Is the pre-marriage first home RRSP homes buyer plan withdrawal considered a debt(loan) in the NFP if it was paid back during the marriage? $20,000 was withdrawn from RRSP with yearly payback for 20 years during marriage. My ex used his RRSP as a down payment for our new home and I used cash - I feel I am being penalized in this situation as I contributed to the payback of this RRSP during our marriage. Is there case law that can support this as a debt on date of marriage for NFP calculation. Thanks
Pre-marriage RRSP withdrawal First Home buyers program
- Thread starter Divorce
- Start date
Rioe
Well-known member
You still have the same value though.
You started with an asset in the form of cash, and ended with an asset in the form of real estate.
Your ex started with an asset in the form of RRSP, and ended with an asset in the form of real estate.
You are now dividing the real estate, and any other assets, which would include the growth in his RRSP that you helped him repay.
Equalization only looks at the snapshots of the financial situation at marriage, when you became one financial entity, and at separation, when you divide back into two financial entities. It doesn't care what happened with any finances in the intervening time, who paid for what, etc.
You started with an asset in the form of cash, and ended with an asset in the form of real estate.
Your ex started with an asset in the form of RRSP, and ended with an asset in the form of real estate.
You are now dividing the real estate, and any other assets, which would include the growth in his RRSP that you helped him repay.
Equalization only looks at the snapshots of the financial situation at marriage, when you became one financial entity, and at separation, when you divide back into two financial entities. It doesn't care what happened with any finances in the intervening time, who paid for what, etc.
This is not a loan. It was a withdrawal from his own savings account. But because it was from a tax-deferred savings account, there IS a tax liability. Basically if you don't replace the $$, you owe tax on the amount. Or conversely, if you pay it back, you miss out on tax reduction that you would otherwise get from that contribution.
So his premarriage NFP was the rrsp-20k.
You paid into his rrsp.
If home equity and rrsps are both split 50-50, then you get your share back.
So his premarriage NFP was the rrsp-20k.
You paid into his rrsp.
If home equity and rrsps are both split 50-50, then you get your share back.
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Assuming his rrsp grew over then length of the marriage, you will be receiving the percentage of that value. Then you receive the percentage of the value increase of the house. You both paid $20,000 into the purchase of the house. If the rrsp had not been paid back you would have owed tax and not had as high an amount in the rrsp at the separation date. It all works out in the value split.
Rioe
Well-known member
So, at marriage, you had a house, with, say $40k invested in it. We know that came half from your savings in cash, and half from his RRSP, which is now basically empty. But the source of funds is irrelevant. It's only important that you know the value of the house and that the RRSP is zero and your savings account is zero.
Then, at separation, you had a house which is worth, say, $100k now, and his RRSP is up to $50k. The homebuyer loan has been repaid and more has been contributed.
Your merged net worth has increased by $110k (100+50-40) over the course of the marriage. So you each leave with $55k somehow.
Then, at separation, you had a house which is worth, say, $100k now, and his RRSP is up to $50k. The homebuyer loan has been repaid and more has been contributed.
Your merged net worth has increased by $110k (100+50-40) over the course of the marriage. So you each leave with $55k somehow.
HalifaxGuy
New member
You were married so the matrimonial home is split regardless of who or how it was paid. You could of paid for the house 100% and it would still be equalized between the both of you.
The fact that you paid cash for a down payment while he used a first time homebuyer RRSP is irrelevant. You may end up on the short end of the stick, having helped to repay the RRSP, but that's typically what happens to at least one person in a divorce.
The RRSP first time homebuyer plan is not a loan. In my opinion, arguing about that is a rabbit hole and a waste of your time.
Further, any increase in his RRSP during the marriage is also split with you. Therefore, what you invested in his RRSP during the marriage is not a total lost to you. Depending on how it was invested, you could make money off it.
Depending on what province you live, there is the potential for his entire RRSP to be split. Some provinces, like NS, consider assets brought into the marriage to be marital assets. Other provinces, like ON, do not.
The fact that you paid cash for a down payment while he used a first time homebuyer RRSP is irrelevant. You may end up on the short end of the stick, having helped to repay the RRSP, but that's typically what happens to at least one person in a divorce.
The RRSP first time homebuyer plan is not a loan. In my opinion, arguing about that is a rabbit hole and a waste of your time.
Further, any increase in his RRSP during the marriage is also split with you. Therefore, what you invested in his RRSP during the marriage is not a total lost to you. Depending on how it was invested, you could make money off it.
Depending on what province you live, there is the potential for his entire RRSP to be split. Some provinces, like NS, consider assets brought into the marriage to be marital assets. Other provinces, like ON, do not.