Who gets the RRSPs?

The Globe and Mail on division of Registered Retirement Savings Plans following the breakdown of a marriage:

While family law across Canada calls for a 50-50 split of matrimonial property, couples don’t necessarily need to split each asset right down the middle. And many don’t, says Ms. Linden, choosing instead to allocate certain types of assets to each spouse in a way that gives both parties roughly the same dollar value in the end.

The tax implications inherent in an RRSP should make parting couples pause for thought, says Tracy Theemes, a certified financial planner and co-owner of Sophia Financial Group in Vancouver.

“There’s a lack of understanding of what an RRSP really is,” says Ms. Theemes, a financial divorce specialist.

“It’s a tax holding structure. With an RRSP, you have a relationship with the CRA (Canada Revenue Agency), and that’s a distinct difference from other types of assets.”Dividing or transferring an RRSP during a divorce does not trigger a tax bill or credit for anyone, but cashing it out will, says Ms. Theemes. That’s why it’s important for divorcing couples to make sure they’ll have enough cash to take them through the transition period after separation, and beyond.

Ms. Theemes says she usually advises couples to just divide all assets down the middle – RRSPs, other investments, and cash from the sale of the family home.

“Especially in high-conflict splits, that’s the best thing to do,” she says.

I usually recommend to clients that the RRSPs simply be divided by way of tax-free rollover, whereby the funds are equalized between the parties without any monies being withdrawn.

If the parties insist on anything other than an equal division – say, if one party decides to waive her entitlement to the RRSPs in order to keep the matrimonial home – standard practice in Nova Scotia is to deduct the applicable withholding tax rate (between 10% and 30%, depending on the balance)   In other words, $50,000.00 in an RRSP would be valued at $35,000.00 for division purposes.

Eric, Lola, and division of property

This week, the Supreme Court of Canada will revisit the issue of whether common-law spouses are presumptively entitled to an equal division of family property:

They’re known as “de facto spouses.” Partners in a paperless marriage. Or, in this case, plain old Eric and Lola.

But there’s almost nothing ordinary about the tale of a 51-year-old Quebec billionaire businessman and a former Brazilian model, whose messy legal battle could change life for millions of Canadian couples.

Their case, which reaches the Supreme Court of Canada [this] Thursday, is expected to decide whether common-law spouses have the same rights as married couples to support and sharing of property after a break-up.

While the case is likely to have its greatest impact in Quebec, legal experts predict that if Lola succeeds in her landmark challenge, eight other provinces and territories that deny property rights to unmarried spouses, including Ontario [and Nova Scotia – DJP], will be forced to rethink their legislation.

As a starting point, common-law spouses should have the right to both alimony and an equal share in property, argue lawyers for the Women’s Legal Education and Action Fund (LEAF), an intervenor in the case.


Looming over the case is a 2002 decision by the Supreme Court involving Susan Walsh, a Nova Scotia woman who sought a share of her late common-law husband’s assets. In that case, the court’s 8-1 majority upheld a section of Nova Scotia’s Matrimonial Property Act, which gives only married people a share in a partner’s property.

The court said excluding common-law couples was a way of respecting their decision to avoid marriage because of the legal obligations that go along with it.

LEAF argues it is time to revisit the Walsh decision, saying the court in 2002 did not have the benefit of social science research that shows when people move in together, they aren’t motivated by legal considerations.

In fact, North American research over the past decade has shown that most couples who live together are under the mistaken impression they already have the same rights as married couples.

Via @John_Magyar.

Family finances shouldn’t be a secret

Mindelle Jacobs of the Edmonton Sun, on the importance of sharing financial information:

Marie got the shock of her life at a routine mortgage renewal meeting, when her husband told the bank manager he’d racked up $22,000 in credit card debt.

“I had no idea,” recalls Marie (not her real name). “I would never have guessed it was that much. My blood pressure went up.”

That one spouse would hide extravagant spending habits from another is no surprise to family lawyers. Arguments over money are probably the biggest stressors on relationships.

When a saver marries a spender or when there’s no reasonable compromise on money management, the consequences can be dire – insistent creditors, bankruptcy or divorce proceedings.

“In my experience, it’s probably more common than not that a spouse doesn’t know every financial detail (about the other spouse),” says Marla Miller, an Edmonton registered family mediator and collaborative family lawyer. “It’s very rare that both spouses . know absolutely everything.”

Grant Gold, head of the family law section of the Canadian Bar Association, agrees. “It happens more often than you would think – that people run separate financial lives.”

The Toronto lawyer says he recently settled a divorce case in which the biggest stumbling block was that the husband didn’t know that his wife had accumulated $60,000 in debts.

“It’s relatively common. It speaks to problems in the marriage. And it speaks to the need for couples to communicate in advance about things like that,” says Gold.

Via @MarlaGilsig.

The legend of “Here, My Dear”

It’s one of the most enduring urban legends in music history: that a family court Judge ordered Marvin Gaye to pay his ex-wife all the royalties from his next album, so he deliberately recorded a stinker that no one would buy.

The truth, according to Snopes.com, is more complicated (and much more interesting):

By the time Marvin’s day of financial reckoning arrived, he had little cash and was well in arrears for a large amount of back taxes, so his attorney worked out a settlement under which Anna would be paid off from the royalties earned by Gaye’s next album. That next album turned out to be Here, My Dear, a harrowing “concept album of divorce” which chronicled the turmoil of Anna and Marvin’s relationship. The record’s symbolism was hardly subtle: The inner sleeve depicted a Monopoly-like board game emblazoned with the word JUDGMENT, across which a male hand passed a record to a female hand. On the man’s side of the board were only a piano and some recording equipment, while the female’s side of the board included money, a house, a Mercedes, and a diamond ring.

Although Marvin and Anna’s divorce settlement was indeed tied to the royalties generated by Here, My Dear, the common legend surrounding the record — that Marvin was ordered by a judge to hand over all his royalties from the album to Anna, and that Marvin was in a position to spitefully deprive Anna of those royalties by intentionally recording an album so bad it would not sell — is largely untrue. First off, the payment-through-royalties scheme was a settlement worked out through mutual agreement, not one devised and mandated by a judge. Second, rarely does a competent attorney accept (or a responsible judge impose) a dissolution of partnership settlement under which the amount of compensation received by one party is completely dependent upon a future endeavor of the other party, precisely because such a settlement could allow one side to cheat the other by deliberately underperforming. (A similar legend about producer Phil Spector is based on this premise.)

The circumstances in Marvin Gaye’s case were that he agreed to pay Anna a total of $600,000, the first $307,000 coming from the advance against royalties he was guaranteed for his next album, and the remaining $293,000 to be paid out of any royalties earned beyond the advance. But Anna would lose nothing if the record sold poorly, because the agreement specified that if the album failed to earn $293,000 within two years, Gaye was obligated to pay Anna the difference himself, and thus he had nothing to gain by tanking the sessions and purposely turning out substandard product. (In fact, he was in a position to lose a great deal by doing so, both because he was entitled to keep any royalties earned after the first $600,000, and because he stood to earn additional monies not payable to Anna through his publishing rights.)


Critical reaction to Here, My Dear was mixed. As Gaye biographer Steve Turner wrote, “Reviewers didn’t seem to know whether the double album was a huge joke at the expense of Anna Gaye and Motown, or a work of genius.” The record was not a hit, failing to sell well enough to even recoup the advance against royalties paid by Motown, so Marvin Gaye (who was by then officially bankrupt) was obligated to begin making monthly payments to Anna to cover the shortfall. However, Gaye was killed in 1984 still owing Anna the additional $293,000 due her, and monies earned by his estate since his death have gone to paying off the IRS rather than benefiting his ex-wives and children, thereby proving the maxim about life’s only two certainties.

Here, My Dear is No. 462 on Rolling Stone‘s list of the 500 greatest albums of all time.  The track listing includes “When Did You Stop Loving Me, When Did I Stop Loving You,” “Anger” and “You Can Leave, But It’s Going to Cost You.”

What part of “get a prenup” didn’t he understand?

Kobe Bryant’s wife has filed for divorce, and under California law, she will be entitled to half of the millions Bryant has earned playing basketball unless he had a prenuptual agreement or marriage contract oh hey guess what?

Kobe Bryant‘s wife has filed for divorce … TMZ has learned.

Vanessa Bryant filed legal docs Friday afternoon, citing “irreconcilable differences.”

Sources connected with the couple tell TMZ … Vanessa — who stuck by Kobe after he was charged with sexually assaulting a Colorado woman in 2003 — decided to end the marriage because she believes Kobe has been unfaithful … again.

As one source puts it, “She’s been dealing with these incidents for a long time and has been a faithful wife, but she’s finally had enough,” adding, “This one is the straw that broke the camel’s back.”

And our sources say … Kobe “desperately” wants to win Vanessa back and will do “whatever it takes” to save their 10 1/2 year marriage.

According to the legal docs, Vanessa is asking for joint custody of their 2 daughters — 8-year-old Natalia and 5-year-old Gianna — but Vanessa is asking that Kobe get visitation rights, which means she wants the kids in her care most of the time.

We’ve learned the couple has NO PRENUP, so 29-year-old Vanessa is entitled to half of the empire Kobe built over the last decade.


Oh yeah, that $4 million ring Kobe gave Vanessa after the 2003 scandal …. It’s all hers.  A gift is a gift.

If Bryant loses half of his fortune, maybe he can get some money back by recording another song:

Yeah, that’ll do it.


When seniors separate

The breakdown of a long marriage is especially heartbreaking, but it’s no longer uncommon.  This Canadian Press article contains some good advice for older Canadians who are separating.

(Well, except for the recommendation that couples who get along “try to divorce without a lawyer to save money.”  If you think paying a lawyer is expensive and frustrating, try navigating the family court system without one.)

Divorce is hard enough but seniors who split up in retirement, especially women, can lower their quality of life and end up in debt or even poverty, experts say.

“It’s so difficult for couples financially to divorce to begin with,” said financial planner Marta Stiteler of the Pillar Retirement Group in Hamilton, Ont.

“When you do it in retirement, it’s like a double whammy.”

If a split is amicable, seniors should try to divorce without a lawyer to save money [good luck with that – DJP] Stiteler said, but advised that couples should at least get separate legal and financial advice.

“Women, they are the most vulnerable if they are of retirement age now. Some may never have worked or may never have been involved in the finances of the home.”


…married couples who get divorced between the ages of 67 and 80 are projected to have the largest decrease in wealth and the largest increase in poverty, said Dabu, vice-president of retirement and financial planning strategy for BMO (TSX:BMO).

“If you’re in retirement and you’re not working, both of you now have to split that income and are supporting two separate households. That can have a significant impact on your retirement lifestyle,” Dabu said.

“It’s one of the big causes of debt, certainly, in retirement.”

Stiteler said emotion, if possible, should be left out of ending the marriage.

“Don’t give up everything to keep the house because of sentimental reasons. Something I see a lot of is that people want to keep the house in lieu of the pension. If you have to sell the marital home, you have to sell the marital home.”

She advises getting an actuarial appraisal of any retirement pensions to find out their value and also said couples need to know exactly what assets, accounts and finances they individually and jointly have.

“Unjust enrichment” and common-law relationships

In Nova Scotia, divorcing individuals are automatically entitled to an equal division of matrimonial property (and debts), with a few recognized exceptions such as business assets and gifts.

For those emerging from a common-law relationship, however, it’s not that simple.  If you seek a share of your former partner’s property, you must establish your entitlement to same in court.

One way to do so it to establish that your former partner was unjustly enriched at your expense – that is, he or she accumulated money and property while you sacrificed by, say, leaving your employment to stay home and care for the children.  A recent Supreme Court of Canada decision clarifies the law regarding this doctrine:

The Supreme Court delivered a unanimous decision regarding the Vanasse and Seguin case and a second case from British Columbia. The court ruled that a person deserves fair compensation for making a sacrifice, such as giving up a career, in support of a partner, when he or she is engaged in a “joint venture” as a common-law couple.

“In my view, where both parties have worked together for the common good, with each making extensive, but different, contributions to the welfare of the other and, as a result, have accumulated assets, the money remedy for unjust enrichment should reflect that reality,” wrote Justice Thomas Cromwell.

“The money remedy in those circumstances should not be based on a minute totting up of the give and take of daily domestic life, but rather should treat the claimant as a co-venture, not as the hired help.”


Hunter Phillips, representing Seguin, said that he was disappointed by the ruling, which he believes has loosened conditions for calculating a monetary reward for unmarried couples in a case of “unjust enrichment.”

This concept of “unjust enrichment” is considered to be defined by a case when one spouse is allowed to accumulate wealth because of an arrangement or sacrifice made by the other partner. But Phillips added that the decision does not guarantee automatic joint property rights for all common-law couples.

“There’s a common misconception amongst the public that a common-law marriage means that after some period of cohabitation, there’s automatic property rights,” said Phillips. “That is wrong and that (Supreme Court) decision doesn’t change that at all.”

A concise summary of the case is posted at the excellent Toronto Family Lawyer Blog.  Full decision, in PDF format, here.