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This chapter will provide a brief introduction to the law on spousal support; the chapters which follow will explore spousal support in more detail, including the Spousal Support Advisory Guidelines. This chapter will also look at what happens when a person who might be entitled to receive support goes on social assistance and review the income tax consequences of spousal support payments. I. An Overview of Spousal Support
Spousal support is the payment of money by one spouse, the payor, to the other spouse, the recipient. Spousal support is paid to help cover the recipient's living expenses and help the recipient get by as a single person who no longer has the benefit of the payor's income and other household contributions. 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 cheques, two hydro bills and two sets of groceries to buy, all of which must be paid out of the same amount of income which supported the family before separation. To be clear, however, a spousal relationship, whether common-law or married, 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 court said in the 1997 British Columbia 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 party 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. Spousal support is available for married spouses under both the federal Divorce Act and the provincial Family Relations Act. Spousal support is only available to unmarried couples under the Family Relations Act, and unmarried couples can only apply for spousal support if they qualify as "spouses" as defined by the act: (Incidentally, qualifying as a "spouse" as defined the Family Relations Act is what makes an unmarried couple a common-law couple under the Family Relations Act. Different laws required different periods of cohabitation. This is really all that being "common-law" means: whether a particular couple qualifies as "spouses" as defined by a particular act. As a result, a couple can be "spouses" under one act and not under another act. See the Unmarried Couples > Common-Law Relationships chapter for more information.) Spousal support is available for same- and opposite-sex married and common-law spouses. There is no automatic oligation 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. Once a spouse has established that her or she has an entitlement to receive spousal support, the question turns to how much support the spouse ought to get. Broadly 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. 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 Relations 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. The parties will have to share in the financial consequences of the end of their relationship. In general, however, the court will not force someone into bankruptcy to provide support for the other party, 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. Once a person's entitlement to receive spousal support has been established and the amount of support payments has been fixed, the next issue to look at is the length of time for which these support payments should be made. For people leaving long relationships, spousal support might be paid permanently. 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. 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 couple's relationship. Where a couple don't have children, time is based on the length of the couple's relationship. It is almost always possible to apply to change a court 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. People receiving spousal support might want to change an order or an agreement if: People paying spousal support usually want to change things if: If 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. Back to the top of this chapter. II. 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 for and collect spousal support on your behalf and, sometimes, keep the whole of 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 pursue 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. If you might be entitled to receive spousal support, FMP may bring an application for an order requiring your spouse or former common-law partner 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 bring on 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. You may have an understanding with your spouse or former common-law partner 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 support. This is not something that your spouse may have any control over, so try not to get too pissed off 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 fight their application, and you may want to hire a lawyer to do so. Note that you cannot defend their 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 defray the government's expenses by looking for money from someone who has or ought to have that obligation in the first place. Back to the top of this chapter. III. 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. The receiving spouse is obliged to claim the support he or she has received as taxable income, in addition to any other taxable income he or she might have, like employment or rent 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 family 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. 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: The payment of spousal support will require the recipient to pay additional taxes 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. 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: When someone pays more support, the recipient simply 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 reciept of spousal support. This is another good time to hire an accountant. The portion of a lawyer's bill attributable to enforcing a spousal support order is tax deductible. It used to be the case that the cost of obtaining or defending a claim for spousal support was not deductible, however the Canada Revenue Agency changed its opinion on this in 2002, following the decision in Gallien v. The Queen: Note the difference in treatment between spousal support under the Divorce Act and spousal support under the Family Relations Act. To claim these deductions, the lawyer must write a letter to the Canada Revenue Agency 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. Back to the top of this chapter. Site Navigation
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