Finances can be very challenging on separation, particularly trying to find a way to ensure that you are able to meet your day-to-day expenses. In many cases you may be entitled to financial assistance from your former spouse or partner. We can help. Contact us today to discuss what you may be entitled to and how you may be able to go about receiving financial assistance from your former spouse or partner.
What is spousal support?
Spousal support (sometimes referred to as alimony) refers to a payment of financial support by a higher earning spouse to a lower or non-income earning spouse after the breakdown of a marriage.
What is adult interdependent partner support?
Adult interdependent partner support is calculated the same way as spousal support but refers to support paid between unmarried people. The difference between the two is that, for adult interdependent partner support, you must first have lived together for a minimum of three consecutive years (or for a period of “some permanence” if there are children) in a relationship of interdependence. A relationship of interdependence includes:
- Whether you and your partner are having sexual relations;
- Whether you and your partner are cooking, cleaning doing laundry or doing other domestic services for the other;
- Whether the general public views you as being in a relationship;
- How integrated your finances are; and
- Whether you own property together.
If an adult interdependent relationship can be established then partner support may be payable.
How do I get spousal / partner support?
If you were married or if you lived together in a “common-law relationship” (in Alberta a common-law relationship is called an adult interdependent partnership and the parties are called adult interdependent partners) you may be entitled to receive or be required to pay spousal or partner support.
In order for spousal/partner support to be payable, entitlement must first be established. Entitlement is established in one of three ways:
- Compensatory; or
- Non-Compensatory (needs based).
What is contractual spousal / partner support?
Contractual entitlement exists because of a contract – a cohabitation agreement, prenuptial agreement, sponsorship agreement, or other contract between the spouses or partners. If an agreement exists, the terms of that agreement will determine whether and how much spousal/partner support is payable. Depending on the circumstances surrounding the signing of the contract or, if the terms of the agreement are unduly unfair, the agreement may be challenged and the terms changed.
What is compensatory spousal / partner support?
Compensatory entitlement happens when a spouse/partner suffers a loss related to the roles each spouse/partner played in the relationship or a loss related to the breakdown of the relationship. Typically, the other spouse/partner experiences a corresponding gain.
For example, if one spouse/partner leaves her or his career in order to care for children and as a result loses out on the opportunity to pursue and develop a career (usually there is a corresponding advantage provided to the other spouse/partner who is then able to grow her or his career), the spouse/partner that stayed home will likely be able to establish an entitlement to spouse/partner support. Compensatory support is aimed at compensating the spouse/partner that has been disadvantaged due to the breakdown of the relationship and the role that spouse/partner played in the relationship that led to the disadvantage.
What is non-compensatory spousal / partner support?
Non-compensatory entitlement is when there is a need – one party cannot make ends meet - coupled with the other party having the means to pay. The goal of the court here is to try to find a way to allow both parties to continue with a standard of living similar to the standard of living enjoyed while the parties were residing together.
For example, if it took $5,000 for you to meet your monthly expenses while you and your spouse/partner lived together, but you now have an income of only $2,000 per month, there is a monthly shortfall of $3,000 needed in order to enjoy the same standard of living. This represents your monthly need.
If the other spouse/partner has monthly income of $10,000, he/she has an extra $5,000 per month. This extra $5,000 represents this spouse/partner’s means from which spousal/partner support can be paid.
How is the amount of spousal / partner support determined?
After entitlement is established, the length and amount of spousal/partner support need to be determined.
The Spousal Support Advisory Guidelines have been established to guide the court in determining the amount and duration of spousal/partner support. The considerations include the length of the relationship, ages of the parties, number of children, amount of child support being paid, and, of course, the income of the parties. A huge gap in incomes does not necessarily mean that there is an entitlement to spousal/partner support. The Guidelines provide a range of support. The court then decides where, in that range, an appropriate amount of support lies.
Generally speaking, spousal/partner support is calculated by considering the net disposable incomes of each party, after the payment of taxes, deductions and costs associated with any children. The appropriate amount of spousal/partner support is an amount that leaves the recipient with between 40% and 46% of the total of both parties’ net disposable incomes, though this is not a hard and fast rule and results may be different depending on an analysis of all of the factors.
How long is spousal / partner support payable?
The spouse/partner receiving support has a duty to attempt to become self-supporting. In other words, this individual needs to find a way to be able to pay her or his own expenses without financial help from the other. However, spousal/partner support may be permanent in some circumstances, even if the recipient becomes self-sufficient.
According to the Spousal Support Advisory Guidelines, the duration of spousal/partner support can be anywhere from one-half year to one year for each year that you lived together. This can be further extended if there are minor children. Further, it can be “indefinite” In some circumstances. Indefinite does not mean forever. It simply means there is no defined end date. In these cases, if you are the one paying spousal/partner support, if circumstances change in the future you can ask the court to either terminate support and/or set a specific end date.
Is spousal / partner support taxed?
If you receive periodic (usually monthly) spousal/partner support you must claim it as income on your income tax return and pay tax on it.
If you pay spousal/partner support you are allowed to deduct the amount paid on your annual income tax return. In other words, you do not have to pay tax on the spousal/partner support you pay.
If monthly cash flow is an issue for you as the payor of spousal support, there is a form that you can fill out and provide to your accounting department at work along with a copy of your spousal/partner support order and agreement (Form T1158). Your accounting department can then submit that form to the Canada Revenue Agency and subsequently reduce your tax remittances on each paycheque to reflect the amount of spousal/partner support being paid. If you do not complete and submit the form then you will pay tax on your entire income on a per paycheque basis, thus minimizing your immediate net cash flow. This will result in an overpayment of tax which will be reflected by way of a tax refund each year when you submit your annual income tax return. In other words, if you do not complete and submit the form this does not mean you will not get the tax deduction. Rather, it simply means that you will not get the benefit of the tax credit until you file your tax return at year end instead of getting the credit on a per paycheque basis.
Do I have to pay spousal support if my spouse left me?
Canada has a “no fault” divorce system. This extends to the determination of spousal/partner support. In other words, it does not matter who left whom. This does not affect whether or not spousal/partner support is payable.
What happens if my former spouse or I remarry?
If your former spouse or partner remarries or lives with someone else it does not necessarily mean you no longer have to pay spousal support. It may, however, affect the amount of spousal/partner support payable or, in some cases, lead to the termination of the payment of spousal/partner support.
Can I pay lump sum spousal support?
Lump sum spousal support is when one party pays the other party all spousal support that is owed at one time, instead of in monthly payments.
Generally speaking, the Court does not usually award lump sum spousal support. Lump sum spousal support can be negotiated and agreed to though. Lump sum spousal support can be structured however the parties wish. It can include tax or not include tax. It can be payable over time or all at once. It is completely up the parties if they can reach agreement.
The benefit of negotiating lump sum spousal support is that it eliminates the need for ongoing support payments. Once the lump sum payment is paid, all support payments are done. Conversely, if you pay lump sum spousal support and then circumstances change in a way that may allow spousal/partner support to be reduced or terminated, there is no way for you to claw back any of the monies already paid, unless specific terms to this effect are included in a separation agreement.
What happens in a bankruptcy?
Spousal/partner support survives bankruptcy. Once spousal/partner support is ordered or agreed to under a formal agreement, the payor of spousal support cannot get out of the obligation by declaring bankruptcy. It will continue.
That being said, if there is a change in the circumstances of the payor or the recipient, then the amount of spousal/partner support being paid may be able to be varied depending on the terms of any contact that has been entered into. So, while spousal/partner support may survive bankruptcy, if a person goes into bankruptcy they may be able to apply to court to reduce or terminate the ongoing spousal/partner support amount because he or she does not have the ability to pay.
How do I enforce my spousal / partner support order?
If the other party does not voluntarily pay support, you are having difficulty collecting support, or you just do not want to deal with the other party directly, you can register your support order or a valid spousal/partner support agreement with the Maintenance Enforcement Program (“MEP”).
The payor or recipient of spousal/partner support can register with MEP. Once a party registers with MEP the other party must enroll as well. Spousal/partner support payments are then made through MEP – the payor pays MEP, then MEP forwards the amounts paid to the recipient.
If a spousal/partner support order is registered with MEP and the payor does not pay the support ordered, MEP will begin to take enforcement actions. These include, but are not limited to:
- suspending driver’s licenses;
- restricting motor vehicle registration;
- garnishing wages and bank accounts;
- intercepting government benefits, such as income tax refunds, and redirecting them to the recipient;
- placing holds on passports; or
- even throwing the delinquent spouse/partner into jail.
Every spousal/partner support order has a clause which allows either party to register with MEP. Neither party has to register with MEP though, even though the wording of the clause makes it seem like the parties must do so. Registering with MEP is optional until one party registers.