How RRSP and TFSA Are Split in a Divorce in Canada

When retirement savings (RRSPs, RRIFs, TFSAs, pensions and LIRAs) are part of a separation, two sets of rules apply. This page covers how each account type is divided; the rest of the RRSP, RRIF and locked-in account guides are in the RRSP and RRIF guide directory.

Family law decides the split, tax law decides the transfer

Provincial family law decides which property is shared and in what proportions. Each province has its own family property statute, and they don’t work the same way. Ontario’s Family Law Act gives the spouse with the lower net family property one-half the difference between the two spouses’ net family property (an equalization payment). British Columbia’s Family Law Act gives each spouse, on separation, an undivided half interest in all family property.

Federal tax law (the Income Tax Act) decides whether moving a registered account from one spouse to the other is taxed.

How the amount to transfer is worked out: Ontario’s equalization

In Ontario, each spouse’s net family property is the value of everything they own on the valuation date (usually the date they separate with no reasonable prospect of getting back together), after deducting:

1. their debts and other liabilities, which can include the tax that would be owed on the property, such as the tax on an RRSP when it is withdrawn
2. the net value of the property they owned on the date of the marriage, other than a matrimonial home

Property acquired after the marriage by gift or inheritance from a third person is excluded. An RRSP or TFSA balance on the valuation date counts like any other property, and savings a spouse already had on the date of the marriage are part of the deduction in item 2.

The payment can be made in cash, by transferring other property, or by transferring registered savings, which is where the tax rules come in.

How an RRSP or RRIF is divided

When a marriage or common-law partnership breaks down, RRSP or RRIF money can move to the other partner's RRSP or RRIF with no tax if you are living separate and apart, the transfer is made under a court order or judgment or a written separation agreement dividing your property, and it goes directly from plan to plan (Form T2220); money paid out to you first is taxable income. The conditions, and how the same rollover works at death, are covered in transferring an RRSP to a spouse.

Money can go into the receiving spouse’s own RRSP only if they are 71 or younger at the end of the year of the transfer; after that it can go to their RRIF.

Cashing out first is the expensive route. An amount withdrawn from an RRSP is taxable income to the person who withdraws it, even if the money is then handed to the other spouse.

Spousal RRSP attribution and separation

Withdrawals from a spousal RRSP are normally taxed to the contributing spouse for a few years after a contribution. Exception: you were living separate and apart because the relationship broke down. The full timing rule and its other exceptions are in spousal RRSP attribution.

How a TFSA is divided

On a divorce or the breakdown of a marriage or common-law partnership, money can move from one person’s TFSA to the other’s through the financial institution without affecting either person’s contribution room, if both of these apply:

• you are living separate and apart at the time of the transfer
• the amount is transferred under a decree, order or judgment of a competent tribunal, or under a written separation agreement

Because the transfer isn’t treated as a withdrawal, it creates no new room for the person it comes from the following year. Withdrawing the money and having the other spouse deposit it is a different thing: the deposit is a new contribution that needs that spouse’s own available TFSA contribution room. How to transfer a TFSA explains how institutions handle transfers.

How pensions and LIRAs are divided

How a pension is valued and split depends on the pension law that governs the plan (in Ontario, the Pension Benefits Act sets the value used for family law), so the plan administrator is the place to start. On the tax side, a lump sum from a registered pension plan (RPP) that a spouse is entitled to under a court order or a written agreement dividing your property can go to that spouse’s RPP, RRSP or RRIF with no tax if it is transferred directly, using Form T2151.

A LIRA is what the CRA calls a locked-in RRSP: a plan holding money transferred from a pension plan, which has to stay in the plan or move to another locked-in plan rather than being paid out. Dividing one uses the same marriage-breakdown rollover as an ordinary RRSP (above), and the receiving spouse’s share goes into a locked-in account in their own name, not into an ordinary RRSP.

Dividing CPP credits

After a divorce or separation, the CPP contributions both partners made while living together can be divided equally (credit splitting), even if one of them never contributed; the division is permanent, and periods when either partner was under 18, over 70, receiving a CPP/QPP retirement pension or considered disabled aren't split. It is separate from dividing property: you or your former partner applies to Service Canada, and who qualifies depends on when you divorced or separated and whether you were married or common-law (Service Canada, CPP credit splitting).

Common mistakes to avoid

Related guides

• Transferring an RRSP to a spouse: the rollover on breakdown and at death
• Spousal RRSP attribution
• RRSP contribution limit
• TFSA contribution limit
• Finances after a divorce in Canada
• RRSP withdrawal rules
• Income tax calculator