Marriage breakdown and removal of spousal designation
See my summary at the bottom, read the content and context first, it can be a little confusing, there is two issues here ++++
There must be no spousal or common-law partner contributions to any of the annuitant's RRSPs (i.e., RRSPs held with any issuer) for the year of the request and the two previous years. The annuitant's written statement should certify that the spouse, common-law partner, former spouse, or former common-law partner did not contribute to any of the annuitant's RRSPs in the calendar year of the request nor in the two immediately preceding calendar years. No withdrawals, There must be no withdrawals from the spousal or common-law partner RRSP during the year of the request
Unfortunately, due to the Canada Revenue Agency's concerns regarding the "spousal RRSP attribution rule," this isn't as easy as you think. The special anti-avoidance rule is
designed to prevent short-term income splitting. Simply put, if the annuitant spouse withdraws any funds from a spousal RRSP within three calendar years of any contribution being made, the withdrawal will be attributed back to the contributing spouse and taxed in his or her hands.
Luckily, this rule does not apply if the spouses or partners are living separate and apart at the time of withdrawal by reason of the breakdown of their marriage or common-law partnership.
The rule that requires you, the contributor, to include certain amounts from spousal or common-law partner RRSPs, spousal or common-law partner RRIFs or, a spouse’s account under an SPP as income does not apply to the following situations:
- At the time of payment, or when we consider the payment to have been received, you and your spouse or common-law partner were living separate and apart because of the breakdown of your relationship.
- At the time of payment, or when we consider the payment to have been received, you or your spouse or common-law partner were non-residents of Canada.
- The amount is a commutation payment that is transferred directly for your spouse or common-law partner to another RRSP, a RRIF or an SPP or to an issuer to buy an eligible annuity that cannot be commuted for at least three years.
- The contributor dies in the year of payment or the year we consider the payment to have been received.
- We consider the deceased annuitant to have received the amount because of death.
In any such case, the annuitant spouse or common-law partner includes the payment in income for the year he or she receives it or is considered to have received it.
In all cases, the tax deducted has to be claimed by the individual to whom the slip is issued. In most cases, the information slip issued for the withdrawal will be in the name of the annuitant. However, report the income according to the calculations completed in Parts 1 and 2 of Form T2205.
Ok, so , don't withdrawal from a spousal until after separation has been well documented, to avoid the taxes being taxed on the contributors return. You may have to maintain the spousal rsp designation for up to 3 years after the last contribution, but that does not prevent withdrawals and the income from being taxed in the spouses hand that has the account after separation