When I started writing this column a few short months ago I promised you some reader email. The following query, my first received so far, comes from "Dave," in Ontario:
"My question concerns alimony. I have been married 21 years and even though my wife and I aren't planning to divorce any time soon (hopefully), I would be lying if I said the last few years have been smooth. I'm not concerned about child support as I love my kids and they deserve everything they need. My wife works, but only makes about one-half of my salary and she's already told me she'd go after everything she's entitled to, i.e. pension, property, alimony. I guess what I really want to know is, after everything is divided down the middle, would I still be on the hook to pay her alimony for the length of our marriage, 21 years?"
Dave's question is really about entitlement and duration of spousal support. That's what we call it in Canada. In the United States they call it "alimony."
Let's start with the first part, entitlement.
There are usually two ways a support recipient can establish entitlement: need and compensation. Need is simple. If Dave's wife (let's call her Mary) is simply not able to pay her bills and afford a reasonable lifestyle with her own income, she will have established need. Of course, while these concepts seem simple in general, when you get into specifics things can get complicated and quite nasty. Sometimes a recipient's income is so low or her ability to support herself so weak that it will be easy to conclude need. But in far trickier cases, the payor feels that the recipient needs a lot less than the recipient believes she does, especially once child support has been included. Also, sometimes we see battles over what the payor believes is the recipient's failure to work sufficiently to pay her own way. Generally speaking however, absent cases where the recipient can clearly provide for herself, need will be established.
Just because Mary earns half of what Dave earns does not mean she is entitled. If she earned $200,000 and he $400,000 then I could make a strong case she is not entitled. That's where compensation comes in.
Compensatory support is support designed to, well, compensate a spouse for making financial sacrifices during the marriage which benefited the children and/or other spouse. If Mary was, for example, a brain surgeon who took 10 years off from her career to stay home and raise the children, it would be pretty easy for her to establish that she would be earning far more than $200,000 but for said decision. This would entitle her to spousal support even though she may not need it.
Let's assume Dave earns $100,000 and Mary earns $50,000. Let's also assume that upon a physical separation there are two children and they live primarily with Mary. We need this information because the amount of spousal support Dave will pay is a function, to a great extent, of the child support he must pay first. Only after child support has been calculated can we realistically assess how much spousal support will be payable.
Based on the Child Support Guidelines, which are federally enacted mandatory levels of child support payments based on the gross income of the payor and the number of children involved, Dave will pay Mary basic child support in the sum of $1,416 per month. Mary will not pay tax on this sum nor will Dave be able to deduct it from his income. Also, assuming this information, Mary will, in my view, easily establish entitlement to spousal support based on need. She may also have a compensatory element to her claim but we do not know this based on the information provided.
In order to see how much Dave should pay in spousal support we then turn to something called the Spousal Support Advisory Guidelines. Introduced across Canada in 2005, they are an extremely useful and widely used tool by lawyers and the judges to establish consistent quantum and duration for spousal support claims where entitlement has been accepted or proven. In a future article I will write about the SSAG and how they work in further detail. For now, let's see how they impact on Dave and Mary.
The starting point is that after inputting Dave and Mary's ages, incomes and once again, assuming the children live primarily with Mary, the SSAG will generate three monthly numbers: low, midpoint and upper figures. With Dave and Mary, the numbers are $76, $433, and $794. These numbers are the same across Canada and are based on the assumption that the payments are tax-deductible to Dave and included as income for Mary on her tax return. The closer Dave and Mary live to a big city, the closer to the upper level the amount will be. Further, caselaw in recent years has established that absent exceptional circumstances, a figure within the SSAG will likely be considered reasonable upon first review by a court.
Finally, duration. Again, the SSAG are instructive. Largely but not entirely a function of the length of the marriage, the amount of time a spouse will pay spousal support can range anywhere from half the length of the marriage to "indefinite," which means until some other event triggers a review, termination or variation.
In Dave and Mary's case, based on their 21 years together, the recommended duration is indefinite. This means there is no fixed range for when support should end, which is often very unsatisfying for payor clients. Consequently, if Dave wants a fixed end-date for spousal support he will have to negotiate it with Mary or start a court case and ask a judge at a trial to fix one. Whether a judge will or won't is debatable and depend on various factors, such as when Dave retires or if and when it's reasonable to expect Mary will earn significantly more money in the future.
Dave and Mary, however, can agree to a fixed-length term by increasing the payments up front for a number of years or reducing them for a longer period (called "restructuring"). They can also agree, usually with the assistance of an accountant or valuator, on a one-time lump-sum payment which is not taxable to Mary or tax-deductible to Dave. Once paid and provided Dave's lawyers have prepared appropriate release language in their settlement documentation, Mary will not be entitled to any further spousal support.
So, Dave, in sum, if you separate and live in or near a cosmopolitan center I predict you will have to pay child support of $1,416 per month and spousal support, in an amount between $400 and $800 per month per month, for an indefinite period of time, subject to variation in the event of a material change in circumstances.