In British Columbia, Registered Retirement Savings Plans (RRSPs) are treated as property and are typically divided when spouses separate. RRSPs are governed by the property division rules set out in the Family Law Act, which apply to both married spouses and common-law partners.

Because RRSPs are long-term savings with built-in tax consequences, it is important to understand how they are valued and divided so the outcome is fair, practical, and workable for both people.

Under the Family Law Act, RRSP contributions made during the relationship are considered family property and are subject to division.

RRSP contributions made before the relationship began are generally excluded property and remain with the original owner. However, any growth on those pre-relationship contributions that occurs during the relationship is considered family property and must be divided.

This means that even when part of an RRSP is excluded, it is very common for at least some portion of the RRSP to be shared.

RRSPs are usually valued as of the date the Separation Agreement is signed, unless both spouses agree to use a different valuation date.

The value used includes both contributions and investment growth up to that point. Using a clear and agreed upon valuation date helps ensure the RRSP division aligns with the division of other assets and avoids confusion or disputes later.

In British Columbia, family property is generally divided equally. This includes RRSPs.

An unequal division can occur if both spouses agree or in limited circumstances where an equal division would be significantly unfair. In most cases, however, RRSPs are included in the overall equalization calculation and divided on a fifty-fifty basis.

There are two common ways to address RRSPs in a Separation Agreement.

RRSP funds can be transferred directly from one spouse’s RRSP into the other spouse’s RRSP on a tax-deferred basis, as permitted by the Canada Revenue Agency.

This type of transfer does not trigger immediate tax, but it does require a written Separation Agreement or court order that clearly sets out the division. Financial institutions rely on this documentation to complete the transfer.

Divii defaults to this method because it preserves the registered status of the funds and avoids unnecessary tax consequences.

Alternatively, instead of physically splitting an RRSP, one spouse can keep their RRSP and the other spouse can receive assets of equivalent value, such as equity in the family home, cash savings, or other investments.

This approach requires more care. RRSPs are pre-tax assets, while many other assets, such as houses or businesses, are effectively after-tax assets.

In Divii, you will be asked whether you want to discount the RRSP value for tax so that it can be compared on an after-tax basis to other assets. This is usually done only when RRSPs are being balanced against non-registered assets and is often part of reducing an overall equalization or buyout payment.

RRSPs are registered assets, meaning tax is deferred rather than eliminated. Income tax will be payable when RRSP funds are eventually withdrawn.

Because of this, RRSPs are typically valued on a before-tax basis when they are being compared against other registered assets, such as pensions or additional RRSPs.

If RRSPs are being balanced against non-registered assets, such as a house or a business, it may be appropriate to consider the after-tax value of the RRSP to ensure a fair comparison.

Clearly addressing tax assumptions in the Separation Agreement helps avoid misunderstandings and reduces the risk of future disputes.

Defined contribution pension plans are often treated in a similar way to RRSPs.

The non-member spouse can usually have their share of a defined contribution pension transferred into an RRSP or a Locked-In Retirement Account. This avoids immediate taxation and allows retirement savings to remain sheltered.

The pension is typically assigned a before-tax value and included in the equalization of registered property.

Formal pension valuations are usually required only when one spouse plans to buy out the other’s interest in a pension, or when a pension needs to be balanced against other high-value assets such as the family home.

When comparing pensions to RRSPs, it is important to use consistent values. Before-tax values should be used when balancing against registered assets, and after-tax values should be used when balancing against non-registered assets.

Your Separation Agreement should clearly set out:

• The value of each RRSP
• Whether any portion is excluded
• How the RRSPs will be divided
• Whether division will occur by transfer, offset, or another agreed method

Clear drafting in Divii ensures the agreement complies with the Family Law Act and applicable tax rules, and allows financial institutions to carry out the division without delay.

Although RRSP division is often more straightforward than pensions or businesses, it still involves tax planning and legal requirements.

Speaking with a family lawyer, accountant, or financial advisor can help ensure the RRSP division is structured correctly and fits cleanly into the overall property division.

By addressing RRSPs clearly and thoughtfully in your Separation Agreement, both spouses can move forward knowing that retirement savings have been handled fairly, legally, and with long-term financial stability in mind.

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