Can my wife and I divide our RRSP money without feeling the tax consequences now?
Yes. It is very common in separation agreements or court orders to separate property that RRSPs are also subject to a division, or effectively redistribution, between former spouses. Canada Revenue Agency (CRA) imposes certain technical requirements on you and your spouse before it will allow such a division. The first hurdle: you and your spouse must be living separate and apart. In addition, the division must arise as a result of your separation and it must form part of a written agreement or a court order relating to a division of property.
Once you have satisfied these requirements, you must now inform CRA of the division by completing Form T2220. This form tells CRA that you have done a transfer of the RRSP because of the marriage breakdown and that you should not have any tax consequences now.
Although it is usual to have these transfers done upon finalizing a property settlement, CRA does not impose any time limits on making the transfer from one RRSP to another. Therefore, the transfer may be done years later, for instance, as a form of future spousal support. The general rule is that once the transfer is done, Form T2220 must be filed with CRA – whenever that transfer actually occurs.