In British Columbia, Registered Retirement Savings Plans (RRSPs) are divided according to the Family Law Act, which outlines the rules for property division upon separation. Below is an outline on how RRSPs are generally handled in a Separation Agreement.

RRSP contributions made during the relationship are considered family property and subject to division. Contributions made before the relationship are excluded; however, any growth on those pre-relationship contributions during the relationship is family property and must be divided.

The value of the RRSP is assessed as of the date of the Separation Agreement, unless otherwise agreed. This valuation includes both contributions and investment growth accrued up to that point. Proper valuation is important to ensure fairness in the overall division of assets.

In BC, family property, including RRSPs, is typically divided equally between spouses. Exceptions for unequal division may apply if both spouses agree or if there are unique circumstances, such as significant debts.

Offset Method: Instead of splitting the RRSP, one spouse’s share can be offset by other assets, such as equity in the family home or savings accounts.

Tax-Deferred Transfer: RRSP funds can be transferred directly into the other spouse’s RRSP account through a tax-deferred transfer without triggering tax consequences, as permitted by the Canada Revenue Agency (CRA). A court order or a written Separation Agreement is required for this process.

RRSPs have deferred tax liability, meaning taxes are owed when the funds are withdrawn. Separation Agreements often adjust the value of the RRSP to account for these future taxes, ensuring a fair division.

The Separation Agreement should detail the method of division, whether through a tax-deferred transfer, an offset with other assets, or another arrangement. It's essential that the agreement complies with legal and tax requirements to avoid disputes or unintended tax consequences.

The non-member spouse can have their share of the pension transferred into a Registered Retirement Savings Plan (RRSP), or a Locked-In Retirement Account (LIRA).

This avoids immediate taxation and simplifies the division. The pension’s before-tax value should be assigned and factored into the calculation for equalizing registered property.

Pension valuations are typically only done if one spouse plans to buy out the other’s share of the pension. The pension value is needed to offset other high-value assets, like a family home.

Be sure to use before-tax values to balance the pension against registered assets like RRSPs and use after-tax values to balance the pension against after-tax assets like a house or business.

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