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Difference between revisions of "Basic Principles of Spousal Support"
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Basic Principles of Spousal Support (view source)
Revision as of 19:00, 17 March 2013
, 19:00, 17 March 2013→Calculating Spousal Support
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==Calculating Spousal Support== | ==Calculating Spousal Support== | ||
It is difficult to predict how much spousal support will be paid in any given case. You can, however, get a rough idea by looking at each | It is difficult to predict how much spousal support will be paid in any given case. You can, however, get a rough idea by looking at each spouse's expenses and the disposable income available to each of them, especially the payor. You should also look at the Spousal Support Advisory Guidelines, which lawyers and the court routinely rely on to determine spousal support payments. These are discussed in the next page, ________ . | ||
In order to decide what should be paid, assuming of course that the recipient is entitled to receive support, it is critical that each party prepare a sworn Financial Statement where a court | In order to decide what should be paid, assuming of course that the recipient is entitled to receive support, it is critical that each party prepare a sworn Financial Statement where a court proceeding has started or not. A Financial Statement is a court form used in both the Supreme Court and the Provincial Court that sets out each party's income and assets, expenses and liabilities. Exchanging sworn Financial Statements is an excellent starting point for figuring out the amount of support which ought to be paid. | ||
===Calculating Spousal Support Without the Advisory Guidelines=== | |||
Assuming that the Advisory Guidelines will not be used, you can use this process to get a rough idea about how much spousal support will be paid. | Assuming that the Advisory Guidelines will not be used, you can use this process to get a rough idea about how much spousal support will be paid. | ||
First, figure out what the reasonable monthly expenses of the recipient are. These needs will include things like paying the rent, utilities, groceries and so forth. | *First, figure out what the reasonable monthly expenses of the recipient are. These needs will include things like paying the rent, utilities, groceries and so forth. ''Reasonable expenses'' won't usually include things like savings for RRSPs, vacations or days at the spa; these are luxury items, not necessities. | ||
Second, subtract from the recipient's monthly expenses any income he or she might have. Typical sources of income include employment income, child tax benefits, baby bonus payments and so forth. The shortfall between the recipient's income and his or her expenses will be the amount of the recipient's monthly needs. | *Second, subtract from the recipient's monthly expenses any income he or she might have. Typical sources of income include employment income, child tax benefits, baby bonus payments and so forth. The shortfall between the recipient's income and his or her expenses will be the amount of the recipient's monthly needs. | ||
Third, figure out what the payor's reasonable monthly disposable income is. Take the payor's net monthly pay, subtract the payor's reasonable monthly expenses, and subtract any child support payments. The resulting | *Third, figure out what the payor's reasonable monthly disposable income is. Take the payor's net monthly pay, subtract the payor's reasonable monthly expenses, and subtract any child support payments. The resulting amount will the be payor's monthly disposable income, the amount of extra money the payor has each month for discretionary spending, to put into savings or to provide to his or her spouse. | ||
Fourth, compare the recipient's monthly needs to the payor's disposable income. If the recipient's needs can be met from the payor's disposable income, a support order will likely be made in that amount. If the recipient's needs can't be met from the payor's disposable income, go back to step one and be more conservative with both parties' expenses. | *Fourth, compare the recipient's monthly needs to the payor's disposable income. If the recipient's needs can be met from the payor's disposable income, a support order will likely be made in that amount. If the recipient's needs can't be met from the payor's disposable income, go back to step one and be more conservative with both parties' expenses. | ||
The payor's monthly disposable income is an obvious place to begin talking about how much spousal support he or she can afford to pay. However, if there is a shortfall between the payor's diposable income and the recipient's need, someone needs to trim some expenses somewhere. Ultimately, if compromise can't be reached, one of the parties may have to accumulate some debt over the short term. This will usually be the party better able to shoulder the financial burden... usually the payor. | |||
The payor's monthly disposable income is an obvious place to begin talking about how much spousal support he or she can afford to pay. However, if there is a shortfall between the payor's diposable income and the recipient's need, someone needs to trim some expenses somewhere. Ultimately, if a compromise can't be reached, one of the parties may have to accumulate some debt over the short term. This will usually be the party better able to shoulder the financial burden... usually the payor. | |||
The court will not bankrupt a payor in order to meet the dependant spouse's needs. Obviously, there must be a balancing. In many cases this means that both parties must adjust their standard of living to be able to live within the pool of income available to them. | The court will not bankrupt a payor in order to meet the dependant spouse's needs. Obviously, there must be a balancing. In many cases this means that both parties must adjust their standard of living to be able to live within the pool of income available to them. | ||
Finally, once a starting figure has been reached, look at the income tax consequences to the | Finally, once a starting figure has been reached, it can be important to look at the income tax consequences to the recipient from receiving support and the income tax benefits to the payor from paying it, and then readjust the amount of support to be paid if desired. | ||
The tax consequences of spousal support sometimes suggest that the basic amount should be adjusted. Because support is a deduction for the payor, he or she will pay less taxes and have more money left over at the end of the year; for a recipient, taxes will be owing on the support payments, and he or she will have less money than expected at the end of the year. | The tax consequences of spousal support sometimes suggest that the basic amount should be adjusted. Because support is a deduction for the payor, he or she will pay less taxes and have more money left over at the end of the year; for a recipient, taxes will be owing on the support payments, and he or she will have less money than expected at the end of the year. | ||
These tax issues are ususally resolved in one of three ways: | These tax issues are ususally resolved in one of three ways: | ||
the tax consequences of spousal support can be ignored altogether (this is the most common approach); | #the tax consequences of spousal support can be ignored altogether (this is the most common approach); | ||
more spousal support could be paid each month to offset the year-end tax consequences; or | #more spousal support could be paid each month to offset the year-end tax consequences; or | ||
the payor could agree to pay any tax debt owed by the recipient resulting from the spousal support. | #the payor could agree to pay any tax debt owed by the recipient resulting from the spousal support. | ||
Where an order or agreement for spousal support does not address these tax issues, it is very important that the recipient set aside a portion of the support he or she receives to pay the tax man. Few recipients are able to pay unexpected tax debts without difficulty. | Where an order or agreement for spousal support does not address these tax issues, it is very important that the recipient set aside a portion of the support he or she receives to pay the tax man. Few recipients are able to pay unexpected tax debts without difficulty. | ||
===Calculating Spousal Support With the Advisory Guidelines=== | |||
Assuming that the Advisory Guidelines will be used, you can visit DivorceMate's website, mysupportcalculator.ca, to use their free spousal support calculator. | |||
The next page, ________ , discusses the Advisory Guidelines formulas in a lot more detail. | |||
==Spousal Support Orders and Agreements== | ==Spousal Support Orders and Agreements== | ||