Divorce in Canada is federal law, but how your property is divided depends on your province, and in some provinces on whether you were married at all. Ontario’s property rules apply only to married spouses; B.C. includes couples who lived together in a marriage-like relationship for two years; Alberta includes adult interdependent partners. Pensions, RRSPs and the house are each divided under their own rules, and CPP credits earned while you lived together can be split. A fee-only planner shows what a settlement is worth after tax before you sign, at a median C$250 an hour or C$1,900 for a one-time plan.
This is the Canadian version of our guide to a financial advisor for divorce, which covers US rules.
The federal part
The Divorce Act lets a court grant a divorce if the marriage has broken down, most often shown by the spouses having lived separate and apart for at least one year. Child support and spousal support under the Act are federal too. Everything to do with who owns what is provincial.
Property division in three provinces
Ontario
Ontario doesn’t split assets one by one. Each married spouse works out their net family property: roughly, what they own at separation less debts, less what they brought into the marriage. The spouse with the lower figure is entitled to half the difference. Gifts and inheritances received from someone else during the marriage are excluded, unless they went into the matrimonial home, as are life insurance proceeds and personal injury damages. The deadline is two years after the divorce or six years after separation, whichever comes first.
These rules cover married spouses only. Common-law partners in Ontario have no claim under them. They can claim support after three years of living together, or sooner in a relationship of some permanence with a child.
British Columbia
In B.C., spouses include couples who lived in a marriage-like relationship for at least two years, for property purposes. On separation, each spouse has an undivided half interest in all family property and is equally responsible for family debt. Family property is what either spouse owns at separation, including business interests, pensions and RRSPs. Property owned before the relationship, inheritances and gifts from others are excluded, but any growth in their value during the relationship is family property.
Alberta
Alberta’s Family Property Act covers married spouses and adult interdependent partners. Gifts, inheritances and property brought into the relationship are exempt at their value when the relationship began or when acquired, and a court divides any growth on them as it finds just. Property acquired during the relationship is divided equally unless the court finds that wouldn’t be just and equitable.
Quebec and the other provinces
Quebec has its own system under the Civil Code, and treats married and unmarried couples very differently. We couldn’t load Quebec’s government pages to confirm the details, so see a family lawyer or notary there. The other provinces and territories each have their own law, which we haven’t checked one by one. Ask your lawyer two questions first: whether your relationship is covered, and what the deadline is.
Why an equal split isn’t always equal
Two assets with the same balance can be worth very different amounts.
| Asset, each worth C$200,000 on paper | What it’s really worth to you |
|---|---|
| Cash | C$200,000, available now |
| An RRSP | Less: every dollar is taxed as income when withdrawn |
| A TFSA | About C$200,000: withdrawals aren’t taxed |
| Shares in a non-registered account bought years ago | Less, after capital gains tax when sold |
| Equity in the family home | Less after selling costs, and it doesn’t pay the bills |
Taking the house and giving up the RRSP can feel safe and leave you short of cash. A planner models each version over 10 or 20 years so you can compare them.
The rules that shape a settlement
- RRSPs move tax-free with Form T2220. A transfer from one spouse’s RRSP to the other’s on a breakdown of the relationship can be made without tax if it’s direct and made under a court order or a written separation agreement, and for RRSPs, while you live separate and apart. Cashing out and handing over the money is taxed in full.
- CPP credits can be split. After a divorce, CPP credits earned during the time you lived together are divided once Service Canada has the information it needs. Separated married spouses and common-law partners can apply after living apart for one year; common-law partners must generally apply within four years of separating, or later if both agree in writing. You need to have lived together for at least a year. A signed agreement not to split binds Service Canada only if it mentions the CPP specifically and your province’s law expressly allows it. Quebec workers are covered by the QPP instead. See CPP in the glossary.
- Spousal support is taxable, child support isn’t. Periodic spousal support under a court order or written agreement is generally taxable to the recipient and deductible by the payer. Child support under orders and agreements made after April 1997 is neither.
- Workplace pensions follow their own rules. How a pension is valued and divided depends on the plan and on whether provincial or federal pension law governs it, so ask the plan administrator for the options in writing. Our glossary explains commuted value and the LIRA and LIF, and our guide to taking the commuted value or keeping the pension covers the trade-off.
Common mistakes
- Dividing balances instead of after-tax values, as in the table above.
- Missing the CPP split. It’s often worth more to the lower earner than they expect, and it isn’t automatic for common-law partners.
- Withdrawing from an RRSP to pay a settlement instead of a direct T2220 transfer.
- Missing a provincial deadline, such as Ontario’s two years after divorce.
- Leaving the old will and beneficiaries in place. In Ontario, divorce, and in some cases separation, revokes gifts to a former spouse in a will, but beneficiary forms on RRSPs and insurance aren’t changed for you. See estate planning in Canada.
Questions to ask a divorce planner
- How many divorces have you worked on in the past year, and in my province?
- Will you model each settlement option after tax and over time?
- How would you value the pension, and should I take a share or other assets instead?
- Have you accounted for the CPP split and support payments in my budget?
- Do you work with my lawyer or mediator directly?
- How do you charge for this, and do you or your firm earn anything from products you recommend?
When a fee-only or advice-only planner is worth it
If you’re splitting a rented apartment and two TFSAs, you may not need one. A planner pays for themselves when the settlement involves a defined benefit pension, a house you’re deciding whether to keep, RRSPs on one side and non-registered investments on the other, a business, or support that has to last years. Your lawyer handles the law; the planner handles the numbers. Some planners hold the CDFA designation, which shows training in divorce finances but says nothing about how they’re paid.
Divorce work is usually billed by the hour or as a project. Canadian fee-only planners who publish prices charge a median C$250 an hour (middle half C$170 to C$298, 15 firms) and C$1,900 for a one-time plan (46 firms). A case with a pension or a business to value takes more hours, so ask for a written estimate. The samples are small; what fee-only advisors charge in Canada explains how to read them.
A settlement can put a large sum in one person’s hands at a hard time, which is when insurance and investment products get pitched. An advice-only planner sells none, and our guide to checking a financial advisor in Canada shows how to confirm registration and history. To find one, see the divorce financial planning specialty, the list of divorce financial planners, or fee-only planners in Ontario, British Columbia, Alberta and Quebec in the public graph.