Family Law 101: Spousal Support

Whenever people come in for an initial consultation, I tell them the same thing: the courts don't want to keep people married for any longer than they have to. In Canada you generally need to have three things sorted out prior to getting a divorce, and once this is done, you can get a divorce. The three things which need to be sorted out before being able to get divorced are:

1. Spousal support that will be paid (if any);

2. Things to do with the child/children; and

3. Matrimonial property.

This blawg will focus on spousal support, and the subsequent two blawgs will address the other two topics.

Spousal Support

Spousal support (sometimes known as alimony) is money that one ex spouse will pay to the other ex spouse following separation. However, a spouse is not entitled to support simply because they were married. In Canada there are three different categories of spousal support - and one or more of these categories must apply for a spouse to receive the support. These categories are were established by the Supreme Court of Canada in the cases of Moge v. Moge, [1992] 3 SCR 813 and Bracklow v. Bracklow, [1999] 1 SCR 420, and include:

1. Contractual;

2. Needs based (or non-compensatory); and

3. Compensatory.

Contractual Support

Contractual support is exactly what it sounds like - support which the parties agreed to and placed into a contract. Most often this takes the form of a pre-nuptial agreement which is entered into prior to the marriage taking place, however post-nuptial agreements are becoming more and more common. When support is contracted, it can take almost any form, and be for any duration, that the parties agree too.

Needs Based Support

Needs based support (sometimes known as non-compensatory support) is based upon one spouse having a need for support, and another having the ability to provide for this need. This type of need may be based upon one spouse having an inability to provide the necessities of life (such as food and shelter), and the other spouse earning enough in order to provide assistant to the spouse. However, needs based can also include support which is paid because one spouse suffers from a dramatically decreased standard of living due to the breakdown in the marriage. A person may be able to live perfectly well on $100,000 per year - however if the other spouse regularly earned $10,000,000 per year while the parties were married, the higher earning spouse may have to provide support to the lower earning spouse simply to assist them with maintaining their standard of living.

Compensatory Support

Finally, compensatory support is support which one spouse provides to the other for disadvantages suffered during the marriage which unfairly allowed the other spouse to benefit. The most common example is a spouse (usually the wife) who stays at home to raise children while the other spouse continues to work. The spouse who continues to work is able to continue to advance their career, and continue to grow into areas where they are likely earning more and more money. This would not be possible if the other spouse were not staying at home to raise the children. However, the spouse who stays home to raise the children suffers the disadvantage of not being able to advance his or her career, and sometimes may have been out of the work force for so long (15+ years) that they must effectively start over again at the bottom.

Why Support is Being Paid

While the spouse who ends up paying support to the other is rarely pleased by having to do so, there is a good reason why courts order support to be paid: to assist the spouse to adjust to the change in circumstances. Courts have repeatedly said that spousal support should not be a "pension for life" nor should an award for spousal support be a tool for punishing a spouse for misconduct that they may have engaged in during the course of the marriage. According to the Divorce Act one of the primary objectives of a spousal support award is too "...in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time." Other objectives found within the act include to:

(a) recognize any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;

(b) apportion between the spouses any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage; and

(c) relieve any economic hardship of the spouses arising from the breakdown of the marriage.

How is Support Calculated?

Spousal support is something that is highly case specific and unique to each set of circumstances. Justices have significant leeway when it comes to determining how much support will be paid, and for how long. Under the Divorce Act, the factors that justices are to consider when making this award include:

(a) the length of time the spouses cohabited;

(b) the functions performed by each spouse during cohabitation; and

(c) any order, agreement or arrangement relating to support of either spouse.

However, other factors will also come into play such as whether or not child support is being paid, and whether or not the paying spouse can afford to make a spousal support payment. If the courts determine that the paying spouse can only afford to pay spousal support or child support, the courts will almost always order that child support be paid first.

When it comes to calculating exactly how much support is to be paid, the Spousal Support Advisory Guidelines will often be applied to the circumstances in a case, and a justice will then make an award in accordance with the Guidelines. Very broadly speaking though, if a party was to be earning $150,000 per year, and the other spouse was earning $0 per year, the spouse earning the income would be paying somewhere between $1,400 per month to $3,200 per month.

When determining how long the support will be paid for, courts will often apply the "one half the time of the co-habitation period" rule. Therefore if a couple moved in together on 1 January 2000, got married in March of 2003, and separated on 31 December 2018, the courts would likely award support payable for 9 years, as the parties cohabited for 18.

Tax Implications

Spousal support which is "periodically" payable is tax deductible for the person paying the support and the person receiving the support must declare it as income and pay tax on it. Generally "periodic" support payments means once per month - however once per week, once per quarter, or once per six month period could also be considered periodic payments.

If the parties agree to a lump some payment of spousal support the person paying it does not receiving a tax deduction for it and the person receiving it does not pay tax on it.

For example, if a spousal support were to be payable at the rate of $3,000 per month for nine years on the first of each month, the person paying the support would receive a tax deduction each year for $36,000. The person receiving the support would have to claim this same $36,000 in income, and pay tax on it.

If the agreement was that spousal support would be payable at the rate of $3,000 per month for nine years, and it would be payable in a single lump sum, the paying party would be looking at a sum of $324,000 ($3,000/month x 12 months/year x 9 years). However, most lawyers and justices don't stop here. The person who is making a $324,000 lump sum payment does not receiving the benefit of a tax write off - and the person receiving it does not have to pay taxes on the lump sum payment. So, lawyers and justices will regularly reduce the lump sum payment by 25%-30% in order to adjust for this. Therefore, the $324,000 lump sum award used in the example above would likely be reduced to $226,800 - $243,000. This way the overall result is likely comparable to if tax had been paid on the periodic amount, however this way the spouses don't have to wait the 9 years for resolve things and the amount that would have been paid towards tax is still being kept within the "family" unit.

Final Thoughts

Spousal support is a complex area of law, mostly because justices will have a lot of leeway to craft and establish a regime based upon the unique circumstances in each case. While the Guidelines and precedents exist, justices are not bound to follow them. While it is common for them to apply the "one half the duration of the cohabitation period" rule when determining the duration which support would be paid, they are not bound to doing so. If circumstances warrant it, a justice may award support to be paid for 1 year, following an 18 year cohabitation and marriage. Likewise, a justice may also award support to be paid for 30 years following an 18 year cohabitation and marriage. Therefore it is important to speak to a lawyer about your situation prior to agreeing to any final spousal support arrangement.