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On December 19th, 2002 the Quebec National Assembly adopted a law which was intended to make it easier for Quebecers to own RRSP’s which are not seizable by their creditors. The first paragraph of Article 187 of Bill 110 attempted to accomplish this by providing that:

Unfortunately, since the Quebec government has, once again, chosen to legislate in a piecemeal, indirect fashion, the Supreme Court of Canada has now stated in the Thibault case that this change is not effective to make self-directed RRSP’s exempt from seizure. Some explanation is necessary.

The general rule in Quebec is that the property of a debtor is available to his creditors and may be seized to satisfy his obligations (Arts. 2644 and 2645 C.c.Q.).

Exceptionally, the rights under a life insurance policy are exempt from seizure if the beneficiary of the policy is the spouse, descendant or ascendant of the policyholder or is designated irrevocably (Arts. 2457 and 2458 C.c.Q.).

In addition, life or fixed-term annuities transacted by insurers are assimilated to life insurance (Art. 2393 C.c.Q.) and accordingly benefit from the same protection against seizure.

Finally, fixed-term annuities held by trust companies benefit from the same protection from seizure as do fixed-term annuities issued by insurers (Art. 178 of the Trust Companies and Savings Companies Act).

In order to take advantage of this somewhat confusing web of provisions, trust and insurance companies have offered RRSP contracts which give the owner the flexibility associated with an “ordinary” self-directed RRSP (principally the right to direct the investments held in the RRSP and to withdraw the capital from the RRSP), but which, if nothing is done by the owner before a certain time (i.e. the owner’s 69th birthday), will be converted into a “real” fixed-term annuity providing for regular fixed blended payments of interest and capital.

In the Thibault case, the Bank of Nova Scotia attempted to seize such an RRSP established by Mr. Thibault with (ironically) the Bank’s own Scotia McLeod. In a 2 to 1 decision, the Quebec Court of Appeal held that since Mr. Thibault had the right to withdraw his capital at any time prior to the constitution of the annuity, the assets of the RRSP did not constitute an annuity and were seizable.

Although Article 187 of Bill 110 was intended to overcome the Thibault decision, the Supreme Court of Canada in its May 14, 2004 judgment in the Thibault case stated that the change was not effective to change the rule that the alienation of capital is an essential element of an annuity and that self-directed RRSP’s such as Mr. Thibault’s are, therefore, not annuities and remain seizable.

It is unfortunate that the Quebec government has not taken the opportunity to pass legislation which addresses the fundamental issue, namely, the extent to which Quebecers’ retirement savings should be exempt from seizure by their creditors. The result is that, in Quebec, the issue of seizability of retirement savings is an incoherent patchwork of legislation. The seizability of retirement savings often depends on chance and on considerations which are not at all germane to the underlying policy issues.

For example, the protection afforded to pension plans may differ depending on which particular law applies to the pension plan and company pension plans are treated differently from RRSPs.

The seizability of an RRSP will depend on whether the RRSP is issued by a trust or insurance company and further whether the contract of the trust or insurance company RRSP qualifies as a fixed-term annuity.

It is interesting to note that all RRSP’s in Saskatchewan and Prince Edward Island are exempt from seizure. It is hoped that the Supreme Court’s judgment in the Thibault case will prompt the Quebec legislature to now address the issue of seizability of retirement savings by way of coherent, policy oriented legislation.