Divorce is a difficult and emotional process. However, understanding the legal implications is crucial, especially when dividing assets. One such legal implication is spouse entitlement to pension after divorce in Canada.
In Canada, spouses are entitled to a portion of the pension earned during the marriage or common-law relationship upon divorce. The division process for pensions varies based on factors such as the type of plan and provincial laws, ensuring fair distribution of payments between spouses.
This article provides a clear explanation of how the spouse entitlement to pensions is divided following a divorce in Canada.
What is the Pension Division?
Pension division involves splitting a pension plan’s assets and entitlements between spouses during divorce or separation. In Canada, pensions are considered family property like a house or car.
Pension division gives both spouses the right to share the earnings accumulated during the marriage or common-law relationship. Provincial and territorial family laws govern it.
The value of a pension is calculated based on factors like years of service, salary history, and benefit formulas. From there, the spouses have two main options sanctioned by Canadian family laws-
- They can divide the pension asset, with the non-pension-holding spouse becoming a “limited member” entitled to a percentage of the pension amount.
- Keeping the pension untouched, compensating with other assets.
Limited members can designate a beneficiary to receive their pension share after death instead of reverting to the main member’s estate.
The non-member spouse can apply for their share of the pension payments once the main member receives their pension. The spouse can get it even in situations where the primary member:
- Is beyond their earliest retirement age but still contributing to the pension plan
- Has ended their job with the employer providing the pension plan but left their contributions in the plan.
When is Pension Valuation Required?
Pension valuation becomes necessary during divorce to determine the value of pension benefits earned during the marriage. It’s crucial if the pension represents one of the most substantial assets in the marital estate.
Valuation is still required if spouses agree to avoid dividing the pension and instead allocate another family asset. It ensures fairness in the division process by establishing each spouse’s entitlement to a portion of the pension.
Calculating a pension’s value can be complex, often requiring expertise from an actuary. An actuary can provide a precise valuation by considering factors such as the type of pension plan, the number of years of contributions, and the pension holder’s salary history.
Conditions of Spouse Entitlement to Pension After Divorce in Canada
The conditions under which an ex-spouse is entitled to a share of the pension depend on the nature of the relationship.
For Married Spouses
For married spouses, entitlement to a portion of the pension is typically straightforward. The division is often based on the duration of the marriage and the amount contributed to the pension during that time.
For Common-law Spouses
Common-law spouses who have lived together for at least two years in a marriage-like relationship are entitled to a share of the pension. However, they must voluntarily agree to recognize each other’s rights to pension benefits.
Making the Pension Decisions
After a divorce or separation, there are typically two main options for dealing with the pension.
- Divide the Pension Separately: Each spouse receives their share of the pension through splitting the pension benefits.
- Leave the Pension Intact: The pension goes to one spouse, and other assets, like the family home or savings accounts, compensate the other spouse.
Payments of the Divided Pension
Once the pension is divided, the ex-spouse entitled to a share of the pension may receive payments in one of two forms.
- Monthly Pension Payments: The ex-spouse receives monthly payments once the pension holder retires.
- Lump-Sum Payment: The ex-spouse can opt for a lump-sum payment transferred to a locked-in retirement vehicle.
The specific payment option will depend on the spouses’ age, retirement eligibility, and the pension plan’s rules. However, the ex-spouse must apply for their share of the pension; payments do not start automatically.
Separation After Pension Starts
If the separation occurs after the member spouse has already started receiving their pension, the chosen pension option will apply to both parties’ shares.
The non-member spouse can become a limited member and receive direct payments for their portion, even after the member spouse’s death.
Death Before Pension Starts
Per provincial and territorial laws, if the member spouse passes away before pension receipt, the non-member spouse usually gets 50% of the earnings accumulated during the relationship.
If the non-member spouse dies before pension commencement, their estate or named beneficiary has around 30 days to apply as a limited member for their share.
Can Your Spouse Change Beneficiaries After Separation?
The ability to change beneficiaries after separation depends on whether the separation occurs before or after retirement.
Separation Before Retirement
If the separation happens before the member spouse’s retirement, they can change their beneficiary designation. If the non-member spouse becomes a limited pension plan member, they can name their beneficiary to receive their share after death.
Separation After Retirement
Changing beneficiaries after retirement may depend on the specific pension plan and the chosen option.
- A single-life pension with a guaranteed period
- A signed waiver to give up beneficiary rights
- Multiple beneficiaries, including the ex-spouse
Conclusion
Navigating pension division during a divorce or separation can be complex, but understanding your rights and options is crucial. Consult with a qualified legal professional to ensure a fair division of pension assets post-divorce.
FAQs
How long can my ex-wife claim my pension years after divorce?
If entitlement was established during the separation, your ex-wife can claim a portion of your pension years after divorce. There’s no specific time limit for claiming.
Can my ex-wife claim my pension years after divorce in Canada?
Yes, your ex-wife can potentially claim a portion of your pension years after divorce in Canada. The entitlement to a share of the pension depends on factors such as the duration of the marriage or common-law relationship and the applicable provincial laws.
How much of my pension is my ex entitled to in Canada?
In Canada, your ex-spouse’s entitlement to your pension depends on the duration of your marriage or common-law relationship and provincial laws. Typically, it ranges from a portion to half.
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