Spousal Support

Spousal support is a payment made by one spouse, the payor, to the other spouse, the recipient, to help with his or her day-to-day living expenses or to compensate the recipient for the financial choices the spouses made during the relationship. Although anyone who was in a married or unmarried spousal relationship can apply for spousal support, it's important to know that there is no automatic right to receive support just because of the relationship. Whether spousal support will be paid, and, if so, how much will be paid, always depends on the particular circumstances of each couple.

This page provides an introduction to the law on spousal support; the pages that follow will explore issues about spousal support in more detail, including the Spousal Support Advisory Guidelines. This page also looks at what happens when a potential recipient applies for social assistance and reviews the income tax consequences of spousal support payments.

An Introduction to Spousal Support

Spousal support is paid for one of two reasons, either to help cover the recipient's living expenses and help the recipient get by as a single person without the benefit of the payor's income and other household contributions, or to compensate the recipient for financial decisions made by the spouses during their relationship.

No matter if one spouse was working during the relationship or both worked, the fact is that during the relationship there was only one mortgage payment to make, only one hydro bill and only one cable bill. After the relationship ends, there are two rent payments, two hydro bills and two sets of groceries to buy, all of which must be paid out of the same pool of income that supported the family before separation.

To be clear, however, a spousal relationship, whether married or unmarried, is not a pension plan. When a spousal relationship ends, each party needs to become financially independent and self-sufficient as soon as possible. As the judge said in the 1997 Supreme Court case of Dumais-Koski v. Koski, "marriage is not a legal institution created for the redistribution of wealth." Or, as the Alberta Court of Queen's Bench put it in the 2005 case of V.S. v. A.K.:

"A person does not acquire a lifetime pension as a result of marriage. Likewise, marriage is not an insurance policy."

A spouse who is self-sufficient, or readily capable of becoming self-sufficient, at the end of a relationship will not usually be entitled to receive spousal support.

The Law

Spousal support is available for married spouses and formerly married spouses under the federal Divorce Act. Spousal support is available to spouses under the provincial Family Law Act, which, for the purposes of child support and spousal support, defines spouse as including:

1. people who are married to each other;
2. people who have lived together in a "marriage-like relationship" for at least two years;
3. people who lived together in a marriage-like relationship for less two years and have a child together; and,
4. former spouses.

(Incidentally, the law in British Columbia doesn't talk about people who are common-law spouses and never has. Once upon a time, people could marry each other and create a legal relationship simply by agreeing to marry, without getting a licence from the government or having a particular kind of ceremony. Because the rights between the spouses came from common law principles, these were known as common-law marriages. Common-law marriages were valid in England until the Marriage Act of 1753, better known by its full flowery name, An Act for the Better Preventing of Clandestine Marriage. Please don't use this term. It doesn't mean what most people think it means and is two and a half centuries out of date.)

Spousal support is available for all spouses, whether of the same or opposite sexes.

Entitlement to Support

There is no automatic obligation to pay spousal support the way there is for child support. As a result, the entitlement of a spouse to receive spousal support will be decided on the particular circumstances of that person and his or her relationship with the other spouse. In general, the court will take into consideration the following factors, among many others.

• Length of Marriage: The longer the relationship, the more likely it is that an order for spousal support will be made. As well, the longer the relationship is, the stronger will be the presumption will be that the parties should have an equal or almost equal standard of living at its conclusion.
• Difference in Incomes: The greater the difference in income between the parties is at the end of a relationship, the more likely it is that an order for spousal support will be made, even if the support will only be paid for a short period of time.
• Economic Disadvantage: The more economic opportunities a spouse has lost as result of the relationship, such as job skills, job opportunities, raises and promotions, or employability, the more likely it is that an order for spousal support will be made.
• Earning Capacity: The more one party's earning capacity is reduced because of family obligations like child care or a serious illness, for example, the more likely it is that an order for spousal support will be made.

Amount of Support Payments

Once a spouse has established that he or she has an entitlement to receive spousal support, the question becomes how much support the spouse ought to get. Generally speaking, the amount of an order for spousal support is calculated by looking at the disposable income of the payor and the reasonable needs of the recipient. If a payor has a gross income of, say, $2,000 per month, and of that money $1,500 is spent on taxes, child support, housing costs, utilities and other basic living expenses, the payor's disposable income will be $500 per month. Spousal support will usually be paid out of that remaining $500 per month if it's payable at all. Although spouses usually share in the financial consequences of the end of their relationship, the court will not force someone into bankruptcy to provide support for the other spouse, although there certainly are times when a support order will result in the payor racking up debt.

The amount of spousal support payments is now generally calculated using the Spousal Support Advisory Guidelines. The Advisory Guidelines is an academic paper released by the federal Department of Justice which describes a number of mathematical formulas which calculate the amount of spousal support payments based on each person's income, the length of their relationship and the age of their children, and other factors.

Sometimes there is simply not enough money coming in to cover child support, the payor's day-to-day needs and the day-to-day needs of the recipient. In cases like that, both the Divorce Act and the Family Law Act require child support to take priority over spousal support, and the amount of spousal support paid simply may not suffice to cover the recipient's needs.

Duration of Support Payments

Once a spouse's entitlement to receive spousal support is established and the amount of support payments has been fixed, the next step is to look at is the length of time for which the support payments should be made. For people leaving long relationships, spousal support might be paid permanently or until retirement. For people in shorter relationships, particularly where the recipient is either working outside the home or capable of working outside the home, support might only be payable for a fixed length of time.

There are a number of different ways that an order or agreement for spousal support can deal with the issue of time.

• Lump Sum Payments: Instead of on-going monthly payments, it can sometimes be better to pay a single lump sum for all of these support payments made at once. Of course, the payor has to be able to pay a lump sum like that, and not everyone can.
• Division of Property: It is possible that the way the family property and family debt is divided could satisfy the goal of a spousal support order. It's also possible that a payor could agree to give the recipient more of the family property in order to avoid a spousal support obligation.
• Review Dates: An order or agreement can say that when a certain date or event arrives, the amount of spousal support or the recipient's entitlement to receive support will be reviewed. This is sometimes easier to accept than a fixed date on which support will terminate, but it does mean that the parties will have to argue about the issue in the future. Again.
• Escalated Payments: If someone wants to pay spousal support for as short a time as possible but can't make a lump-sum payment, the payor might be able to get an order or agreement requiring greater monthly payments but over a shorter period of time.

The Advisory Guidelines can also be used to calculate a range of time for which spousal support should be paid, in addition to calculating how much support should be paid. Where a couple have children, time is based on the dates the youngest child will enter and exit school, and, sometimes, on the length of the spouses' relationship. Where a couple doesn't have children, time is based on the length of the couple's relationship.

Changing Spousal Support

It is almost always possible to apply to change an order for spousal support or to renegotiate an separation agreement that requires the payment of spousal support, as long as there has been a change in circumstances since the order or agreement was made.

Recipients might want to change an order or an agreement if:

1. their spousal support payments are going to end but their financial situation hasn't improved;
2. their financial situation has worsened and they need more support than they did before; or,
3. something unexpected has happened, like an illness or an accident, that causes them to need support.

Payors usually want to change things if:

1. their financial situation unexpectedly worsens;
2. the recipient finds work or gets better-paying work;
3. the recipient enters a new spousal relationship;
4. the recipient's financial situation unexpectedly improves; or,
5. they have a new legal obligation to support someone else.

I f the parties can't agree about if or how a support order should be changed, they will usually have to make an application in court to vary the order. Couples with an agreement often try to negotiate a change and only go to court if they can't agree on the change.

Spousal Support and Social Assistance

If you are applying for welfare or are receiving welfare, you may be required to sign a form that allows the ministry administering social assistance to take whatever steps are required get an order spousal support on your behalf and, sometimes, keep the spousal support it collects. This is called assigning your spousal support rights to the ministry. The point of this is to allow the provincial government to recapture some of the money it spends on social assistance from someone else who might have a legal responsibility to support you.

The collection of spousal support payments for people on social assistance is run by the Family Maintenance Program. (This is a completely different organization than the program which enforces support payments between spouses, the Family Maintenance Enforcement Program.) FMP has the authority to being court proceedings for spousal support and can apply for new orders for spousal support, or apply to change old orders for spousal support, as it sees fit, and it will do this as it sees fit without much involvement on the part of the recipient at all.

FMP and People Entitled to Receive Support

If you might be entitled to receive spousal support, the Family Maintenance Program may make a court application for an order requiring your spouse to pay support. You will not have a say in the matter if FMP decides to do this, and FMP may bring on such an application for so long as you might be entitled to receive support,.

FMP will make their application whether you like it or not, and they can require that you cooperate in their application. On the other hand, FMP will be responsible for managing any court applications they begin. You will not have to worry about arguing the application yourself.

You may be allowed to keep some of the support money which the ministry collects on top of your social assistance payments; your case worker will tell you how much.

FMP and People Obliged to Pay Support

You may have an understanding with your spouse that no spousal support will be payable; you might not have even seen him or her for several years. Nevertheless, if your spouse applies for social assistance, you may find yourself being served with an application for an order that you pay spousal support. This is not something that your spouse may have any control over, so try not to be too mad about it.

When FMP brings on an application for support, they bring it as if they were the person entitled to receive the support, and the application will be dealt with on that basis. It will be your job to defend their application, and you may want to hire a lawyer to do so.

You cannot defend FMP's claim by saying "but my spouse is on welfare, she doesn't need any support from me." That's actually the whole point of FMP's application; they're trying to reduce the government's expenses by looking for money from someone who has or ought to have an obligation the welfare recipient in the first place.

Spousal Support and Income Tax

A spouse who pays support on a periodic basis is entitled to claim the whole amount of his or her payments as a deduction against his or her taxable income, just like an RRSP contribution. The recipient is obliged to claim the support he or she has received as taxable income, just like employment income, and the recipient will wind up owing money to the government at tax time each year.

To claim spousal support payments as a tax deduction, the order or agreement which obliges the payor to make the spousal support payments must clearly state that the payments are for spousal support and the payments must be periodic in nature rather than paid as a lump sum. Without these clear statements, the federal Income Tax Act requires the payments to be treated as child support payments, and child support payments are neither tax deductible for the payor nor taxable income for the recipient.

Lump-sum spousal support payments are neither deductible for the payor nor taxable for the recipient.

Ensuring Spousal Support is Deductible

If you want to ensure that the money you are paying as spousal support is deductible, there are a couple of important points you must pay attention to in order to satisfy the tax man:

• Court Orders: The order must clearly state a fixed, periodic sum which is being paid, and this fixed sum must be described as "spousal support".
• Separation Agreements: In addition to a term describing a fixed, periodic sum as "spousal support", the agreement must also contain state that the parties have been separated since a certain date and intend to continue to live separate from each other. Payments for child support and spousal support should never be expressed as a single amount.
• Unwritten Agreements: In general, the tax man will not recognize anything other than a written separation agreement or a court order. There are some exceptions to this rule, but you really should arrange your support payments in a formal fashion.

Avoiding Unexpected Taxes

The payment of spousal support will require the recipient to pay additional taxes each year since the payments received must be reported as income.

A recipient of support may also be subject to other tax consequences that aren't so obvious. One of the more common ways this can happen is if the payor is making the payments indirectly, through a company he or she owns. For example, say that Bob, the owner of Bob's Brewery, writes his spousal support cheques on the company bank account of Bob's Brewery instead of from his personal chequing account. In a case like this, the recipient risks having the payor declare the money to have been paid as a corporate dividend or as salary as if the recipient was a shareholder or employee of the company.

In the case of support declared as salary, the recipient might also face an unexpected bill from EI or CPP for missed payments, as well as for underpaid tax from the Canada Revenue Agency. In the case of support paid as a dividend, the payments might be taxed at the corporate tax rate, which may be higher than the recipient's personal tax rate.

The easiest way to guard against unexpected taxes is to ensure that the payments are made by way of a personal cheque drawn on the payor's personal bank account.

Taking Taxes into Account

When it will be difficult for a recipient to pay the tax owing on spousal support, a couple can agree to deal with these taxes in one of two ways if the recipient is to avoid a big bill in April:

1. the payor could pay more in spousal support to account for the tax consequences; or,
2. the payor could simply pay the tax owing by the recipient when the recipient files his or her tax return.

When someone pays more support, the recipient must put the extra amount aside for tax time, or his or her bill to the Canada Revenue Agency will just be that much higher. Since it can be a bit difficult to figure out how much money the recipient will have to pay in taxes, you might want to hire an accountant to get the number right.

When someone agrees to pay the taxes owing on account of the spousal support and the recipient has other sources of income, it can be very difficult to figure out exactly how much of the recipient's tax bill results from his or her receipt of spousal support. This is another good time to hire an accountant.

Deductibility of Legal Fees

The portion of a lawyer's bill attributable to increasing or enforcing a spousal support order is tax deductible. The cost of obtaining a spousal support order or defending a claim for spousal support is not deductible. Read the Canada Revenue Agency's Interpretation Bulletin IT-99R5 for the fine print.

To claim these deductions, the lawyer must write a letter to the CRA setting out what portion of his or her fees were attributable to advancing a spousal support claim. If you intend to ask your lawyer for a letter like this, you must tell your lawyer as soon as possible, preferably the moment the lawyer takes your case. It may be impossible to winnow out the portions of an account spent on spousal support after the fact.

Further Reading in this Chapter

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Legislation

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Links

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