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  • line 150 income average used for support and one time RRSP withdrawals

    I am pushing ahead and there are a few things i can't figure out.....

    Foremost is the issue of incomes used for support calculations, figuring line 150 average over the last three years is the usual way and finally how are one time type of income (from sale of stocks or possibly RRSP withdrawals) that are significant enough to affect the line 150 average.

    Are these one time type items excluded from the calculations as they were indeed one time things not to be repeated in the future? Can anyone let me know what is normally done? Yes I have tried speaking with her on these things and up to now she choses to not communicate.

    I do have a chance to withdraw 15-20k from my rrsp to cover potential legal without needing to pay income taxes on the amount withdrawn if I take it before the end of the year (and I would end up parking it in my TFSA account so I will not need to pay tax on any earnings in the future)- but I am worried on how it may potentially affect the support calcualations when that time comes. Legal fees will need to be paid and this is the only way I can get the cash for it. Does anyone have an understanding how something like this is typically handled???

  • #2
    Like most things in family law the issue of whether RRSP withdraws is included in "income" for support purposes is somewhat grey. I believe I read (somewhere) that if you have a "pattern" of RRSP withdraws (ie. every year) then FOR SURE it is included. For a "one time" RRSP withdraw there didn't seem to be a black/white answer (at least that I could find). The impression I had was that it was "likely" (since courts simply like to keep things simple and read out line 150 income) to be included BUT you could try and argue it was a one time thing.

    Im not a lawyer/accountant and would be interested in what others say but my advice would be try and avoid it if you can.

    So, in summary, I guess the answer to your question is "maybe".

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    • #3
      If the RRSP contribution was withdrawn within the same year, then I think that it does not affect income in any way (i.e. the contribution does not decrease tax, and the withdrawal does not increase tax). Hence neither transaction should have an effect on SS.

      Not sure if this is the case you are describing though. Possibly you are instead withdrawing RRSP tax-free under the LLP or HBP instead? (which just defers the taxes owing).

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      • #4
        In my case because I am on long term disability with CPP pension disability benefits of less than $10,000 (and who is supposed to survive on this I will find out soon enough!) and I am also granted the disability amount for myself which allows me to essentially double my threshold of income (along with the personal amount we all get) which does not get taxed.

        So I did figure out using last years tax rules how much could I take out of my RRSP and all my tax credits will cover it so in effect the withdrawal will not require me to pay any tax on it (I didn't word that well enough the first time because RRSP withdrawals are taxed for everyone including me - I just have a good sized window before I must start paying the tax on my income.

        In this case the withdrawal would be a one time thing to cover legal and if not required, my plan is to leave it in my TFSA account which will shelter it from taxation (just like the RRSP). I confirmed my unused TFSA contribution room and Jan 1 2012 I will have another 5K room added to my current amount.

        The reason I put this on the board is I have been thinking hard how to handle my worst nightmare which is to get through this, I really am not able to self represent because my ability to get things done in any set time frame is impossible - When my pain levels increase past my ability to cope I shut down, I do not make sense, I do not remember things, I admit that I even have posted here in or very close to this state...... and I look later to say to myself "oh shit - I typed that!" - and like right now I also get gabby in person, and I get gabby when i type here.....Back on topic:

        If I take the RRSP out this year - it will be ready to pay the fees. Next year I could do the same. When ( I really hope that after being married for 24 years - I will get some spousal support and that would increase my income and my tax payable so I will not be able to draw RRSP money tax free any longer). Last part of my "plan" is some of my other benefits is income related (as it should be) but today I remain on my wife's benefit plan.... when and if I get cut off that i am already set up for my perscriptions on the provincial plan for low income people - they use income to determine deductables. I stop right here....long!! thanks for everyone's input!

        Comment

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