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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 10-10-2005, 04:37 PM
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Default Pension Plans And RRSP's

Hello,
It is my understanding that when it comes to splitting Pension Plans and RRSP's, the general rule of thumb is that whatever was contributed by both parties (during the time that they were together) is divided in half.
In my case, I contributed to my Companies Pension Plan while my wife purchased RRSP's.
In the five year period that we were together, I contributed approx. $10,000 more into my plan, than my wife purchased in RRSP's.
It is my wife's contention that I will have to pay her $5000.
My view is that I will not be collecting my Pension until I retire (25 yrs from now), and will not have access to any of this money until then. When I retire she will then receive a monthly pension check based on 50% of the five year period that I paid into while we were together, as well as me receiving 50% of her RRSP contributions for the same period, when she retires.
Who is right, or, are we both off base?
TIA
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Old 10-10-2005, 05:45 PM
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Hi flowbe,

In which province do you live? Each province deals with division of property somewhat differently.

The answer may also depend on the type of pension plan you have. In general, there are two main types: defined benefit plan and defined contribution plan. I've got some definitions here:
http://www.ottawadivorce.com/glossary-d.htm
If you can provide this information it would also be helpful to answer your question.
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Old 10-10-2005, 07:40 PM
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Hi Jeff,

Thanks for the response.

I live in Toronto, as well, we spent our married life residing here.
When my wife left (four months ago), she moved back to her family in Quebec.
I believe that our Divorce has to be filed under Ontario guidelines.

I am a Unionized employee at a Crown Corp., I believe that my pension is a "defined benefit plan". I contribute a percentage of my weekly wage, and after a combination of 85 points (age + service) I will be able to retire.

My wife's Company did not have a pension plan, she purchased RRSP's through a bi-weekly deduction directly through her bank, by her bank. I'm assuming that this would be considered a "defined contribution plan".

While on the subject; if we decided to waive each others claim to these assets, what type of documentation would need to be provided to the Court in order to be recognized.

Thanks
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Old 10-11-2005, 12:21 AM
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Hi flowbe,

You can find out more details about property division here:
http://www.ottawadivorce.com/propertydivision.htm


See also the note a little further down entitled "Value of Asset in Dispute" which has to do with pensions.

Note that under the Ontario property division scheme, you are NOT dividing the assets, but the value of the assets. In your case, you’d just be adding up the value of your pension with all your other assets; there’s no specific trade off between your pension and your wife’s RRSPs.
You need to include the value of your pension in your net family property. Valuing a defined benefit pension for family law purposes is a complex calculation that only an actuary can do. Basically, what the actuary does is figure out how much you’d receive when you retire based on how long a male your age is expected to live, then discount the amount to present day dollars. A defined benefit pension will likely be worth more (and after several years significantly more) than just the contributions made.

Finally, the value of your pension gets included in your net family property. If you owe an equalization payment, you can’t defer paying this until you retire, even if the equalization payment is owed because of the pension. What you’re referring to would be known as an "if and when" division of your pension - if and when you collect your pension, the portion accumulated during your marriage would be shared with your ex. No lawyer in Ontario would do this for you, as it would be considered negligent. This is since if you pass away before you receive your pension, your wife will receive nothing, and she’ll sue her lawyer for the half value of your pension she was entitled to. So, it’s not a very common practice, although a lot of people would think it fair.
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Old 10-11-2005, 01:41 AM
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Hi Jeff,

Thanks so much for you reply. I have a better understanding of my situation thanks to your input.

I think I need to find an Actuary who will realize that I'm a heavy smoker who intends to retire at the ripe old age of 67!

The link you provided was very insightful.
I do have one question that I'm hoping you can clear up.
It has to do with the "What items are not included in my 'net family property'?" category.
I purchased an RRSP with an inheritance that I received during the course of my marriage. I then used this RRSP to take advantage of the Federal first time home buyers plan, of which I must repay within 15 years.
Is this money mine, or is it part of the net family property?

TIA
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Old 10-12-2005, 11:00 PM
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That’s actually a complicated question that I’d actually need to spend some time researching. I’ll just give you my quick thoughts, this is certainly not definitive in any way and is really just a starting point:

1. The money was inherited during the marriage, so when you received it, it certainly was what is known as "excluded property."

2. You then transferred it to the RRSP. Providing you can show that the money for this RRSP came from the inheritance, the property still is excluded.

It’s clear up to here. The difficulty is that if excluded property is put into the matrimonial home, it is no longer excluded. I think a lawyer could argue your case either way. On one hand, the money does appear to have gone into the matrimonial home. On the other hand, it was more like money was borrowed from the RRSP, and the funds from the loan, rather than the RRSP, went into the matrimonial home, and that loan needs to be repaid to the RRSP. You’d need to have a lawyer research this in a bit more detail.
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Old 10-12-2005, 11:07 PM
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For people from parts of Canada other than Ontario, you should note that each province’s property division laws are different. As a very brief run down on excluded property:

1. Gifts or inheritances are generally considered excluded property in all provinces except Alberta and Quebec.

2. Damages from personal injury awards are generally considered excluded property in all provinces except New Brunswick and Quebec.

3. Life insurance proceeds proceeds are generally excluded property in all provinces except New Brunswick, Newfoundland, Nova Scotia, and you guessed it, Quebec.

4. In Ontario there are what are know as "tracing" provisions - if you can trace funds you have to one of the above items, it remains excluded. Alberta is the only other province that does this.

5. Some provinces have additional types of exclusions. Newfoundland excludes family heirlooms. Newfoundland and Nova Scotia exclude personal effects.
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Old 10-13-2005, 12:28 PM
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Hi Jeff,

Thanks for the reply.

Yes, the RRSP can be confirmed as purchased with the inheritance.

The RRSP was then used in accordance with the Federal "first time home buyers plan", it was converted to part of a down payment on our matrimonial home.

Under the terms of this Federal program, I (not we) have to payback this money within a fifteen year period. For this reason I believe that this money should be considered excluded.

If it is not considered excluded, then who gets to pay off this temporary debt?
It would make sense that if the court ruled this inclusive income, then my wife should then be saddled with paying half of it back.

Any thoughts?

TIA
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