INSURER RETIREMENT FUNDS
HIGH COURT DECLARES Feb 23/96
by John Geddes
The Supreme Court ruled yesterday that insurance company registered retirement funds are creditor proof, a decision analysts expected to be good news for insurer marketing campaigns.
The court upheld and expanded a legal interpretation that shields many insurance company registered retirement savings plans and registered retirement income funds from the claims of creditors.
Retirement investment vehicles sold by other institutions do not offer the same security in cases where the RRSP or RRIF holder goes bankrupt.
" Where extremely pleased with the Supreme Courts decision, and it certainly confirms the importance of having life insurance retirment products." said Eric Singer, senior counsel at ManuLife Financial.
The ruling came in a complex case
involving a doctor in
The legal dispute brought into quetion the way the federal bankruptsy laws that protect life insurance products from the claims of creditors.
While lawyers are still sorting out the implications of the decision, experts say yesterday's ruling clearly bolsters provincial protections against creditors claims.
A key point in the case was that Ramgotra had tranferred the money into his RRIF less than five years before falling into bankruptcy. Under federal law, transactions made within the five year period can be declared void from the standpoint of a bankruptcy trustee's distrubuting assets to creditors.
But the high courts ruling,
written by justice Charles Gonthier, found the RRIF
remained legally out of the reach of creditors despite the timing of the
investment. "This is very good news for the insurance industry" said
Peter Biro, a bankrupcy lawyer with Goodman &
In cases where an individual shifts money to an insurance company fund in bad faith to avoid creditors, the protections do not hold.
Generally, only life insurers RRSP's and RRIFs are shielded
from creditors under provincial laws, and only in
cases where an immediate family member is named the beneficiary of he plan. (
Federal bankrupcy law disallows the protection for transfers made within one year of bankruptcy.