Keeping RRSPs When Filing Bankruptcy

There are 2 types of RRSPs: (1) RRSPs set up with a life insurance company; and (2) RRSPs set up anywhere else, like with a bank or mutual fund company.

An RRSP set up with a life insurance company is also called a segregated fund. This type of RRSP will always have a designated beneficiary if the debtor dies. If the beneficiary of the RRSP is the child, grandchild, parent, grandparent, or spouse of the debtor, then the RRSP is exempt from seizure by a trustee in bankruptcy under the Ontario Insurance Act.

Under the Bankruptcy and Insolvency Act, all other RRSPs are exempt from seizure by the trustee. However, any contributions made to an RRSP within the 12 month period preceding the date of bankruptcy must be seized by the trustee for the benefit of the debtor’s creditors.

This post should not be interpreted as legal advice or a legal opinion. Please consult your Fong and Partners Inc. advisor to review your own particular circumstances.

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