Spousal Support - What Happens When...

Tuesday, June 22, 2010

Gwen is 61 and Steve is 67.  They  married in 1962 and separated in 1990 after 28 years of marriage.  When they separated they were 47 and 53 and their children were 22 and 20.

By the time the matter was resolved, two years later,  child support was no longer an issue.  Gwen and Steve resolved their property issues taking into consideration the value of Steve’s pension, their investment portfolios and the home.  Steve kept his pension and Gwen received the home.  As well, Steve was required to pay Gwen spousal support of $1,800.00 per month which is now about $2,100.00  because it was indexed.

Now ,14 years later, Steve’s income has dropped significantly because he retired.   Gwen is also retired and receiving pension income, but which is less then Steve’s.  Both parties have remarried.  Gwen still lives in the home she received in the settlement.  Steve has never owned any more property but has acquired some further savings.

Steve wants to reduce support because most of his retirement income comes from a pension which was valued at separation and included as part of the settlement.  Gwen wants support to be maintained.  The parties also don’t agree on when support should end.  Gwen wants it to continue for her lifetime and Steve wants it to end when he dies so his second wife will inherit something from him.

The Court considers three issues:

1) Should support be reduced based upon the reduction in Steve’s income and the changes in the parties’ circumstances?

2) Can Steve exclude the portion of his current income stream generated as a result of pre-separation employment service? (The value of the pension at the time of separation.)

3) How long should support continue?

Support is always subject to variation if one can demonstrate a material change in circumstances.  What is considered a material change in circumstances may vary from Judge to Judge.   Essentially, if there has been a significant decrease in income, support should also be reduced accordingly.  The fact of re-marriage does not necessarily dis-entitle someone to support. 

Answering the next point is a little more difficult.  Lawyers refer to this concept as “double dipping”.  The Supreme Court of Canada has determined that Courts should try to avoid double recovery whenever possible and a court should only consider that portion of a payor’s income stream that arose after separation. (The increase in the pension income generated after sepreation).  After all, the parties agreed long ago that Gwen getting the house made up for Steve’s pension as it was valued when they separated. Nonetheless, the Court still has jurisdiction to decide otherwise,  A lot will depend on the dependent spouse’s situation.   In my opinion, the court should not allow a support recipient to maintain capital assets, while requiring a support payor to draw down his capital.

With respect to how long support should be paid, most often courts resolve this issue by requiring one spouse to be designated a beneficiary of  life insurance.  Once the proceeds are paid out on the death of the payor, there is no further support obligation.  However,  retired persons usually loose the benefit of group life insurance they had while working and  insurance costs at their age are high.

The outcome: Steve continues to pay support in his lifetime, at a reduced amount based upon the percentage that his income was reduced and how much of his income stream was acquired after separation.

Joanne Guarasci  practices family law with Ross & McBride LLP in Hamilton . Please send in your questions to jguarasci@rossmcbride.com.