Most taxpayers are aware that where monies are taken out of a registered retirement savings plan (RRSP) or a registered retirement income fund (RRIF), tax must be paid on those withdrawals. However, our tax system provides for an exception to this rule in the case of a marriage breakdown. Where former spouses are no longer living together, and there is either a court order or a written separation agreement outlining the division of property between them, amounts in an RRSP or an RRIF may be transferred directly from one spouse’s plan to the other’s in accordance with that order or agreement, without any tax consequences.

Similarly, when a couple divorces, the question of entitlement to credits accrued under the Canada Pension Plan by both spouses during the marriage often arises. Here again, the law allows for the splitting of CPP benefits between a taxpayer and a former spouse. Formerly legally married spouses (as well as common-law spouses who have lived together for at least one year) can make an application to have the credits earned by both spouses during the marriage totaled and split equally between the parties.

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