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Posts tagged ‘Support’

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Should Support Be Extended When the Recipient Spouse Loses Their Job?

In a recent case called Lawder v. Windsor, the court grappled with the issue of whether a support-paying spouse should have to pay for a longer period if the other spouse unexpectedly loses his or her job.

The couple had divorced in 1998 after 16 years of marriage. In 2000, the husband had been ordered by the court to pay $800 in monthly spousal support to the wife. He continued to make those payments until 2012, when he applied to the court for an order terminating his support obligations.

The husband claimed that in the circumstances, 12 years of paying support had been enough: he was now 56 years old and retired (he took an early retirement option as part of his termination due from a long-held job due to downsizing), and was two part-time jobs earning about $10 an hour. He also received a pension.

On the other hand the wife, now aged 51, was also employed and had enjoyed a steady increase to her income in the past five years. Unbeknownst to the husband, her income during that period rose from $38,000 to over $62,000 in 2012.

The glitch, however, was that the wife had recently lost her job due to corporate restructuring. She had received a termination package, but on the grounds that she was now unemployed she wanted the husband to continue paying support. (The court pointed out that she had provided no proof that she was actively looking for work, however).

The court considered the circumstances, and declined to extend support; it terminated the husband’s support obligations effective one month hence.

The court reasoned that spousal support was designed in part to compensate the wife for any economic disadvantage that she had suffered as a result of the marriage or its breakdown. That goal had been achieved through the husband paying support since 2007; the job loss now had nothing to do with the marriage or its breakdown.

Further, it was clear that the wife had achieved economic self-sufficiency: she had gotten a good job with a high degree of responsibility, and her income had increased steadily in the past five years alone. She had also never asked for a review of the support order and had never taken advantage of its built-in indexing of support amount.

In short: The wife’s recent job loss was not a good reason for extending support now; there was nothing to suggest that her temporary unemployment would affect her self-sufficiency in the bigger picture, and any short-term financial setback was something she could address through her own efforts and diligence.

For the full text of the decision, see:

Lawder v. Windsor, 2013 ONSC 5948  http://canlii.ca/t/g0qb3

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Two necessary evils — know your obligations re: income tax and spousal/ child support – Video

 

 

Wednesday’s Video Clip: Know your obligations re: income tax and spousal/ child support

Income tax: Not a popular concept even at the best of times. But add in the obligations, which arise in the context of paying child or spousal support, and it’s enough to cause heart palpitations in most Canadians.

This is because the Canada Revenue Agency rules relating to how support payments are to be treated are quite complex. To make things more confusing, the federal Income Tax Act has separate rules for spousal support as opposed to child support.

In this video we review some key points to keep in mind.

The Ins and Outs of “Income”

 income

The Ins and Outs of “Income”

If you are the person obliged to pay child support, you likely know that one of the basic principles of Family Law is that the amount you are required to pay under the Canadian federal Child Support Guidelines is directly related to your income. It sounds simple enough; however there are some important points to know:

• For these purposes, your “income” means annual “total income” which is usually the amount found on the T1 General form as issued by the Canada Revenue Agency.1

• However – as discussed below – in some circumstances this amount may be adjusted by a court, or a different year’s tax return may be used.

• Also, the law recognizes that the amount disclosed on the tax return is not necessarily the same as the income that is calculated using the various listed “sources of income,” as those various categories are set out on the T1 tax return.2 (Usually they are the same, but not always – e.g. if you have not yet filed a return, or if the one you filed is not proper). So it is the latter amount that governs for Guidelines purposes.

There are some additional exceptions and qualifiers to this general rule:

• The Guidelines do not require that “income” is the figure on the last income tax return in every single case. Perhaps you have had an unusual year – your income may be higher or lower for that year due to some unique circumstances. In such cases, the court had the discretion to “consider more than a single number on a tax return”.3

• You and your spouse can also agree to some slight modifications to the general rule. For example:

o You may agree by way of separation agreement to use a prior year’s line 150, rather than the current one; the court may uphold this kind of adjustment if appropriate.4

o With some restrictions you may agree to use a different date from the one otherwise used for the taxation year. 5

• Finally, a court can itself make adjustments to the “income” amount in the right circumstances:

o For example, it can use an average of the past few years, if that is more representative determination of the amount.6

o Similarly, in unusual situations a court may add to your “income” – for example by adding back the amount of voluntary charitable donations you make in a year.7

Note that if for some reason you feel that the line 150 income amount is not the fairest determination of your income, then you have the burden of showing that this is the case.

For the full text of the decisions, see:

1. Bak v. Dobell, 2007 ONCA 304

2. Henry v. Henry (1997), 1997 CarswellOnt 4399 (Ont. Gen. Div.)

3. Clark v. Clark, 2012 ONSC 1026; additional reasons 2012 ONSC 1965

4. Hodge v. Jones, 2011 CarswellOnt 2582, 2011 ONSC 2363 (S.C.J.)

5. Crabtree v. Crabtree, 70 R.F.L. (6th) 371, 2009 CarswellOnt 1918 (S.C.J.)

6. Toon v. Toon, 2011 CarswellSask 511, 2011 SKQB 281 (Q.B.)

7. Zubek v. Nizol, 2011 CarswellBC 1481, 2011 BCSC 776 (S.C.)

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Top 5 Tips for Dealing with the Family Responsibility Office

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Top 5 Tips for Dealing with the Family Responsibility Office

A while ago I wrote about the role of the provincial Family Responsibility Office (FRO) More About The Family Responsibility Office, Some Common Problems Addressed.  (For those who aren’t aware: In Ontario, all child support orders are automatically filed with the FRO, which operates under legislation giving it an arsenal of mechanisms by which to encourage and enforce timely payment of support on the part of the paying parent.)

If you are such a payor pursuant to a court-issued Support Order, here are five tips for dealing with the FRO:

1. Always keep the FRO updated on address changes.

Otherwise, you may miss out on receiving the various noticed that the FRO is required by law to give you. These may include a warning that the enforcement mechanisms that can be levied against you are about to be stepped up – for example a notice that your driver’s license is about to be suspended.

2. Keep the FRO apprised of your employment situation.

If you have lost your job, have been laid off work, or have had your income reduced due to disability or a reduction of overtime, then the FRO should be made aware. In such situations your next step may be to obtain a variation of the filed child support order that triggers the FRO’s involvement in the first place, which will in turn affect the FRO’s role and mandate in the enforcement process.

3. Don’t ignore anything you have received from the FRO.

Many of the processes involving the FRO allow for only a few days for you to respond; the FRO may quickly escalate the remedies available to assist with collection and you don’t want to be surprised by any of them. The FRO’s available avenues for encouraging your compliance and payment can include: suspending your driver’s license or passport, a garnishee of your wages (via a “Support Deduction Order” sent to your employer), filing writs or liens against your property, seizing your income tax refunds and HST rebates, seizing your bank accounts and – last but not least – imposing jail time of up to 180 days.

4. Document everything.

This includes not only your correspondence with the FRO, but also the paper trail of any support payments that you have made. Payments to the FRO can be made by way of internet banking or telephone banking and may be the easiest to document; payments by cheque or money order are more cumbersome to track. But regardless of the method, make sure to designate the FRO case number on any payment that you make.

5. Always make the mandated support payments if you can.

As mentioned, the FRO has a wide arsenal of options to deal with delays or non-payment, including jail time if necessary. Naturally, these shorter-term consequences should be avoided if at all possible. But there can be longer-term drawbacks as well: arrears in child support payments will show up negatively on your credit bureau report, which can affect you for years to come.

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.

For more information, visit us at http://www.russellalexander.com/practice/family-responsibility-office-fro-and-default-hearings/

So what do you think?  Do you have any tips or comments for dealing with FRO?

Ontario Child Support: Wednesday’s Video Clip

 

 

Ontario Child Support: Wednesday’s Video Clip

 Shelley, a senior family law clerk at Russell Alexander Family Lawyers, talks about custody and answers questions many people have about child support.

To learn more about child support or our other videos visit us at http://www.russellalexander.com/videos/  or join us on Facebook at http://www.facebook.com/RussellAlexanderFamilyLawyers

Husband Downgrades Job, Then Quits Altogether – But Support Stays the Same

Husband Downgrades Job, Then Quits Altogether – But Support Stays the Same

This was a case which shows that a voluntary change in circumstances – including a significant reduction in income – does not necessarily mean that a parent’s obligation to pay child support will be reduced correspondingly.

The husband and wife met while in college and got married. They had three children, ranging from 12 to 17. At the beginning of the marriage, the husband had a job with General Motors Acceptance Corporation (GMAC) earning about $30,000. The wife never worked. By the end of the marriage, about 15 years later, the husband was earning about $86,000. At that time, the parties agreed as part of their separation that the husband would pay spousal support of $1,500 per month, and $1,350 in monthly child support.

The husband remarried in the summer of 2007, and filed for bankruptcy a few months later. He then voluntarily quit his job with GMAC and moved to his new wife’s hometown in New Brunswick, taking a job at a car dealership which paid $52,000 per year. Prior to this move – and although he was evasive to the court about his new wife’s finances – he indicated that she had been working at GMAC earning “less than $80,000”, but there was further evidence that she was later let go from that GMAC job and had been earning $100,000 elsewhere. Furthermore, he did not provide evidence as to what the new wife was now earning in New Brunswick, but it appeared that she had purchased a very comfortable home there, in which the both of them lived.

Nonetheless, the husband brought a motion to reduce his existing child support obligations to his first wife, and to end his liability to pay her spousal support altogether. Indeed, before the hearing the husband unilaterally stopped paying spousal support completely, and self-adjusted his child support payments to reflect his new $52,000 income. (And note that as part of a related interim hearing, the court ordered the husband to continue paying both child and spousal support at the old levels, which he failed to do.)

Meanwhile, the husband was let go from his employment in New Brunswick due to a change in the company’s ownership; he began collecting Employment Insurance benefits of $485 per week. This prompted him to stop making any child support payments whatsoever, despite him later admitting to the court that he owed $447 per month, based on his new level of E.I.-based income.

Still, the husband came to court to ask to have his child and spousal support obligations reduced to reflect his change in income. At this point, he was actively looking for work, but was limiting his search to Atlantic Canada.

The court refused his request. First of all, Ontario law gives the court the right to impute income where a spouse is “intentionally under-employed”, meaning deliberately choosing to earn less than he or she is capable of. In this case, given that the husband’s employment decision resulted in a significant reduction in child support, it needed to be justifiable in a compelling way.

This requirement was not met here: the husband had considered only his own interests.

First of all, it found that the husband’s decision to quit his employment with GMAC was entirely his own. It said:

Regarding his decision to quit GMAC Mr. Thompson said that he had heard unofficially from friends and managers that his job was in jeopardy. He claimed that his work performance was suffering because the stressors noted above were weighing on him. Without a vehicle he was often arriving late. However, there was no independent evidence from GMAC that Mr. Thompson’s job situation was indeed insecure. Mr. Thompson did not suggest or provide any evidence that he had been subject to discipline. While we heard that there was financial turmoil with General Motors around that time, there was no evidence that anyone at GMAC or its successor lost their jobs. Mr. Thompson had 22 years of seniority at the time he quit.

Next, citing the husband’s understanding that his children needed only to be “minimally covered” by his child support payments, the court found that the husband failed to appreciate that he had a legal obligation to support his children and that he could not avoid that duty by a self-reduction in income. Furthermore, at the time he made his decision to quit, he had no substantial debt, no other dependents, a good-paying job, and was at minimum sharing living arrangements with a new wife who earned well and owned a home mortgage-free.

The husband had unilaterally reduced the child support payments and was found by the court to be intentionally under-employed. As a result, the court imputed an income of about $86,000 to him, which was in accord with his prior earning levels, and ordered him to continue paying both child support and spousal support accordingly (although it did allow a $500 monthly reduction in spousal support due to other factors).

For the full text of the decision, see:

Thompson v. Gilchrist (2012), 2012 ONSC 4137 http://canlii.ca/t/fs2d2

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Wednesday’s Video Clip: Top 5 questions about spousal support in Ontario, Canada

 

 

Top 5 questions about spousal support in Ontario, Canada

In this video Russell reviews some of the more common questions about spousal support in Ontario, including:

1) What is spousal support?

Spousal support – which is sometimes called “alimony” – is money paid from one spouse to the other after the dissolution of the relationship. The obligation to pay spousal support is a legal one, and may arise either from a marriage, or from a common-law relationship.

2) What is the legal basis for obtaining spousal support?

The obligation for one spouse to pay spousal support to the other does not arise automatically from the fact that the parties had a relationship together (whether formally married or common law). Rather, the spouse who is claiming spousal support must prove an entitlement to it.

A court may order spousal support, and will set an amount and duration based on various factors that exist between the parties. The jurisdiction for a court to award spousal support comes from either the federal Divorce Act (as part of a divorce order), or from the Ontario Family Law Act.

3) What factors dictate the duration and amount of spousal support?

The determination of how much support a spouse should receive, and for how long, is a complex equation. In making a spousal support order courts consider several factors, including:

• the length of the entire relationship (including time living together before marriage);

• the financial circumstances of each spouse, both during the relationship and
after separation;

• the functions performed by each spouse during the relationship;

• the financial repercussions or detrimental financial effect on one or both spouses of caring for each other or for any children of the relationship; and

• each spouse’s ability to support him or herself.

In some cases one spouse may have suffered a financial loss or disadvantage as result of joint career and lifestyle decisions made during the marriage or relationship (for example the decision to move the family so that a spouse can take a new job, or that the mother will give up her career to stay home and raise the children). A disadvantaged spouse will be entitled to support to compensate him or her for that setback.

There may also be a limit on the duration of the support that one spouse receives from the other, as means of encouraging the recipient spouse to achieve post-separation financial independence as quickly as possible. Alternatively, the order may contain a built-in review mechanism.

Note that there are certain tax consequences relating to spousal support – both from the payor’s and the recipient’s perspective. In short – and provided it is paid pursuant to either a written separation agreement or a court order – it is considered “taxable income” in the hands of the spouse who receives it, and is deductible from the taxable income of the spouse who pays it. These tax ramifications are taken into account when determining the amount of support.

4) How does the spouse’s behaviour affect spousal support entitlement?

Generally speaking, the entitlement to spousal support is not dependent on the spouse’s pre- or post-separation behaviour, morality, or ethical conduct. In other words, a spouse who is otherwise entitled to spousal support after the dissolution of a marriage will not become disentitled because he or she was violent, or because it is later discovered that he or she had an extra-marital affair during the marriage.
Having said that, a court’s determination of the amount and duration of spousal support will hinge upon each party providing forthright, comprehensive financial disclosure to each other. If in making the determination the court feels that one spouse has withheld financial information (e.g. has failed to disclose a source of significant income), the court may impute income to the spouse and award the other spouse his or her support accordingly.

5) What happens if there is a change in circumstances?

As indicated above, the notion of one spouse receiving spousal support from the other is rooted in several concepts and principles, including:

1) the financial disadvantage or dependence that relationship gave rise to must be redressed post-separation; and

2) the ability of the paying spouse to fund the spousal support award must be taken into account.

The amount or duration of spousal support may have to be adjusted if there is significant change in the financial circumstances of either party. This change must be significant, and must not have been foreseen when the separation agreement or the court-ordered spousal support award was made.

We hope you have found this video helpful. If you require further information about spousal support please give us a call or visit our website at www.russellalexander.com

Court Finds Spouse Not Disabled, Merely Afflicted by “Lack of Desire to Work”

Court Finds Spouse Not Disabled, Merely Afflicted by “Lack of Desire to Work”

Kilbreath v. Morgan involved a 16-year common-law relationship. Just before they started living together in 1991, the man had been a talented photographer who was already married with children.  He seemed to be affluent, drove a nice car, and owned two homes.  He left his wife and children in order to be with the woman; in order to provide them with somewhere to live, he broke down the door of one his two houses and the two of them moved in (it was unoccupied, as the wife and children were living in the other one).  However, he asked the woman to pay him rent, in order to maintain their financial independence.

The man and woman lived together until 2006, when the woman told him the relationship was over.   At this point they were living in a luxury condominium together, and despite being separated they continued to live under the same roof until 2007, when the woman finally left.  At this point, she was about 40 years old, while the man was 48.

However – and despite his apparently successful photography career – the man had stopped working in 1992, i.e. one year into their relationship.   This was because as part of the divorce from his first wife (which was described as one of “extremely high conflict”), there were several hundred thousand dollars place in a trust fund, and he received “monster chunks of money” approximately every six months, which he used for his living expenses.   In 1999 he received the final $200,000 as part of a lump-sum settlement.   He used some of this money to buy about $30,000 in digital photography equipment, including a $15,000 camera.

The man apparently needed time to “master his equipment”, which took more than a year.      He then claimed to need an agent because he was (as he put it) “a great artist but a terrible sales agent.”  Another 12 to 18 months went by, but no agent had been hired.  At this point, the woman started to insist that he find gainful employment.

Finally, in around 2003, he declared that he was too sick to work as a professional photographer, claiming that he suffered from a chronic sleep disorder, chronic anxiety, and chronic depression.  The woman urged him to see a doctor, but he did not go.  Having run out of patience, she threatened to end the relationship, and in 2006, made good on that promise.  Moreover, the woman had to resort to taking formal legal steps to try to get the man to move out of condominium.

At this point the man sought spousal support, claiming that the woman had a social, moral and ethical responsibility to support him for the rest of his life.  The woman moved out, but she continued to pay the mortgage, condominium fees, property taxes and insurance amounting to about $1,600 per month.   As part of a separation agreement reached in 2007, she agreed to pay the man temporary spousal support of $2,000 per month, and she also paid the first-and-last month’s rent (totalling about $2,500) on the new accommodations he was renting.  

(Meanwhile, the man still had not vacated their condominium, and was ordered by the court to move out in March of 2008, failing which he would be ejected by Toronto Police Services.   He eventually did move out on precisely that date, although police intervention was not required).  

The question for the court was whether the man was entitled to spousal support from the woman on a going-forward basis.  The woman claimed that the man was fully capable of earning income that would make him self-sufficient, and that her temporary spousal support payments should cease immediately or at least be gradually reduced to zero over the course of the coming months.    Her assessment of his approach to finding work was reflected in the following passage from the court’s judgment:

40         Mr. Frenkel [the man’s lawyer suggested that [the woman] thought that the reason [the man] had not worked since 1992 was because he was lazy. She said that he didn’t work for the first few years because he didn’t have to and then he got into a pattern in which he was very comfortable. She agreed that he sometimes expressed frustration that he could not find “meaningful work”. He refused to do “meaningless work”. He wanted to use his skill and talent in photography in an appropriate way as opposed to having rules and boundaries on his talent. As an example, if the going rate for photography for a wedding was $1500, she wanted him to undercut that just to get his name out and he refused because “his talent was worth more than that”. When she pushed him to sell his images on line, he would get frustrated with her and say “I’m not going to sell my soul, I’m not going to give my work away for $50.”

The court began the task of determining the man’s entitlement to spousal support with an assessment of the parties’ credibility.  First of all, it found that although the woman was clearly angry with the man, she gave her evidence in a straightforward and credible manner, and demonstrated a good memory of events.    In contrast, the court assessed the man (among other things) as having “no respect for people and institutions that do not meet his expectations” and indicated that he was “prone to exaggeration.”  More importantly, the court saw no evidence of the fatigue, lack of alertness, or lack of focus about which the man complained and on which he relied in order to avoid having to find gainful employment to support himself.

Next, after reviewing the medical evidence and reports of various experts, the court found nothing to suggest that the man was unemployable or that he could not become self-sufficient.   Although the man did suffer from chronic, low-grade depression, he was not “disabled” to the extent that he could not work.  Indeed, the evidence showed that he was part of a large and active network of internet-based photography devotees, some of whom he voluntarily “mentored”; he also had extensive websites where he posted garnered compliments on his photography.   Rather, the man was deliberately avoiding contributing to his own support because he was too proud of his photography accomplishments to sell the product of his work, and because he was under the misapprehension that the woman had a responsibility to support him for the rest of his life.  

In the end, the court found the man “is capable of using his skills as a photographer to be self-sufficient but he will do nothing until he is ordered to do so…. [he] is capable of working and the only thing holding him back is his own lack of desire to work.”

The court accordingly ordered that the woman’s obligation to pay the man spousal support – which she had already been doing for 10 years at the time of trial – was to permanently end in December of 2012.

For the full text of the decision, see:

Kilbreath v. Morgan, 2012 ONSC 2494  http://canlii.ca/t/fr573

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at  www.RussellAlexander.com

Can the Court Change the Terms of a Dead Person’s Divorce?

Can the Court Change the Terms of a Dead Person’s Divorce?

Last week I wrote about the question of whether a deceased person’s Estate is obliged to continue to pay support to a surviving spouse. This week, in another post, I wrote about whether retroactive support obligations can still be pursued from the Estate of a former spouse who has passed away.

A third, related question is whether the court has a right to retroactively vary the support terms of a Divorce Judgment involving someone who has already died. This was the precise question that arose in an older B.C. case called Despot v. Despot Estate.

The Divorce Judgment between the spouses in that had provided for the wife to receive $500 per month in “maintenance” (which is the term for spousal support order as part of a divorce under the federal Divorce Act). This was increased to $800 per month while both parties were living. It is important to note here that there had also been an earlier separation agreement that also provided for the wife’s support until she remarried or until her death (whichever came first). However, this separation agreement was never incorporated into the Divorce Judgment.

The husband died in 1990. The wife contacted the Estate’s lawyers with a view toward having the $800 per month in spousal support continue; the Estate was not convinced it had the obligation to do so. The wife applied to the court for an order confirming the Estate’s obligation in this regard.

The court considered its ability to make the order requested. First, it untangled a good deal of old and sometimes-contradictory legal precedent (including decisions from Ontario). After doing so it found as follows: the husband’s ongoing obligation to pay spousal support under either the separation agreement or the Divorce Judgment ended the moment the husband died (unless there was a specific agreement between the parties that it was to continue after death and bind the Estate).

This is because the right to receive spousal support under the Divorce Act is a personal right that can only be enforced during the lifetime of the spouse who holds the order. But the same works in reverse, in connection with the death of the person who is paying being paid. Quoting from another decision in a case called Public Trustee of British Columbia (Price Estate) v. Price, the court reiterated:

“A person is a spouse only while married. After the marriage ends a former marriage partner becomes a former spouse. But once a person dies, all that is left is a corpse, an estate, and a personal representative. The corpse is not a person at all. The estate is only a legal concept. The personal representative could be a corporation. None of them is either a spouse or a former spouse.”

In other words, spousal support order cannot be proactively made once the person required to pay is dead, because that person is no longer considered a “spouse” in law. More to the point, a court cannot impose a new obligation on the husband’s Estate that he did not himself have during his lifetime. The court pointed out that there may even be constitutional principles that would prevent such an order.

Here, at the time the Divorce Judgment was made, the wife essentially had to make an election between two choices: either she could rely on the provisions of the separation agreement and not claim any maintenance under the Divorce Act, or else she could claim maintenance. These remedies were alternative ones, and not cumulative. The wife in this case had chosen to take her support via the Divorce Judgment and the maintenance order contained within it. Once the husband died, the order was no longer in effect. The court had no authority to vary it after-the-fact.

In the end, the wife’s application to vary was dismissed.

For the full text of the decisions, see:

Despot v. Despot Estate, [1992] B.C.J. No. 1902; 95 D.L.R. (4th) 62 (B.C.S.C.)

Public Trustee of British Columbia (Price Estate) v. Price [1990] 4 W.W.R. at 52

Russell Alexander Family Lawyers work exclusively on divorce law and family related matters, including custody, spousal support, child support, alimony and separation. For further information, or to schedule an appointment, call 1.905.655.6335.

 

 

Is a Deceased’s Estate Required to Keep Paying Support?

Is a Deceased’s Estate Required to Keep Paying Support?

When someone dies, there are lots of emotions involved, and lots of details to be arranged. In the aftermath, it’s not always easy to focus on the rights and obligations that may arise in connection with the surviving loved ones — and in some cases, the “no-longer-loved” ones.

In particular, the deceased and his or her former spouse may have had a separation agreement in place, or there may have been a court order requiring one spouse to pay support to the other. After the death of the paying spouse, the question arises whether his or her Estate has any ongoing obligation to keep making payments under that agreement or order.

The normal rule – unless the separation agreement or court order expressly states otherwise – support payments are not normally binding on a deceased person’s estate, and the obligation ceases the moment the person dies.

However, that question of whether the agreement or order “states otherwise” can give rise to disputes as to interpretation. In some cases the deceased’s Estate administrator or executor is forced to bring an application to court to determine the question.

Although the facts (and outcome) will vary from case to case, two Ontario cases are illustrative of how this plays out. In the first one, called Brubacher v. Brubacher Estate (Trustee of), the husband and wife had been divorced by way of a Divorce Judgment made in 1996. Upon separation, the parties had agreed that the husband was to pay the wife spousal support for a fixed three-year period, until June of 1999. This commitment was embodied in the formal Divorce Judgment that was issued by the court.

The husband died in 1997. The question arose whether the support obligation survived the husband’s death.

The court considered the circumstances, including the fact that the support order was not open-ended (which it said would normally favour a conclusion that it ceased upon the husband’s death), and that it was made to reflect the parties’ own negotiated separation agreement. Ultimately, on these facts it held that the Divorce Judgment, being specific and time-limited, continued in full force even after the husband’s death, and amounted to a charge on the husband’s Estate.

In the second case, Roth Estate v. Roth, the question was actually not whether the Estate had to pay after death, but rather how much. There, the separation agreement was clearly worded so that the wife was entitled to receive support “for her lifetime”. The husband – whose Estate was worth $24 million – had died a few years earlier. After his death, the Estate continued to pay the wife $10,000 per month for a few years, but it was eager to have that support entitlement brought down. Eventually, the Estate reduced the monthly payment to the wife to just over $5,000, relying on the assertion that the separation agreement contemplated a reduction in the monthly payments “by reason of the resultant income tax consequences” that flowed from the husband’s death. Because upon death there had been a change to the tax deductibility of the spousal support payments that the husband had been making, the Estate claimed that the wife’s spousal support payments should be adjusted accordingly.

Naturally, the wife objected. The matter came to court for resolution.

After a close review of the wording of the separation agreement itself, the court concluded that in reaching that agreement, the parties’ clear intent was to maintain the wife in the same after-tax position following the husband’s death as she enjoyed before. Before the husband died, the monthly support payments were taxable in the wife’s hands, and deductible by the husband (which is the usual situation under Family Law). Once the husband died, any payments by the Estate to the wife were not taxable, but were also not deductible by the Estate from any income that the Estate generated. With this in mind, the court concluded that the wife’s support payment should indeed be adjusted – but after “doing the math” and determined that the reduction should be calculated use the top combined marginal tax rate of 46%.

For the full text of the decisions, see:

Brubacher v. Brubacher Estate (Trustee of), [1997] O.J. No. 2466; 33 O.T.C. 241; 18 E.T.R. (2d) 296; 30 R.F.L. (4th) 276

Roth Estate v. Roth, 2009 CanLII 57455 (ON SC)  http://canlii.ca/t/26968

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