Spousal support & interest/divs/cap gains *inside* RRSP

[respondent]

It is with a big bank. I don�t know what fund and I�m not going to look it up. My point stands that some funds provide a T5.

As for your second comment, you missed the point. If someone is worried about the consequences of RRSP income after retirement they need a lawyer and an accountant to work it out for them ahead of settling.

mind at least telling what bank it is with? There are only 5 big banks, so you won't give up a big secret. The RRSP is tax deferred by definition, thus there shouldn't be T5, however if some bank offers non standard RRSP, I am all for learning about it more

[rockscan]

I am not saying it is impossible, I am asking what type of RRSP you have that it brings T5. If this is with some major provider, like big 5 banks, maybe you won't mind sharing plan name.

As for RRSP and equalization if RRSP was in your name you can transfer it to your ex if he/she agrees and has contribution room. But if they say no, all you can do is negotiate disposition cost, either via lawyers (or yourself) or in court. From what I heard it is very hard to convince judge that your costs will be above 25%, unless you have millions in RRSP.

It is with a big bank. I don’t know what fund and I’m not going to look it up. My point stands that some funds provide a T5.

As for your second comment, you missed the point. If someone is worried about the consequences of RRSP income after retirement they need a lawyer and an accountant to work it out for them ahead of settling.

[respondent]

My husband and I get a dividend T5 every other year for amounts depending on how our accounts do. I know of a few others on this forum who had the same thing. Some years it�s less than $100, some years it�s more. We don�t see that money, we get a tax form from the bank. Just because your situation doesn�t happen doesn�t mean it is wrong. You just happen to have a different situation.


Which is why all parties getting divorced should look at their situation and decisions on equalization. It would be stupid to take funds and dump them in an RRSP if you have to pay spousal after retirement. Having a good lawyer and accountant helps.

I am not saying it is impossible, I am asking what type of RRSP you have that it brings T5. If this is with some major provider, like big 5 banks, maybe you won't mind sharing plan name.

As for RRSP and equalization if RRSP was in your name you can transfer it to your ex if he/she agrees and has contribution room. But if they say no, all you can do is negotiate disposition cost, either via lawyers (or yourself) or in court. From what I heard it is very hard to convince judge that your costs will be above 25%, unless you have millions in RRSP.

[rockscan]

what type of RRSP you are referring to? In self directed RRSP you could get dividends from some stock, but as long as it stays in RRSP, even without being reinvested you won't get T5. I am not getting from one managed by bank either.

My husband and I get a dividend T5 every other year for amounts depending on how our accounts do. I know of a few others on this forum who had the same thing. Some years it’s less than $100, some years it’s more. We don’t see that money, we get a tax form from the bank. Just because your situation doesn’t happen doesn’t mean it is wrong. You just happen to have a different situation.

As for the reasoning imagine couple is divorced. One gets 50k, the other gets 75k in RRSP. Next year they both retire, for simplicity let's say RRSP grew to 76K, and one wants to withdraw entire amount 76k. Why would you pay SS on the withdrawal from RRSP? It was part of the equalization. I could understand the dispute SS on 76-75=1k, but not on 76k.

Which is why all parties getting divorced should look at their situation and decisions on equalization. It would be stupid to take funds and dump them in an RRSP if you have to pay spousal after retirement. Having a good lawyer and accountant helps.

[respondent]

Actually, depending on the fund type, you will get a T5 for gains in the RRSP. The gains are simply reinvested but are taxable due to the fund set up.

The logic is it�s still income and unless you have lifetime ss or retire early, there is no impact.

what type of RRSP you are referring to? In self directed RRSP you could get dividends from some stock, but as long as it stays in RRSP, even without being reinvested you won't get T5. I am not getting from one managed by bank either.

As for the reasoning imagine couple is divorced. One gets 50k, the other gets 75k in RRSP. Next year they both retire, for simplicity let's say RRSP grew to 76K, and one wants to withdraw entire amount 76k. Why would you pay SS on the withdrawal from RRSP? It was part of the equalization. I could understand the dispute SS on 76-75=1k, but not on 76k.

[rockscan]

you won't see T5 for RRSP - the tax is differed till withdrawal time.

I am not as confident about RRSP income though. Say you had equalization, one party gets cash 50K, other RRSP 75K (with some discount due to future tax). What is the logic behind party that ends up with RRSP to pay support on those withdrawals?

Actually, depending on the fund type, you will get a T5 for gains in the RRSP. The gains are simply reinvested but are taxable due to the fund set up.

The logic is it’s still income and unless you have lifetime ss or retire early, there is no impact.

[respondent]

Do you get a tax slip for it? I believe its a T5? If yes and it is reported on your taxes you could argue that the money is not seen but simply reinvested in the RRSP each year. Only if you withdraw it as income can it be claimed as such.

you won't see T5 for RRSP - the tax is differed till withdrawal time.

I am not as confident about RRSP income though. Say you had equalization, one party gets cash 50K, other RRSP 75K (with some discount due to future tax). What is the logic behind party that ends up with RRSP to pay support on those withdrawals?

[rockscan]

If a *recipient* of spousal support has an RRSP that generates tax-sheltered interest/dividends/capital gains each year (let's say for example, $25,000 each year), is (how is) that $25,000 factored in to the calculations of that recipient's monthly spousal support entitlement? The recipient does not *withdraw* the $25k (the RRSP value simply increases by that amount).

I can find lot of info on how RRSP *withdrawals* or income from a RRIF factor in, but can't seem to find info re: interest/dividends/cap gains that make the $ value of the RRSP portfolio increase but those $ are not withdrawn.

Do you get a tax slip for it? I believe its a T5? If yes and it is reported on your taxes you could argue that the money is not seen but simply reinvested in the RRSP each year. Only if you withdraw it as income can it be claimed as such.

[DHTO]

Gains inside a registered plan are not part of the net income for calculating support.

Similarly if the value of her portfolio went down, she couldn't claim that as a deduction.

My guess is that support payments are designed to level the quality of living based on disposable income for that year. Future years are not considered. That's why capital gains realized in year are grossed up from 50% gain for tax purposes.

[rconnors]

If a *recipient* of spousal support has an RRSP that generates tax-sheltered interest/dividends/capital gains each year (let's say for example, $25,000 each year), is (how is) that $25,000 factored in to the calculations of that recipient's monthly spousal support entitlement? The recipient does not *withdraw* the $25k (the RRSP value simply increases by that amount).

I can find lot of info on how RRSP *withdrawals* or income from a RRIF factor in, but can't seem to find info re: interest/dividends/cap gains that make the $ value of the RRSP portfolio increase but those $ are not withdrawn.