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RRSPs and Child Support/Spousal Support

April 29, 2014     Articles

When it comes to BC child support and spousal support, it is not just your employment income which is included. It is extremely important to know what you can exclude so that you do not have to pay more than you have to. Here are some tips on whether you can exclude RRSPs from your income for BC child support and spousal support purposes:

Are the RRSPs I Cashed Out Last Year Included in My Income for Child Support?

It depends. If you continuously take out RRSPs or have for the past few years, they might be considered as your income. If it was just a one-time thing, then they might be excluded. If you used RRSPs to pay joint debts or for your legal fees, they will likely be excluded. If you want the RRSPs excluded, you bear the burden of proving why it should be excluded. If you do not properly know how to argue for them to be excluded, then you may risk having them included in your income. See what the courts say:

The Court of Appeal Case of McKenzie v. Perestrelo discusses RRSPs and Child Support/Spousal Support Income

The most recent BC Court of Appeal case of McKenzie v. Perestrelo discussed the RRSP issue:

82] There is no clear rule about the inclusion of RRSP withdrawals in a payor’s Guideline income; this is left to the discretion of the judge hearing the case: Burzminski v. Burzminski, 2010 SKCA 16 at para. 11. However, there are some guiding principles from the case law that may be summarized as follows:

  • RRSP income is presumptively part of a spouse’s income for child support purposes because it forms part of a person’s total income on a tax return and it is not listed as an exemption in Schedule III of the CSG. The spouse seeking to exclude the RRSP amount bears the burden of demonstrating that treating his or her RRSP withdrawal as income would not lead to the fairest determination of income: Fraser v. Fraser, 2013 ONCA 715 at paras. 97-99.
  • Where RRSP withdrawals are regular and a spouse’s only source of income they are more likely to be included as income for the purpose of determining support: for example, see Edgar v. Edgar, 2012 ONCA 646.
  • On the other hand, there is no presumption that “non-recurring withdrawals from RRSPs should be automatically excluded from income for child support purposes”: Fraser v. Fraser, 2013 ONCA 715 at para. 105.
  • …For instance, RRSP withdrawals have not been included as income where:
  • The amount has already been accounted for in the division of assets and was used to fund legal fees: de Bruijn v. de Bruijn, 2011 BCSC 1546 at para. 34.
  • The amount has been used to repay a debt incurred by the other spouse in their joint names: K.A.M. v. P.K.M., 2008 BCSC 93 at para. 51.

Reading Court Cases is Like Reading Chinese…so are RRSPs included in my income?

I will try to put it as simply as I can:

  1. If you take out RRSPs to pay your lawyer, they will be excluded from your income
  2. If you take out RRSPs to equalize the division of family assets, they will not be included in your income
  3. If you only take RRSPs out once not to happen again, they will be excluded
  4. If you take RRSPs out every year, they will be included
  5. If you take RRSPs out to pay joint debts, they will be excluded.

There are many other situations where RRSPs can be excluded from your income.

For questions or to set up an INITIAL CONSULTATION, contact us at 604-974-9529 or email info@ylaw.ca

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