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What to know about splitting CPP credits

One of the most valuable assets that a Canadian spouse may have is his or her pension. Like most assets, pensions are subject to property division. However, these assets can be complex, and understanding how the split of pension credits works can help Alberta spouses plan better for the years after their divorce.

One important concept to understand is that a spousal agreement does not generally prevent a credit split. However, spousal agreements that were established before June 4, 1986 allow couples to block a split. Typically, the lawyers representing spouses who are dissolving their marriage will attempt to assess the value of CPP credits in order to help provide the other spouse with an equivalent amount of assets. The splitting process is conducted pursuant to the Canada Pension Plan Credit Split on a six-page form. This form inquires about the cohabitation and pension information regarding both individuals. A formal separation agreement is one way that normally begins the splitting process. 

While splitting is gender-neutral, there may be other ramifications if a man received the Child Tax Benefit between the child's birth and age 7. For example, this man's CPP benefits would be adjusted for the time period in which he was child-rearing. If a couple got married very young, there is no split for any time period in which one of the partners was under the age of 18. If one or both of the partners received CPP and QPP and contributed to both of these, the splitting will be more complicated as the plan must be checked to ascertain the split periods.

A person who has questions about the CPP or QPP splits may wish to consider this information before negotiating a property division settlement. An Alberta family law lawyer may be able to advise him or her before a binding agreement is reached.

Source: Financial Post, "Five things you need to know about splitting your pension credits after divorce", Andrew Allentuck, October 31, 2013

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