Are RRSP and RRIF Withdrawals Part of Your Income for Spousal and Child Support? (Short Answer: It depends)
Many people make RRSP and RRIF withdrawals before and during a family claim. Sometimes these are used to pay legal bills or purchase a new residence. If you do make a withdrawal, how does it affect your guideline income for the purposes of child and spousal support. Like many areas of family law, it all depends.
There is no set rule from the case law on how these withdrawals are treated. It depends on type of claim (spousal or child support), what the withdrawals were used for and the frequency. Ultimately it depends on the trial judge who is hearing the claim and the unique circumstances of each individual case.
The Federal Child Support Guidelines do not give clear directions on this. While they set out how a persons annual income is to be determined, if the court finds that formula does not fairly determine that person’s income, the legislation says the court may determine an amount that is fair and reasonable under section 17. The provisions are produced below:
Calculation of annual income
16. Subject to sections 17 to 20, a spouse’s annual income is determined using the sources of income set out under the heading “Total income” in the T1 General form issued by the Canada Revenue Agency and is adjusted in accordance with Schedule III.
Pattern of income
17. (1) If the court is of the opinion that the determination of a spouse’s annual income under section 16 would not be the fairest determination of that income, the court may have regard to the spouse’s income over the last three years and determine an amount that is fair and reasonable in light of any pattern of income, fluctuation in income or receipt of a non-recurring amount during those years.
Fortunately, the BC Court of Appeal in McKenzie v. Perestrelo, 2014 BCCA 161 has given family law litigants some guidelines on how judges should approach this issue.
In McKenzie, the court considered whether a husband’s RRSP Income should be included in calculating his available income for child and spousal support. The court concluded while there are no clear rules, a persons RRSP and RRIF income is presumed to be part of a payor’s income because it forms part of their total income on their tax return and is not listed as an exemption under Schedule III. This presumption may be rebutted by a variety of circumstances including the reason of the withdrawal, whether a spouse has contributed and withdrawn to the same RRSP in that calendar year, whether the withdrawals are regular or one time and whether the asset is divided as family property. The person seeking the deduction has the onus of proving to the court why it should be excluded.
The RRSP and RRIF withdrawals are treated differently depending on whether the issue is spousal or child support. The fact that an RRSP is equalized during property division would be considered for the purposes of spousal support guideline income, but not necessarily for child support. The Court in McKenzie stated as follows on this point:
” The fact that the RRSP was equalized in the division of property between the spouses does not mean that RRSP withdrawals will be excluded from income for the purpose of determining child support: see Fraser v. Fraser, 2013 ONCA 715 at para. 102 (adopting Aitken J.’s reasoning in Stevens v. Boulerice, 1999 CanLII 14995 (ON SC),  O.J. No. 1568):
 Second, Aitken J. observed that the equalization was a matter between the parents while the issue before her was a question of child support. She could see no reason why an available source of income to fund child support should be excluded because of dealings between the parents. The child support was not being paid to increase the mother’s lifestyle. “
For spousal support, there is a general rule that income from family property that has already been divided should not be used to determine income for the purpose of determining the income of spousal support payable to a spouse. Otherwise, you would be double counting. The case quote is below:
“However, there is a general rule that “income generated from marital property which has already been divided should not be brought into income for purposes of determining the amount of support payable to a payee spouse”: Brown v. Brown, 2012 NBCA 11 at para. 16 (emphasis added), reconsideration allowed on a different issue, 2012 NBCA 69. This indicates that regard must be had to whether spousal or child support is at issue. “
The frequency and the purpose of the withdrawals are also an important consideration. While every case is very fact specific, the court said the following:
- 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.
- Where a spouse has contributed to an RRSP and withdrawn that amount in the same year, it may be unfair to include both the contribution and withdrawal in the Guideline income: Dillon v. Dillon, 2005 NSCA 166 at paras. 28-29.
- The court will consider the reason for the withdrawal. 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 or 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.
Any withdrawals from your RRSP, Investments or RRSP are required to be listed in each spouses Form 8 Financial Statement. Fair financial disclosure is essential to resolving your family law dispute and it is important to be thorough in listing your assets and income. A failure to make full and fair disclosure and lead to costs and having separation agreements set aside if the financial information later turns out to be misleading. For more information or to set up a consultation with a family law lawyer, visit our website.