What happens to home, RRSPs after separation
March 30, 2012 | John Syrtash
Q: I have been married for seven years. My wife and I live in the home I own, bought five years before marriage. The home is registered in my name only. My wife contributed nothing to the purchase or enhancement to the value of this home. I also own a large amount of RRSPs and no debts. My wife has no assets or liabilities. Our marriage may end in separation, I am not certain. The mortgage payments are a bit high and I would prefer to move into a smaller home.
What is my current situation if we were to separate, and if not, what should I do to plan for separation down the road to minimize the damage to my property holdings?
Before marriage, my home was worth $350,000. Now it’s worth over $550,000.
A: Currently, if you were to separate, your wife would be entitled to half of the entire value of your matrimonial home, including its premarital value. She would also be entitled to half of the increase in the value of your RRSPs, after tax, since they increased after the date of marriage, valued as of the date of separation.
There is nothing you can really do about your RRSPs, unless you foolishly and improperly attempt to transfer them into the names of third parties, like a close and trusted relative or friend.
However, the moment you do so the entire capital amount of the RRSPs becomes calculated as part of your taxable income for the year in which you cashed them.
Moreover, if you transferred them close to the date of separation, say within the year or so, you could be accused of deliberately and fraudulently depleting your assets to deprive your wife of her rights to an equalization split. She might then likely recover what you tried to hide from one of your other more exposed assets or from your income over a number of years, plus penalties and interest.
Your matrimonial home is another matter. The law gives her an unfair split of its premarital value in your situation. Accordingly, this is what you might wish to do to avoid splitting the premarital value of your home: your wife might agree to buy a new home, one that you did not own before the marriage, especially if you offer to do so in joint names.
Since you will not have owned that second home on the date of marriage the Ontario Family Law Act permits you to deduct the full value of the equity in the first home owned on the date of marriage in the equalization calculation in the event that you separate from your net worth when you compare your respective wealth positions. This effectively means that your wife would only benefit from her half-share in the post-marital value of the second or any subsequent matrimonial home.
According to your evaluations, this means a saving of about $100,000 if you were to separate in the near future.
JOHN T. SYRTASH, B.A.(Hon.) LL.B,, Phone: (416) 642-5410, Barrister and Solicitor, Mediator • Mr. Syrtash is Counsel to Garfin Zeidenberg LLP • 5255 Yonge Street Suite 800 • Toronto Ontario M2N 6P4 • Cell (416) 886-0359 • website:www.freemychild.com • email: firstname.lastname@example.org • In practice for 29 years.