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Lorne MacLean, Q.C. one of Canada’s most experienced and tenacious family lawyers leads our wealth preservation family law lawyer team. Mr MacLean works out of our downtown and South Surrey offices but also handles cases across BC and in Calgary Alberta.
In McKenzie v. Perestrelo, BC’s highest court decided that when calculating a paying spouse’s income for child and spousal support purposes There is no clear rule about the inclusion of RRSP withdrawals in a payor’s Guideline income; this is left to the discretion of the judge hearing the case.
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The trial judge found that Mr. McKenzie’s RRSP income should not be included in the spousal support or child support calculations.
The wife received far less child and spousal support without the addition of this $100,000 so she appealed and she lost.
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Here is what our top Court said:
(82) There is no clear rule about the inclusion of RRSP withdrawals in a payor’s Guideline income; this is left to the discretion of the judge hearing the case: Burzminski v. Burzminski, 2010 SKCA 16 at para. 11. However, there are some guiding principles from the case law that may be summarized as follows:
- RRSP income is presumptively part of a spouse’s income for child support purposes because it forms part of a person’s total income on a tax return and it is not listed as an exemption in Schedule III of the CSG. The spouse seeking to exclude the RRSP amount bears the burden of demonstrating that treating his or her RRSP withdrawal as income would not lead to the fairest determination of income: Fraser v. Fraser, 2013 ONCA 715 at paras. 97-99.
- 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] O.J. No. 1568):
(102) 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.
- 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.
- 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.
The amount 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.
(83) Thus it seems clear from the jurisprudence that there is a presumption that RRSP withdrawals should be included in income for the purpose of calculating child support and, depending on the decision with respect to the division of that asset, in the calculation of spousal support. The presumption may be displaced by an array of circumstances.
(84) In this case, Mr. McKenzie bore the burden of establishing that the presumption should not apply, a fact which seems not to have been drawn to the attention of the judge.
(85) Nevertheless, it is clear the judge considered the purpose for which the withdrawal was made (to pay legal expenses) and the fact that the withdrawal was non-recurring.
(86) As the authorities make clear, a judge’s decision to include or exclude RRSP withdrawals from income for the purpose of calculating support is entitled to deference. In this case, Mr. McKenzie’s income as shown on his tax return, exclusive of RRSP withdrawals, was approximately $100,000. Had the RRSP withdrawals represented his only income, the decision to exclude that income might not have been justified.
When you add in issues of :
- income taxes, capital gains taxes and how to get money out of businesses or RRSP’s with the least tax;
- looming retirement and how that affects spousal and child support;
- private pension division;
- the often aggravating factor of remarriages and how this impacts spousal support;
- the arrival on the scene of new and possibly younger partners and fears on how this will impact the former couple’s inheritance planning for their children;
- exceptions to child and spousal support for high income earners
- self sufficiency objectives for partners leaving long marriages or relationships;
- how gifts and inheritances have been dealt with
- excluded property calculations dealing with the values of assets from decades ago
it is critical you hire a seasoned and savvy high net worth family law lawyer like Lorne MacLean, Q.C. or his equally experienced senior associates such as Nick Davies, or Audra Bayer.
Our Vancouver Wealth Preservation Family Lawyers can help you develop a proper strategy before or during your marriage or common law relationship to protect the family property and excluded property as well as the income you have work so hard to create. Call Lorne MacLean, Q.C. at 604-602-9000 or request a consultation today.
