Spousal Support Formulas: The Basics

Determining Factors for Spousal Support Entitlement

The Supreme Court of Canada in Bracklow v. Bracklow identified three bases for spousal support entitlement: contractual, compensatory, and non-compensatory, Contractual support would be support based on any agreement that existed between the parties. Compensatory support is meant to reimburse the spouse for choice’s they made during the marriage that required them to sacrifice professional success in favour of the marriage. Non-compensatory is based on the need of the spouse, determined according to the economic interdependency created during the marriage. The longer the marriage, the greater the amount of interdependency, and the longer that may be required to unravel it.

Formulas

There are generally two different methods used to determine both the amount and duration of spousal support: the with child support formula, and the without child support formula. Regardless of the formula applied, both calculations originate from s. 15.2 of the Divorce Act. The Divorce Act sets out, that in making a spousal support order the Court shall consider the means needs and other circumstances of each spouse including:

(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.

These considerations are further supplemented by s. 33(9) of the Family Law Act which provides a long list of considerations to be made when the court is addressing both amount and duration of spousal support. The Court weighs these issues in light of the objectives of spousal support, which the Divorce Act sets out as follows:

(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;

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

(d) in so far as practicable, promote the economic self-sufficiency of each spouse within a reasonable period of time.

 

The Spousal Support Advisory Guidelines (“SSAGs”) set out two formulas and the method for determining the amount and duration of spousal support.

While the SSAGs do not need to be strictly adhered to, and contain several exceptions, they have become a valuable tool for the courts in determining duration. In fact, the Ontario Court of Appeal in Fisher v. Fisher held that when Judges deviate from the SSAGs, after being referred to them by counsel, they must provide a reason as to why the SSAGs should not be relied upon.

In the SSAGs, calculations regarding the duration of spousal support rely heavily on the duration of marriage. The amount or ‘quantum’ of support is calculated differently based upon whether child support is being paid.

 

The Without Child Support Formula

The without child support formula proposes two occasions when a spouse is entitled to indefinite support. First, when the marriage has been 20 years or longer in length. Second, indefinite support may be awarded where the marriage has lasted five years or longer if the years of marriage plus the age of the support recipient at the time of separation equals or exceeds 65. This is known as the “rule of 65”. Indefinite support does not mean permanent support; it simply means that there is no set date of termination.

When the situation does not fit one of these two scenarios, the duration is generally within the range of, at minimum, half the length of the marriage and, at a maximum, the entire duration of the marriage.

In regards to amount, it ranges from 1.5 to 2 percent of the difference between the spouses’ gross incomes for each year of marriage, up to a maximum of 50 percent. For marriages of 25 years or longer the maximum percentage that will be granted is between 37.5 and 50 percent.

The With Child Support Formula

The Guidelines establish that any initial orders when a spouse is also receiving child support should be indefinite. The SSAGs simply suggest that the original order not have an end date but allow for it to be established subsequently. To do this, the Guidelines further include a duration with an upper and lower limit. The minimum being the longer of one half the length of marriage or the date the youngest child starts full time school and the maximum being the longer of the length of the marriage or the date the last or youngest child finished high school.

Under the basic calculation of this formula, the amount is based on a spouse’s individual net disposable income (INDI), which for the paying spouse is essentially their income after removing child support and taxes. The recipient’s spouse’s INDI is their income adjusted for child support, taxes, and, government benefits. The spousal support amount is then calculated based on the recipient spouse receiving between 40 and 46 percent of the spouses’ combined INDI.

How these factors are to be assessed in determining the amount and duration of spousal support will always be a matter to be determined by a judge. A properly prepared and experienced lawyer will have the knowledge to explain the situation to a court in a thorough and persuasive manner regardless of the type of spousal support order being sought.

— Daniel Pinsky for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Equalization Claim by a Surviving Spouse

The Family Law Act (the Act) makes provision for an equalization claim by a surviving spouse. Section 6(2) of the Act allows a surviving married spouse (i.e. not a common law spouse) to elect between his or her succession rights under a will and his or her equalization claim under the Act.

For example, a husband dies and leaves an estate worth $2,100,000.00. In his will he leaves a bequest of $100,000.00 to his wife and the balance of his estate to his secretary. The surviving wife has a period of 6 months from the date of death to file her election if she wishes to make an equalization claim under the Act. In order to determine what is most beneficial for the surviving spouse she has to make a calculation of the value of her equalization claim. In order to make that calculation the surviving wife has to determine her Net Family Property (NFP) and the NFP of the husband. This requires knowing the values of all assets and debts of the parties at the date of marriage and at “valuation date”.

To continue with our example lets assume that that at the date of marriage they had no property. At “valuation date” the husband had $2,100,000.00 and the wife had $1,000,000.00 in net assets. [Note: In the case of a separation “valuation date” is the date of separation. In the case of an equalization claim following a death “valuation date” is the day before death]. Based on the facts set out above the surviving wife’s equalization claim would be ($2.1M - $1.0M = $1.1M / 2 = $550,000.00). Based on those facts, it would be financially advantageous for the wife to make an election to make an equalization claim (worth $550,000.00) rather than take her bequest under the will.

If the wife made the necessary election within the 6 month time limit, her right to an equalization claim would have priority over bequests in the will and dependents relief claims (other than dependent relief claims by the deceased’s children).

Recent statutory amendments have clarified the credits which are to be made against a surviving spouse’s equalization entitlement. The credits listed are as follows:

a) Benefits payable to the spouse pursuant to a life insurance policy on the life of the deceased spouse;

b) Lump sum benefits payable to the spouse pursuant to pension or similar plan payable as a result of the death of the deceased spouse; and

c) The value of property or a portion of property to which the surviving spouse becomes entitled by right of survivorship on the death of the deceased spouse.

So, in the example above, if the wife was, together with her husband, the joint owner of a home which had equity of $1.1M she would receive a benefit of $550,000.00 by way of survivorship. This “credit” would eliminate her equalization claim. In this circumstance the wife would be advised to take the said survivorship interest and the bequest under the will.

It quickly becomes apparent how complicated these sorts of cases can become. In real cases this complexity is often magnified by the difficulty in getting the necessary financial disclosure to make the necessary calculations in a timely fashion. Anyone considering making an election pursuant to the section 6(2) of the Act should obtain good legal advice and should do so as soon as possible.

- Philip W. Augustine for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Full & Honest Disclosure Integral in Family Law Disputes

Subrule 13(6) of Ontario’s Family Law Rules states that any party serving a financial statement must make “full and frank disclosure of the party’s financial situation.” Financial statements must also be fully complete and submitted with supporting documentation.

Despite the fact that full and accurate disclosure from both sides is an essential component to the swift resolution of virtually any family law matter, the rule can sometimes be loosely adhered to or disregarded in its entirety by litigants.

As the following case illustrates, a failure to make open and honest disclosure can lead to extreme delays, inflated legal costs and a very undesirable outcome for the party failing to disclose.

In Oelbaum v. Oelbaum, 2010 ONSC 4874 (CanLII), a husband and wife separated after 22 years of marriage. The litigation began in October of 1996. Throughout the 14 years of litigation, the husband refused to provide meaningful financial disclosure.

Although having been warned that not making disclosure would lead to his Answer being struck, the husband continued to disregard the rules. His Answer was eventually stuck, and the trial proceeded on an uncontested basis.

One month after the issuing of the trial judgment in favour of the wife (which included an order of $183,158 in costs) the husband filed a financial statement and brought a motion for the reinstatement of his Answer. Unfortunately for Mr. Olebaum, Murray J. found the new financial statement to be both incomplete and inadequate. In the end, the Court dismissed the motion, noting that the Respondent’s latest attempt at disclosure was “too little and too late.”

After a thorough review of the history of the husband’s failure to disclose his finances, Murray J. stated the following:

[21] … It is fair to conclude that Mr. Oelbaum elected to treat court orders and the applicant with complete disdain behaving as if the Court and the applicant had no business knowing the details of his financial situation. He refused to provide accurate financial information that was of fundamental importance in fairly determining issues of property allocation and child and spousal support in accordance with the applicable legal principles.

In his endorsement, Murray J. highlighted some of the broader policy considerations weighing against a decision in favour of the Respondent. On the importance of full disclosure to the administration of justice, his Honour stated:

[38] What would be the effect of any order the motions judge might make on the overall integrity of the administration of justice? Without meaning to trivialize the importance of candour and honesty in uncontested proceedings, I conclude that the overall integrity of the administration of justice would be tainted by granting the respondent's motion in this case. The respondent has bullied this applicant for years. The respondent's refusal to provide accurate and complete financial information was intended to be, and was, a barrier to the applicant's ability to obtain relief.

And later,

[47] … If the respondent were to be successful in this case, it would be an invitation to like-minded spouses in other matrimonial cases to stonewall, not to pay interim child and spousal support, to refuse financial disclosure and to be extremely contentious in litigation. It would encourage “gaming the process.” Such a result would be antithetical to the notion of fair and efficient dispute resolution in matrimonial cases.

The respondent was finally ordered to make payments to his wife for support arrears, costs and ongoing support totaling well in excess of $1.5 million.

One can’t help but wonder how much time and money could have been saved had the husband simply adhered to subrule 13(6).

— Michael D. Heikkinen for abblaw.ca