Balance of Assets Payment - Do I have a choice?

[PereAMav]

Apologies if this is answered somewhere but I could not find it.

Once we completed the assets and debts calculations my ex owes me several thousand dollars (I will be paying SS and SS, seperate issue) and the mediator informed us that my ex gets to choose how to pay it. My ex wants to pay it by transferring RRSPs but I want it in cash. Do I have a choice?

Thanks.

[NBDad]

If you want it cash, then cash the RRSPs. As long as you get paid, who cares? RRSP transfers may be the easiest way of doing it. Not everyone has several thousand in cash sitting around.

[PereAMav]

Thanks. but...
In this case the cash exists from the sale of the matriomonial home, more than enough. As well, to get an equivalent amount in cash from RRSP the contributions would need to be even higher than the standard 20% tax rate applied to RRSP transfers.

[NBDad]

As well, to get an equivalent amount in cash from RRSP the contributions would need to be even higher than the standard 20% tax rate applied to RRSP transfers.

No it wouldn't. If you want to cash them, that's your choice and you would have to suck up the tax hit you'd acquire. The only thing the ex would be responsible for is the 20% hit on the transfer. (and that 20% hit should be a debt on HIS side of equalization anyway)

As long as equalization is done fairly, then at the end of the day it's irrelevant in terms of how it's paid out. Is the amount more or less than 10-30k? That's what it will cost you to litigate.

[PereAMav]

Its under 10k, and I guess I should have worded the question more carefully.
A friend had to pay an offset amount exactly like this, and he was told it was her choice how she received it. And it was well over 25k of which there was no cash around to cover it. He got lucky that she chose RRSPs or it would have cost him about 40k in RRSPs to generate the 25k in cash. This is exactly the same scenario, in the same jurisdiction, Ottawa ON, and the opposite is happening, she gets to choose how she pays.

So, trying to determine the law on this matter. Totally agree the cost to litigate is many times this amount its the inconsistency that bothers me.

[NBDad]

There is no set in stone for equalization, since each situation is unique and the assets/liquidity is different.

In your friends case:

He got lucky that she chose RRSPs or it would have cost him about 40k in RRSPs to generate the 25k in cash.

He could have argued otherwise. If there was insufficient cash to equalize and all he had was RRSPs....transfer the 25K in RRSPs and call it a day. (again, if this is required, the resultant "transfer costs" are included as a debt on that persons side of the balance sheet, those costs should affect and be included in equalization.)

At under 10K in disparity, honestly it's not worth fighting about. RRSPs aren't taxable, and you'll get resulting income tax write offs for them anyway. AND they can be used as collateral/etc. There are very very few situations where you should require "cash" instead. Need a house? You can withdraw the downpayment from the RRSPs tax free for 10 years? if I recall correctly.

Need to pay bills? They can be used as collateral against a loan/line of credit rather than being cashed directly.

[PereAMav]

Perfect thanks! Appreciate the time you took to answer the question.

[Mess]

No it wouldn't. If you want to cash them, that's your choice and you would have to suck up the tax hit you'd acquire. The only thing the ex would be responsible for is the 20% hit on the transfer. (and that 20% hit should be a debt on HIS side of equalization anyway)

☺.

Didn't work that way with us. My ex chose to pay using RRSPs. The CRA allows transfer between spouses without any penalty, so this cost her nothing. On my end, I would have paid the tax hit (depending on the amount, it may be as low as 22%, in my case is was higher) so the judge set the amount of the transfer as having the additional (I believe it was..) 29%. Both lawyers and the judge indicated to us that this was standard operating proceedure. If you are owed 3k, the RRSP transfer should be about 3.6k.

If the ex has large amounts of cash from the sale of the home, I would think that they are trying to use the RRSPs to transfer just the pre-tax amount and let you take the hit.