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Immediate Pension Transfer vs. Rollover of Pension in Future


Our blog this week reviews an excellent case, Baribeau v Baribeau, 2020 ONSC 861, where the Court has provided sound guidance on the issue of immediate pension transfer vs. rollover of pension many years later.

Pension is part of the equalization process. Equalization can be satisfied through pension division. But more often than not, such division takes time. Case laws, based on particular circumstances, have held that pensions may be ordered to be transferred immediately instead of waiting for the future.


Fortier v. Lauzon, 2017 ONSC 7503 provides a useful summary contained in paragraph 40 of his decision as follows:

[40] Courts have considered various factors when considering whether the equalization payment is to be satisfied by way of a pension transfer:


i. where the employment pension was the most significant asset owned by the parties and it was the only method by which the applicant would realize the equalization payment owed to her, the court ordered a transfer by pension rollover (O’Kane v. O’Kane, 2013 ONSC 1617);

ii. where neither party had much in the way of liquids assets; over half of the wife’s net family property was related to her future pension; the pension was to be locked in for many years and not liquid in either party’s hands; the husband had no pension or provision for retirement savings; and if the pension was not divided at source, the wife would have to deplete almost all her liquid assets to satisfy the equalization payment, the court ordered equalization by way of a pension transfer (Spurgeon v. Spurgeon, 2016 ONSC 14);


iii. where the applicant’s pension constituted a great portion of her net family property, both parties were in their early 40s, and the court was satisfied that each of the parties would be able to meet their needs in retirement; and the equalization payment of $35,660 represented only one quarter of the net proceeds of sale which the wife was to receive upon this matrimonial home being sold, leaving her with over $100,000 to invest in a new home, the court refused to order the equalization satisfied by way of a pension transfer (VanderWal);


iv. where there was a young child residing with the pension holder; the pension transfer would require the non-pension holder to pay an equalization of $55,000 which could significantly impact the type of residence that she could afford; and a cash payment would require the pension holder to provide a small amount to satisfy the equalization and both parties would come out of the relationship at roughly the same amount of cash, placing them in equal liquidity, the court ordered a cash equalization (Jackson v. Mayerle, 2016 ONSC 72); and


v. the pension holder cannot force the other spouse to accept a deferred payment of a share of his pension to ease his own liquidity position in the face of the clear words of section 9(1) of the Family Law Act (Tupholme v. Tupholme, 2013 ONSC 4268).

In Baribeau, the Court reviews the financial statements of the parties and notes that there is very little in the way of other options available for them to effect equalization but for a substantial lump-sum division of the pension. The applicant has taken the position that she wants her equity in the home and wants to remain in the home. This is not unreasonable especially given the fact that the children reside with her. It is however not equitable that the respondent be completely denied his equity in the home. Both parties wish to make use of their equity – the applicant by remaining in the home holding her equity therein, and the respondent wishing to remove his equity and make use of it in a different way.

What does the Court do?:

[79] On balance it is also not equitable to force the applicant to receive one hundred percent of her equalization entitlement by way of a locked-in plan that she cannot easily access for many years. I am conscious also of the fact that the respondent is 14 years older than the applicant and will be in a position to draw on his share of the pension far sooner than the applicant. The applicant on the other hand will have many more years of growth in the pension to more firmly ground her moment of retirement. I find on balance given the financial circumstances of this case that a substantial portion of equalization be satisfied by way of a pension transfer. Given my findings on the amount of equalization it is not possible in any event to equalize hundred percent of the obligation through pension transfer as this would go beyond the 50% rule of available funds from the pension (when the tax gross up is added in at 15% which is the figure agreed between the parties).

[80] Notwithstanding that there may have been a shortfall, in any event I find that it is in this case reasonable for both parties to receive some cash, the applicant in partial satisfaction of her equalization entitlement and the respondent the remaining share of his equity on sale of the home.  

[81] In the face of a dispute as to the jointly owned matrimonial home I am unprepared to order transfer of the home as a methodology for effecting an equalization obligation. The jointly owned matrimonial home must be sold and through sale of that property the remaining equalization obligation shall be discharged out of the respondent's equity. 

The “further ordered that in order to satisfy the issue of equalization and pending the pension transfer, the respondent shall hold in trust for the applicant her $150,000 share of pension entitlement (plus the grossed up amount). 

This way the court felt that the respondent will receive a reasonable portion of his equity from the home on sale and the applicant will have a partial cash payment toward her equalization along with the pension transfer.


BLOG ANALYSIS:

The most important lesson that I can draw from this case on whether there is to be a pension rollover or an immediate pension transfer is that which of a party goes to court needs to be thoroughly prepared. It is important to analyze the facts and to present those facts in a proper manner to the court. This includes doing proper research of past case laws in relation to the facts of the case and then advising the court whether it is a fit case for an immediate transfer or whether it is possible to wait for a rollover of pension in due course of time.


In other words the devil is in the details and in preparation. This is where a client can do well with solid legal advice and analysis. At Shankar law we will do that for you. We will look at the facts of your case, have a discussion in relation with other cases with you and we can work out a strategy that we can use in convincing the court one way or another.


At Shankar Law, we are happy to assist and guide you through whatever challenges you have in your spousal and matrimonial life to lessen yiyr tension and stress. We work in three counties: Huron, Bruce, and Grey and span several cities (Southampton, Kincardine, Goderich, Wiarton, Hanover, Dundalk, Walkerton, Meaford, Markdale, Chatsworth), through our two locations in Port Elgin and in Owen Sound.



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