16 October 2008 External T.I. 2008-0274371E5 - RRSP division of matrimonial property

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Can an amendment be made to an existing separation agreement to allow a transfer of RRSP property?

Position: Yes but the agreement must provide that the transfer is in respect of a division of property as a consequence of a marriage breakdown. It is not sufficient to merely provide for a transfer for some other reason.

Reasons: The provisions of 146(16) may only be used as described therein.

XXXXXXXXXX 								2008-027437
									Wayne Harding
October 16, 2008

Dear XXXXXXXXXX :

Re: Transfer of amounts from a Registered Retirement Savings Plan (RRSP)

This is in response to your facsimile of April 7, 2008, regarding transfers of amounts out of an RRSP on marriage breakdown.

Written confirmation of the tax implications inherent in particular transactions can be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. The following comments are, therefore, of a general nature only and are not binding on the Canada Revenue Agency ("CRA"). All publications referred to herein can be accessed on the CRA website at the following address: http://www.cra-arc.gc.ca/formspubs/menu-e.html.

Subsection 146(16) of the Income Tax Act (the "Act") permits a direct transfer of an amount from an individual's RRSP (the "payor's" RRSP) to an RRSP of which his or her spouse or former spouse (the "recipient") is the annuitant, where the payor and the recipient are living separate and apart, the payment or transfer is made under a decree, order or judgement of a competent tribunal or under a written separation agreement, and the transfer or payment relates to the division of property in settlement of rights arising out of or on the breakdown of marriage.

We understand that you are questioning whether an amending agreement can be made to an existing separation agreement to provide for a tax-deferred transfer of an amount under paragraph 146(16)(b) of the Act where (i) the existing agreement already provides for a total division of the matrimonial property and (ii) the RRSP is the subject of a trust agreement. In our view, in order to have paragraph 146(16)(b) of the Act apply, a transfer of the amount from a payor's RRSP must be in respect of the division of the matrimonial property. Accordingly, it would not be sufficient to merely amend a separation agreement to provide for a tax-deferred rollover. Rather, the separation agreement would need to be amended to provide for a division of the matrimonial property in settlement of rights arising out of or on the breakdown of marriage and for the transfer of the RRSP amount to be in relation to that division.

Whether or not an amended agreement can be created where the RRSP is the subject matter of a trust agreement is a question of trust law.

We trust that these comments will be of assistance.

Yours truly,

Mary Pat Baldwin C.A.
for Director
Financial Sector and exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch