Why is the TFSA not divided at divorce?

Who said it was more taboo to talk about your finances than your sexuality? Me, I find people more and more unstuck. Look, on Facebook, a young woman threw this question the other day to members of a group dedicated to financial matters, in a tone that seemed a bit perky to me for the subject:

” Hi all ! I am thinking of separating soon, when my baby is a little older. I earn a lot more than my husband. If I take RRSPs, will they be shareable with him during the divorce? Am I better off investing in a TFSA? THANK YOU ! ”

No kidding.

A member of the group wished him “serenity” while inviting the other subscribers to remain “delicate” in their interventions. I wondered if a man would have been entitled to this kindness if he had asked the same question.

In short, it amused me a lot.

The initial question is no less interesting, because it makes us think about the reason for the TFSA.

The RRSP is part of the family patrimony, shared between the spouses upon separation, but not the TFSA. So, when you see a divorce coming, it is in your interest to favor the TFSA to invest your money.

This fact is widely known, but the relevant question here can be summed up in one word: why?

Family patrimony is defined in the Civil Code. Pension plans are one of them. The law specifies what it means by “pension plan”. It includes in there supplemental pension plans (employer pension funds) and voluntary retirement savings plans (VRSPs). It also mentions “a retirement savings plan” (hence the RRSP) and “any other retirement savings instrument”.

Therefore, it must be concluded that the TFSA is not considered a “retirement savings instrument” in the same way as the RRSP.

This brings us to this other question: could this interpretation one day change?

The TFSA was introduced in 2009 to encourage taxpayers to save, without specifying the purpose of saving. We can indeed use the TFSA for any project, which is why we allow you to dip into it when it suits us and put back the amounts withdrawn the following year. The money is not tied up there like in an account to fund retirement needs.

However, the tax-free account is increasingly used as a “retirement savings vehicle”. A whole literature has developed around this arbitration which savers must make: is it more advantageous to contribute to your RRSP or to your TFSA? There are those who prefer the TFSA for their old age, and with good reason. Financial advisors have long integrated the TFSA into their retirement planning strategies.

In addition, the Law on Voluntary Retirement Savings Plans (VRSP) obliges SMEs to set up a VRSP, a plan that is part of the family patrimony. However, it exempts those that already offer an automatic savings mechanism taken from the payroll, such as a group RRSP or … a group TFSA.

“We can see that the border is starting to be blurred. Moreover, it has already been proposed that the TFSA and the RRSP be subject to a common limit. [Rapport Godbout]is to say how the two are close, ”observes financial planner Daniel Laverdière, director of the Center of Expertise at Banque Nationale Gestion privée 1859.

On the other hand, the RRSP is more versatile than they say. It allows, among other things, to finance a return to school thanks to the permanent education incentive plan (REP) and to make a down payment for the purchase of a first house thanks to the Access Regime. to the property (RAP).

In addition, first-time buyers will be able to use $ 40,000 in RRSP contribution room to fund a new account, the Registered Property Savings Plan, promised by the Liberals.

It is starting to create ammunition for a lawyer who would like to argue that the tax-free account should be part of the family patrimony, especially since we are starting to see quite well-stocked TFSAs.

The young lady who brought me to this subject may have an interest in leaving her money in an unregistered account after all … already she has unveiled her game on Facebook.


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