In 2014 BCCA 161, the Court of Appeal dealt with whether RRSP withdrawals were included in Guideline income for the purposes of child support or spousal support in divorce or separation cases.
The trial judge had decided that the RRSP withdrawals, used as one time payment for legal fees, were not to be included in income. The wife appealed. The Court of Appeal affirmed the following principles:
- RRSP withdrawals are presumptively included in child support income;
- If already divided, RRSP withdrawals are not generally included in spousal support income;
- If RRSP’s have been contributed to that year and that same amount withdrawn, they would not generally be counted twice
- Non-recurring withdrawals to pay legal fees or pay off debt in joint names incurred by the other spouse are not generally going to be included in income
After remarking that the trial judge had erred in not placing the onus on the payor to show that the funds were not available, the Court of Appeal upheld the award, noting that including RRSP withdrawals as income was a discretionary decision.
As a note of caution, the Court of Appeal also observed that there was income of $100, 000 aside from the RRSP withdrawals and that if the withdrawals had been the only source of income, the trial judge’s decision might not have been reasonable. The court of appeal also noted an excerpt from the trial judgement where the trial judge had indicated that the RRSP’s were not being used to fund lifestyle.
Living off RRSP withdrawals before turning 65 is generally not a good idea, but this is yet one more reason to be cautious in using them. Particularly if it’s a large amount, you should consider discussing your individual circumstances and the purpose for the withdrawal with a lawyer before deciding to go down that route.
Contact one of our Family Law lawyers for more information.