RRSP and C/S

[hannah]

Hi,Just wondering if anyone knew if annual RRSP'S have to be included in my gross income when paying child support,i know at least one person who does not have it included in the gross but know of someone else who has to include it...any commets would be greatly appreciated!!!

[MaggieKM]

In our case, it did. When our initial court order was drawn in 2009, they used DH's income tax returns info. The RRSPs were on there, so they upped his income for that year. As such, CS payments were calculated based on the sum of the RRSPs and his annual income for that year. His income has changed since (less), but the monthly payments would be about $10 less, so we never bothered to vary the order.

[Teenwolf]

Originally Posted by MaggieKM

In our case, it did. When our initial court order was drawn in 2009, they used DH's income tax returns info. The RRSPs were on there, so they upped his income for that year. As such, CS payments were calculated based on the sum of the RRSPs and his annual income for that year. His income has changed since (less), but the monthly payments would be about $10 less, so we never bothered to vary the order.

Was he collecting on the RRSPs or were they just sitting in an account waiting for retirement?

[hannah]

In our case it is RRSP'S that the company contributes yearly and they will not be used until retirement but we still pay c/s on those because they are included in the Gross,so that's why i was wondering if they could be deducted off the gross before c/s?

[Teenwolf]

I see no reason why RRSPs (not cashed) should be included in CS calculations. They are not liquid until you cash out, which means they are not cash in hand until a withdrawal is made. The idea behind CS is to ensure that each parent's income contributes to the child, similar to the way it would work if the parents were still together. If a parent is still with the other, and s/he gets RRSPs from work, none of that goes to the child unless it is cashed out. I have an employee sponsored pension plan and they contibute to the plan; am I supposed to include their contribution when calculating my income for CS purposes? That wouldn't make any sense, as it's money I don't have, which can't be spent on the child until I retire.

If I were to cash out a RRSP, then that's money in hand, which is taxed and available to contirbute to child expenses.

I'm not saying it doesn't happen, but it doesn't seem right to me.

What happens if uncashed RRSPs are included in CS calculations and the NCP retires while CS is still payable? Is it a double dip?

[Berner_Faith]

Originally Posted by Teenwolf

What happens if uncashed RRSPs are included in CS calculations and the NCP retires while CS is still payable? Is it a double dip?

Yup...may not seem right but such is family law

[ddol1]

Originally Posted by hannah

Hi,Just wondering if anyone knew if annual RRSP'S have to be included in my gross income when paying child support,i know at least one person who does not have it included in the gross but know of someone else who has to include it...any commets would be greatly appreciated!!!

This is not quite clear "annual RRSP's" as exactly what is the OP referring to? One would be annual contributions, another withdrawals - one would reduce available income and the second would increase it. But in the end would this not depend on "If this detail is included in the seperation agreement - one way or the other?"

If you are concidering support issues one would think that even if you did contribute to your RRSP one would expect that the CS would be based on total income before rrsp contributions otherwise it would be the advantage to just max out RRSP contribution just to limit CS obligations?

The other is the withdrawals which would add to available income as the withdrawals do add to your total available yearly income and as such would then increase the CS accordingly.

The last - which is something to which I did investigate is one time withdrawals from the rrsp which the income will not be used to supplement low income (Oh gosh I wish it could be used for anything but which is its purpose - to cover anticipated legal representation fees. I will be repeating the step in the new year as well for the same purpose. So I will do strong accountability to exactly where these funds do end up going or get used for so there will be no case for the ex to try and bump up my annual income for support purposes.

Not that that is not bad - but for me there was no other way, I am lucky to have unused disability for self tax credits which I requested from the government a rrelease from taxes with holding since i only took the amount which would fall under the point to where I would then actually need to pay income tax on this money at year end in April. What does not get used for the lawyer will remain as part of my retirement plan but will remain in my Tax Free Savings Account (will have the same tax deffurring affect as if it was left in the rrsp - but no tax will be paid when it finally is used years from now.

[Teenwolf]

Originally Posted by Berner_Faith

Yup...may not seem right but such is family law

That's insane!

[Teenwolf]

I wish the poster included a link to CanLii...

http://www.ottawadivorce.com/forum/f...-150-not-7225/

Originally Posted by dinkyface

If paying CS before retirement (but not during), then RRSP contributions should not affect CS.

If paying CS after retirement (but not before), then regular RRSP withdrawals should affect CS.

HOWEVER - if paying CS before AND during retirement, then the situation arises where that 20K that was contributed was counted towards CS before retirement, but it SHOULD NOT be counted AGAIN towards CS when withdrawn (even though it shows up as taxable income). There is a case on CANLII describing that situation, and the judge recognises the need to avoid this 'double-dipping'.

The word 'retirement' above refers to any period where you are living off your RRSP savings i.e. making regular withdrawals to support your lifestyle.

The above is just an example to put into context the rule that RRSP contributions do not affect CS.

I did find some case law on CanLii which stated that the propriety of including an RRSP withdrawal as income for child support calculation purposes is fact dependent.

I also found this on the web: http://www.ottawadivorce.com/blog/ca...child-support/

Even though RRSP redemptions are included in your income for tax purposes, a one-off RRSP redemption normally would not be considered part of your income for child support or spousal support purposes. However, if you had a pattern of cashing in a certain amount of RRSPs each year, the results might be different.

More info of note: http://www.justice.gc.ca/eng/pi/fcy-fea/faq/cs-pae.html

Under the Federal Child Support Guidelines, child support calculations must be based on the amount of income shown on line 150 of your income tax return, adjusted by Schedule 3 of the Guidelines. This would include any amount withdrawn from an RRSP. The Guidelines do not include a provision allowing you to deduct RRSP investments or withdrawals from income used to calculate child support. However, the courts do have some discretion when deciding how to deal with rare or one-time amounts (non-recurring amounts). You may wish to ask a lawyer for advice on this.

This leads me to believe that unredeemed RRSPs are not used for CS calculations; the same would hold true for employer contributions to a pension plan/RRSP. Once you start collecting on that plan/RRSP, it's a different story, but the facts of the case may change what CS amount is payable.

[ddol1]

teenwolf - your words are right on - "fact dependant"...

I know in my case i had it set up with the tax people to have the one letter split in December and the other in January - one month later. In the end, they wanted it done one at a time, do the withdrawal and reapply with the same rational and wording for the request. If i were to keep on doing this - over time it is income, or maybe better said, "would then be deemed as income in the eyes of the government"