spousal support

Lump-Sum Spousal Support Revisited

 

Money Issues - Toronto Family Law Lawyer

(Photo courtesy of stock.xchng. All rights reserved).

Toronto Family Law Lawyer Pei-Shing B. Wang

Under the law in Ontario, child support payments are always periodic (except for amounts owed in arrears), while spousal support payments may be made periodically or by lump sum, or both. Today’s blog discusses when lump-sum spousal support might be appropriate.

There is a fundamental difference between spousal support paid periodically and spousal support paid by lump sum, from the point of view of taxes.

Periodical or recurring spousal support payments are tax-deductible for the payor and tax-payable by the recipient because the payments are treated as taxable income. Lump-sum support payments, however, are seen as capital in nature and are not taxable. That may mean the recipient doesn’t need to pay tax on lump-sum support paid, but it also means that the payor cannot deduct the amount.

The relevant case history of lump-sum spousal support has until recently indicated that lump sum payments should be made only in very unusual circumstances.

In recent years, however, there has been a shift in jurisprudence. In the recent case of David v. Crawford, the Ontario Court of Appeal undertook to re-examine the principles of spousal support and could not find supporting legislative provisions to justify the restrictions imposed on lump-sum support payments in earlier cases.* The Court of Appeal explicitly rejected the notion of limiting lump-sum spousal support to “very unusual circumstances,” as had previously been done.

According the Court of Appeal, a lump-sum support order should not be made to redistribute the assets owned by the parties because the governing legislation does not recognize redistribution of assets as one of the purposes of a spousal support award. At the same time, a lump-sum support order may be made to relieve financial hardship.

In determining whether a lump-sum support is appropriate in any given case, in addition to considering the payor’s ability to make such a payment, the court must weigh the advantages against any presenting disadvantages.

On the plus side, lump-sum payments can afford the parties a clean break, can facilitate the delivery of capital to meet an immediate need of the recipient, and can preclude any possible future non-payment of periodic support. On the negative side, lump-sum spousal payments may not address a future material change in circumstances, are ineligible for future review, and may present special challenges when it comes to calculating the appropriate amount.

After weighing the pros and cons of making a lump-sum support order, the trial judge should provide a clear explanation of the basis and the rationale of his/her decision in the particular case. What’s more, judges awarding lump-sum spousal support should consider how the amount awarded compares with the periodic payments that would otherwise have been made.

*2011 ONCA 294 (CanLII)

This blog is provided for educational purposes and for your reference. It is not intended as legal advice and should not be regarded as such. The law may have changed since the publication of this article.

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Sorry, No More Support Payments. I Found My Dream Job Flipping Burgers – Intentional Under-Employment in Family Law

 

Money Issues - Toronto Family Law Lawyer

(Photo courtesy of stock.xchng. All rights reserved).

Toronto Family Law Lawyer Pei-Shing B. Wang

When it comes to child support and spousal support payments, people react differently. Many honourable payors cut back on other expenses in order to make ends meet, while some others simply quit their jobs and claim inability to pay.

In Ontario, the table child support payments under the Child Support Guidelines are calculated exclusively according to the payor’s income, whereas spousal support obligations depend largely on the gap between the income levels of the payor and the recipient.  In other words, the more you earn, the more you pay. Conversely, the less you earn, the less you are supposed to pay.

Therefore, it’s not unheard of that a payor would intentionally quit his or her job or switch to a lower-paying position voluntarily in a bid to reduce support payable. At times I’ve seen a payor’s six-figure salary reduced to social assistance payments, purportedly because of the “economic downturn.”

Thankfully, under the law, if the court is of the opinion that a payor is intentionally unemployed or underemployed, it can impute income and fix the support amount accordingly.*

In deciding whether income should be imputed, the court must ask whether the payor chooses to earn less than what he or she is capable of earning, or whether the reduction is involuntary and reasonable.

Of course, no litigant will state to the court that his or her income has been intentionally reduced in an effort to evade support obligations. The Ontario Court of Appeal ruled in Drygala v. Pauli that there is no need to find a specific intent to evade support obligations before income is imputed.^ As a general rule, a parent cannot avoid child support obligations by a self-induced reduction of income. If the payor chooses to earn less than what he or she is capable of earning, income may be imputed. A finding of “bad faith” is not required.

When imputing income, the court must determine whether the reduction of income is voluntary or involuntary, and reasonable or unreasonable. The factors include the age, education, experience, skills and health of the payor parent. The court may also look at the support payor’s financial circumstances and the history of payment or non-payment. Available job opportunities may also be relevant.

*The same principle regarding imputation of income applies both to child support and spousal support. See, e.g., Rilli v. Rilli, 2006 CanLII 24451 (ONSC)

^ (2002), 61 O.R. (3d) 711 (C.A.)

This blog is provided for educational purposes and for your reference. It is not intended as legal advice and should not be regarded as such. The law may have changed since the publication of this article.

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Collaborative Family Law Series: Successfully Concluding a Case

Wrapping up a collaborative family law case can bring mixed feelings. (Photo courtesy of SXC, all rights reserved.)

Toronto Family Law Lawyer Pei-Shing B. Wang:

In previous postings, I’ve talked about starting and managing collaborative family law cases. Today’s discussion is about wrapping things up.

In my experience, “the end” in a collaborative family law case is almost always bittersweet. On the one hand, the spouses are relieved that they have sorted out their legal issues and don’t need to worry anymore about being sued. On the other hand, they realize that they are no longer spouses to each other and must move on with their lives.

In collaborative family law, most agreements are not binding until they’ve been formally executed. Therefore, once the spouses have agreed on a settlement, it’s important for the lawyers to act quickly to bring the matter to its formal conclusion.

Usually the final settlement agreement is written as a separation agreement with a few tweaks. Basic background information, such as the dates of marriage and separation, will of course be stated. The final agreement will confirm that both spouses have chosen the collaborative process and that each spouse has been aided by his or her own lawyer. Other professionals who have helped the couple during the process will also be specified along with the tasks they have performed.

If there are children involved, a separate parenting plan may be attached as an exhibit to the agreement. The parenting plan may be drafted by the child specialist or the divorce coach who has worked with the parents extensively as part of the collaborative process. Invariably, there will be clauses stating that the parents will remain flexible to accommodate special circumstances, such as illness and school events, and put the best interests of the children above their own.

Finally, there is almost always a special paragraph where the spouses acknowledge that they have been advised of the relevant laws and understand that their decisions as outlined in the settlement may differ from those adjudicated by the court system.

This blog is provided for educational purposes and for your reference. It is not intended as legal advice and should not be regarded as such. The law may have changed since the publication of this article.

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Professional Licence and Degrees in Family Law in Ontario

Toronto Family Lawyer - Pei-Shing B. Wang

Dr. Caratun married Mrs. Caratun to assist him in immigrating to North America to practise dentistry. Mrs. Caratun worked extremely hard over a number of years in Israel and Canada to assist him in reaching this goal. Two days after reaching it, he rejected Mrs. Caratun as his wife, at a time when family assets were next to non-existent but his future income-earning ability was substantial.

Mrs. Caratun sued to include Dr. Caratun’s licence to practise dentistry as property.*

Was Dr. Caratun’s licence to practise dentistry considered as property in Ontario?

The short answer is : No. The Ontario Court of Appeal held that a degree or professional licence acquired during the marriage with the contribution of the other spouse does not constitute property for the purposes of s. 4 of the Family Law Act.^

The Ontario Court of Appeal explained that the broad definition of “property” clearly encompasses many forms of intangibles. However, there are several difficulties in considering a professional degree as property: (1) it is not transferable; (2) the value of it in the future depends on the efforts of the degree holder; and (3) the only difference between a licence and any other right to work is in its exclusivity. Therefore, it was deemed clearly inappropriate to consider such attainments as property for the purposes of determining equalization payments pursuant to the Family Law Act.

The Court of Appeal, by allowing Dr. Caratun’s appeal, concluded that not all rights to income are considered as properties, especially if they are dependent on personal service.

In the end Mrs. Caratun was awarded compensatory support in the amount of $30,000, the sum determined by the trial judge to reflect her contribution to Dr. Caratun’s licence.

* (1992), 11 O.R. (3d) 385 (C.A.)

^R.S.O. 1990, c.F.3, as am.

Please note that the law is only applicable in Ontario and may have changed since the publication of this article. This blog is provided for your reference only and is not a substitute for the law. This article is not legal advice and should not be regarded as such.

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Financing Your Divorce

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There’s no doubt that divorce can be expensive. Depending on the length of the marriage, the value of the assets, and whether minor children are involved, divorce or separation requires quite a bit of work to untangle the entitlements and obligations between the spouses.

For most people, the sizable undertaking of separation or divorce usually translates to high legal fees. However, the cost need not result in one’s financial ruin. With careful planning, the process can be divided into manageable steps.

Many couples contemplate getting a divorce for years. However, for various reasons they are reluctant to initiate the proceeding. (Concerns about children come to mind.) If the spouses mutually decide to separate or divorce, they can consult with financial professionals regarding the resources available to fund the divorce proceeding.

On the other hand, divorce or separation may be forced on individuals because of their partner’s decision. They may not have had the opportunity to plan for the unexpected process. Nonetheless, if you’re served with divorce papers, you shouldn’t remain paralyzed with shock or fear for long because the law only allows a short window in which you may present your side of the story.

Regardless of whether the divorce or separation is planned, one should try to learn about the process quickly. For example, a one-hour consultation with a family law lawyer would be very helpful in learning about the costs and the rest of the process. Once you know enough about the process and the associated costs, you will be better equipped to discuss with your financial adviser how to proceed.

Typically, the most recommended financing options would be through a line of credit, a second mortgage, RRSP savings, or for some of the lucky ones, financial assistance from family and friends, while credit card debts and payday loans are not preferred because of the high cost.

If you’re thinking about getting a divorce or have been served with a divorce application, you’re welcome to make an appointment with our office at 416-433-5531.

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Why Is Spousal Support So Hard?

For modest-income families with children, spousal support is hard to come by after the breakdown of the spousal relationship. There are several reasons for this.

1. Child support takes priority to spousal support.

Under both the Family Law Act* and the Divorce Act^, child support takes priority over spousal support if the payor is unable to pay both.

Depending on particular circumstances, the spousal support payable may be so low that it’s not worth the efforts of pursuing it. For example, a $25 monthly spousal support for two years is hardly justifiable given the associated costs.

2. Calculation of support owing is practically impossible for the layperson.

While the non-binding Spousal Support Advisory Guidelines (SSAG)+ provide a range of amounts payable, the exact calculation requires sophisticated computer calculation programs, which are not readily available to the public.

The SSAG also refers to two different kinds of calculation: spousal support without child support and spousal support with child support. The calculation takes into consideration such factors as these:

  • the income of the parties,
  • the individual net disposable income of the parties if child support is involved,
  • spousal support payable by the custodial parent,
  • shared and split custody arrangements, if any,
  • the length of support payable for adult children, if any,
  • the length of the marriage,
  • the age of the parties at the time of their separation.

With so many variables in the equation, calculation by hand is nearly impossible except for lawyers who are very familiar with the formula.

3. It’s difficult to interpret the results of the calculation.

The SSAG provides a range of amounts of spousal support payable – a ceiling and a floor. The discrepancy between these two amounts can range from several dollars for people earning modest income to tens of thousands of dollars for extraordinarily high income earners.

The interpretation of the results requires the application of case laws and legislative principles, and the analysis of the specific facts involved in the presenting case. Without the assistance of a lawyer who is familiar with these factors,the  parties are likely to find themselves stuck at an impasse, with the recipient claiming the ceiling and the payor the floor.

If you require assistance in finding out more about spousal support payable in your separation or divorce, give us a call at 416-433-5531.

PSWLaw is a results-driven law firm that practices in the area of family law.

Note: Please keep in mind that this article is provided for information and educational purposes. It does not constitute legal advice and should not be regarded as such. The law may have changed since the publication of the article.

*R.S.O. 1990, c. F.3, s. 38.1

^ R.S.C. 1985, c. 3 (2nd Supp.), s. 15.3

+ The SSAG is a project developed by the federal Department of Justice and authored by Professor Rogerson and Professor Thompson, both of the University of Toronto.

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A Brief Note on Terminating Child Support

In Ontario the majority of child support payments are enforced by the Family Responsibility Office (FRO) if the payments are made pursuant to a court order or a registered domestic contact, unless the parties have withdrawn their file from the FRO.

The support obligation in Ontario, unlike other jurisdictions, is not automatically extinguished under the law when the child turns 18.

There are two ways to cease the enforcement of child support. If both the payor and the recipient agree that the support should be terminated, they can file their consent with the FRO and the FRO will close the file accordingly.

If the parties can’t agree whether the support obligation should end, there’s nothing the FRO can do. Instead, the support payor must bring a motion to change before the court that granted the child support payments in the first place.*

It’s perhaps a good idea to discuss the proposed termination with the recipient to find out whether a consent order to terminate child support could be a possibility. If so, the support payments may be terminated without the parties’ attending the court by way of a consent motion. If not, the support payor will have to ask the court to change or terminate the support.

*Family Law Rules O. Reg. 114/99, R. 15

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A Brief Note on Simple Divorce and Uncontested Divorce

Many people think a “simple divorce” and an “uncontested divorce” are the same thing.

In Canada they are not.

A simple divorce refers to spouses asking the court to dissolve the marriage and not to adjudge any other issues, such as custody and access to the children, child support, spousal support, and property division. A simple divorced may be petitioned and granted in writing without the personal attendance of the spouses.

An uncontested divorce refers to one spouse petitioning for a divorce and corollary relief unopposed by the other. This often happens when the other spouse decides not to participate in the proceeding.

A divorce can be simple and uncontested at the same time. For example, if the parties have settled their affairs at separation by a separation agreement, the divorce proceeding is likely to be simple and uncontested.

Alternatively, in extremely short marriages where there are no children involved, (e.g. two near-strangers with killer hangovers wake up surprised to find that they got married the night before) the parties may wish to part their ways by a simple and uncontested divorce.

However, what started out as a simple divorce may become a full-blown proceeding before the Court. For example, one spouse’s application for a simple divorce may be contested by the other because the latter wishes to ask for spousal support.

Similarly, an application for divorce and corollary relief (e.g. spousal support, child support, etc.) can be uncontested if the other spouse simply doesn’t participate in the proceeding.

There you have it.

PSWLaw is your relentless advocate in family law.

Please Note: This article is provided for information and educational purposes. It does not constitute legal advice and should not be regarded as such. The law may have changed since the publication of the article.

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A Brief Note on The Legal Benefits of Getting Married

Why get married? It turns out that, besides the love, affection, and companionship provided by their spouses, married couples also enjoy quite a few entitlements in law not available to”common-law” couples. Today I’d like to share a few of the entitlements with you.

To a great extent in modern Canadian jurisprudence, cohabiting couples who have lived together for a certain amount of time enjoy a vast degree of protection in common law and under the legislation (for example, spousal support under the Family Law Act* and dependency claims under the Succession Law Reform Act^). But a few entitlements remain in the exclusive domain of married couples.

Unlike cohabiting couples, who generally are required to prove that they have lived together for a certain number of years before they become entitled to the spousal benefits, married couples (same-sex or opposite-sex) are instantly recognized  in Canada. It doesn’t matter if the couple have only met yesterday and got married today (as so do many in Las Vegas); the fact that they’re married entitles them to spousal support and property division rights under the Family Law Act in Ontario if their relationship should breakdown (although the amount in question is debatable).

Under the Family Law Act, married spouses are entitled to certain posessory rights with respect to the matrimonial home, regardless of which spouse owns it. For example, both spouses are entitled to live in the home, and neither may dispose of or encumber an interest of the matrimonial home without the other’s consent or a court order.

Married spouses also automatically become each other’s official next of kin. This entitles a spouse to give (or withhold) necessary consent for healthcare and other purposes. Generally, the married spouse has priority in giving or withholding such consent over blood relations such as parents.

The same can’t be said for unmarried cohabitants, who often have to prove their relationship before they are recognized as the next of kin. This can create a significant obstacle in emergency situations.

Further, if the relationship breaks down, the Family Law Act distinguishes clearly between married couples and cohabiting couples. Only married couples are entitled to the statutory right of equalization, meaning, the equal division of properties accumulated during the marriage.

What’s more, if one married spouse predeceases the other, the survivor is entitled to an election between the equalization payment and what has been left for him or her under the will or, where there isn’t a will, under the law of intestacy. Unfortunately, this option isn’t available to cohabiting couples, even though under common law they may be recognized as spouses for other purposes.

Finally, in litigation, there is a limited privilege (“marital privilege“) for married couples, in that one spouse can’t be compelled to testify against the other regarding confidential information communicated between them during marriage. However, this rule has very limited application in modern Canadian law, as it has been narrowly defined by the courts, with various exceptions attached to it.#

*R.S.O. 1990, c. F3

^R.S.O. 1990, c. S.26

# see e.g., Evidence Act, R.S.O. 1996, c. E.23, s.11

PSWLaw is your proud advocate in family law matters.

Please Note: This article is provided for information and educational purposes and is protected by copyright. It does not constitute legal advice and should not be regarded as such. Regulation referred to may have been amended or repealed since the publication of the article.

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A Brief Note on Driver’s Licence Suspension and the Family Responsibility Office (FRO)

Today I’d like to talk about the suspension of one’s driver’s licence by the Family Responsibility Office (FRO).

Under the legislation,* the FRO is entitled to suspend a default support payor’s driver’s licence with30 days’ notice. In this notice the FRO will inform the support payor that his or her driver’s licence may be suspended unless the payor makes an agreement satisfactory to the Director of the FRO, obtains a court order refraining the director from doing so (“refraining order”), or pays all arrears owing under the support order.

The 30-day period following the first notice is crucial. Under the law, the 30-day period is the only window during which the court may deal with the suspension of the driver’s licence. If the 30-day period has expired, the court will no longer have jurisdiction in ordering the FRO not to suspend the licence.

If the driver’s licence has already been suspended by the FRO, it becomes a more serious problem. The court cannot order the director to reinstate the licence. Rather, the support payor must satisfy the conditions as set out in the legislation to have it reinstated.

If you require further assistance, please contact my office at 416 433 5531.

PSWLaw provides effective solution to your family law matters.

*Family Responsibility and Support Arrears Enforcement Act, S.O. 1996, c. 31

Please Note: This article is provided for information and educational purposes. It does not constitute legal advice and should not be regarded as such. Regulation/Legislation referred to may have been amended or repealed since the publication of the article.

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