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Old 02-04-2015, 09:54 AM
whyme? whyme? is offline
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Default Equalization of retirement savings first?

Looking for some advice here. We had 2 properties - one has been sold with proceeds held in trust pending final separation agreement and equalization, the matrimonial home is mortgage free and will be put on the market soon.
-no real debts
-I have significantly more RRSP savings than she does
-I have a federal pension plan (currently working-not drawing from it) and have an actuarial calculation of present value.
-she had a TFSA in her name and has kept those sums
-I have been paying all joint bills since separation

My lawyer says it is typical in this situation to attempt to equalize retirement savings assets first then split up the other assets. In that scenario I would be owed an equalization payment out of the proceeds of either property to cover the TFSA and bills paid. This is unlikely to be palatable by my ex. So I suggested we calculate the rrsp spousal transfer amount such that no equalization payment is warranted and we split proceeds evenly of the 2 properties.

Does this sound reasonable?
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Old 02-04-2015, 02:24 PM
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Rioe Rioe is offline
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Argh, I had a better answer but lost it somehow.

There are several types of assets (we saw a recent CanLII decision describing them go by, maybe someone can track it down).

Income generating assets like a pension or a business.

Non-liquidatable assets like a house, or maybe a RRSP that would have tax implications if it was cashed out.

Liquidatable assets like a vacation property or a TFSA.

It's better to have each spouse end up with some of all of them, rather than one type with each spouse. For example, one spouse get the pension, and the other gets the matrimonial home. So then one has retirement income but no place to live, and the other has a place to live, but no income after retirement.

Your lawyer is suggesting:

Divide the pension in half.
Divide the RRSPs in half.
Your ex gets her entire TFSA.
Subtract the value of the TFSA and her accumulated share of the joint bills from the funds in trust and matrimonial home proceeds for yourself, and divide the remainder in half.

Seems very fair and reasonable to me. Why do you think your ex would balk at it?

The alternative you are suggesting:

Divide the funds in trust and matrimonial home proceeds in half.
You get your pension.
Your ex gets her TFSA.
Subtract the difference between the above, plus her accumulated share of the joint bills from the RRSPs and transfer enough of the RRSPs to her to make it fair.

On the surface, it seems reasonable, but when you look closely, it doesn't divide up locked-in assets and liquid assets as evenly as your lawyer's method. There's a reason that's the way it's typically done.

Also, keep in mind that there are special rules for federal pensions. If you don't divide it evenly, your ex can come back at ANY time in the future and ask for it to be divided properly. Unless you have solid documentation in your separation agreement to account for that value being divided with other assets, you could be stuck later.

Lastly, keep in mind that you could be setting yourself up for possible SS obligations. If she gets little to no retirement income out of the division, you could be paying SS later and longer. Also, why isn't she paying her half of the bills out of her TFSA? You paying them is like admitting she needs SS from you.
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Old 02-09-2015, 01:52 PM
whyme? whyme? is offline
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Hi - thanks for the input. My lawyer and I are advocating the same division - just in my suggestion she would not owe me a cash payment (due to TFSA and bills payment) - we would only transfer sufficient rrsps to her such that no equalization payment would be required.

I would ensure that there is language in the separation agreement to detail that no further entitlement to the pension would be possible.

I agree in hindsight that me paying the bills and going for an accounting of those sums are equalization wasn't smart. She wasn't working much and cried that she needed the TFSA amounts for a down payment on a house. Well her cheating partner bought her a house so it was just a lie. Fool me once...
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