Lawyers and other professionals usually have two significant assets which are available for attachment by their creditors: their home and their RRSP or RRIF. Often professionals arrange to transfer their residence to a spouse prior to embarking upon a professional partnership. While there is judicial authority that transferring an asset prior to embarking upon what might be a “hazardous business venture” may be a fraudulent conveyance, for the most part professionals have been able to use this transfer as a means of protecting their homes from the claims of creditors. Until recently, this was not the case with their RRSPs or RRIFs. These investments, unless in the form of a contract between a professional and a life insurance company and therefore protected by Section 142 of the Insurance Act, were subject to attachment by a creditor or were an asset which vested in any Trustee in Bankruptcy appointed over their assets.
Fortunately for professionals, recent legislative amendments to the British Columbia Court Order Enforcement Act R.S.B.C. 1996, c.78 have extended creditor protection to certain funds held in registered plans, including RRSPs and RRIFs.
The amendments to the Court Order Enforcement Act create a general blanket exemption against using the court order enforcement process to recover from designated registered plans (including RRSPs and RRIFs, but not the newly introduced Tax Free Savings Account). The amendments then carve out limited exceptions to this general protection, permitting some rights of attachment.
The most important exceptions permit attachment of:
(a) property contributed to a registered plan after or within 12 months before the date on which the debt being enforced came due; and
(b) property that has been or is being paid out of a registered plan.
Other exceptions include proceedings to enforce family maintenance orders or those initiated against a registered plan before November 1, 2008.
The recent amendments to the Court Order Enforcement Act now provide professionals who hold RRSPs or RRIFs with some measure of protection from attachment by their creditors.