Category: Spousal Support

Marriage is type of economic partnership and thus experiences certain tax implications at its dissolution. The most notable of which are support payments.

Spousal support payments received in a specific calendar year are taxable to the recipient and deductible to the payor so long as:

1. The parties are living separate and apart by reason of the breakdown of their marriage at the time the payments are made;
2. The payments are considered an allowance payable on a periodic basis;
3. The payments are made for the maintenance of the recipient so that the recipient has discretion as to how the support is used;
4. The payments are made directly to the recipient spouse or are considered third-party payments;
5. The payments must be made pursuant to a court order or written agreement; and,
6. The agreement or order must refer to the amount as “spousal support amount” or “spousal support”.

Spousal support payments paid by an estate are not taxable to the recipient or deductible by the estate.

A lump sum spousal support payment is not taxable in the recipient’s hands or tax deductible to the payor.

To learn more about spousal support payment, contact the family lawyers at Krol & Krol today at 905.707.3370.

In Stevens v. Stevens, the wife stayed at home and raised the children during a 16-year marriage. The Superior Court of Justice ordered that the wife was entitled to compensatory support despite the fact that she would receive $8 million in assets. Accordingly, the husband was ordered to make a lump sum retroactive spousal support payment in the amount of $136,182.

The repartnering or remarriage of a support recipient affects spousal support under the Spousal Support Advisory Guidelines. It is to be noted that repartnering and remarriage does not necessarily mean that there is an automatic termination of spousal support.

The following factors often have an impact on determining the quantum of spousal support when a support recipient repartners or remarries:

1. Whether the support recipient is in receipt of compensatory or non-compensatory spousal support. Compensatory spousal support is often treated differently than non-compensatory spousal support.
2. The standard of living in the recipient’s new household.
3. The length of the first marriage is often a relevant factor to be considered.
4. The age of the spouse receiving spousal support.

In extreme situations, it is easier to attempt to predict the outcome of the recipient spouse repartnering or remarrying. For instance, remarriage by the recipient of spousal support may well terminate spousal support if the first marriage was short in duration, the spousal support is non-compensatory and the recipient is young. This ability to predict is not sufficient to provide a formula that can be applied across the board in these cases.

If you are a recipient of spousal support and you are considering repartnering or remarrying, contact the experienced divorce lawyers at Krol & Krol for a consultation at 905.707.3370.

If sufficient resources are available spousal support may be paid from one spouse to another in lump sum form. This has the advantage of allowing the parties to have a clean break. A lump sum may also be appropriate if the payor spouse presents a high risk of defaulting on ongoing payments.

Lump sum spousal support is not taxable in the hands of the recipient and it is not tax deductible to the payor.

Spousal support rights and obligations can apply to both married and common law couples. In a common law relationship, a party may have a right to spousal support if:

1. They have a child or children together; or,
2. They have been cohabiting for a period of more than three years.

According to section 15.2(6) the Divorce Act, spousal support awards should:

1. Recognize any economic disadvantages or advantages to the spouses arising from the marriage or its subsequent breakdown;
2. Apportion between the spouses any financial consequences that have arisen from caring for any child of the marriage in excess of any obligation for the support of any child of the marriage;
3. Relieve any economic hardship borne by the spouses, which arises from the breakdown of the marriage; and,
4. Insofar as is practicable, promote the economic self-sufficiency of each spouse in a reasonable period of time.

While adults are expected to take care of themselves and become self-sufficient following the breakdown of a relationship, there are often factors and consequences of the relationship which may leave one party at an economic disadvantage. For example, where one party forgoes career opportunities or advancements in education in order to maintain the home and be a stay-at-home parent, they may experience serious impediments to their future financial self-sufficiency.

Generally, if one spouse is unable to support himself or herself or if there is a significant difference between the income of the parties, the lower-earning spouse may have a claim for spousal support from the higher-earning spouse. Subject to any agreement between the parties, based on current case law, a spouse who is not able to maintain a standard of living commensurate to the accustomed lifestyle upon the breakdown of marriage is likely entitled to support. Although the Spousal Support Advisory Guidelines, commonly referred to as the ‘SSAG’, are not mandatory, they are often considered by judges in cases involving claims for spousal support.

The duration and quantum of spousal support is dependent on many factors, including but not limited to:

1. The length of the marriage;
2. The age and health of the recipient on the date of separation;
3. The effects of the relationship on the recipient’s career and education opportunities; and,
4. The employability of the lower-earning spouse.