, but let's say the recipient is a stay at home parent. Then they would be taxed in a low bracket and perhaps shielding some of the spousal support (that in the RRSP still) from tax and remaining able to qualify for government benefits, such as family allowance or the child tax benefit.
In taking spousal support in a fixed sum, the recipient reduces the risk of the other spouse's health, employability, etc and can also access the money in the present.
But what else should be considered in reviewing such an offer?