It was your idea to leave the relationship. But have you thought about the financial implications associated with separating from your spouse or common law partner? Separating from your spouse can be more challenging when there are ongoing financial obligations. This is often the case whether you are paying or receiving spousal support. Typically one partner pays spousal support to another on the dissolution of marriage (or common-law relationship). It’s based on ex-partners’ need for financial assistance once that the relationship is over.
If you will receive support, perhaps the amount being offered to you is not quite what you assumed. Perhaps you are not going to be receive enough of a monthly allowance to stay in the family home. On the flipside, if you pay support, you may be concerned about the amount you are required to pay. Maybe it’s not clear how the courts arrived at that figure. Read on for the financial impacts of negotiating spousal support in your separation agreement.
Why do I have to pay spousal support?
Spousal support is required when you or your ex- partner sacrificed their ability to earn an income during the marriage. Or if they will now experience financial hardship due to the breakdown of your relationship. For example, was your spouse the primary caregiver and did not work outside of the home? Will you or your spouse need to provide ongoing care of the children? You should also be aware if you or your partner were the primary caregiver to your children in the relationship. You could potentially receive compensation for caring for your children on separation. The separation agreement often addresses this compensation in the form of spousal support. The amount of support takes into consideration the financial needs of the partner who did not work outside the home or earned significantly less income. Compared to their ex-partner who was the primary breadwinner.
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How is spousal support calculated?
Many factors are taken into consideration when calculating spousal support payments. The rules can often be complex on what should be considered fair for each situation. Most courts and family law professionals use the spousal support advisory guidelines as a framework for calculating support. https://www.justice.gc.ca/eng/fl-df/spousal-epoux/ssag-ldfpae.html. These guidelines help to calculate spousal support for court orders and pay of court settlements.
How long will paying spousal support last?
The length of time spousal support is necessary depends on the following:
1) How long you were in a relationship with your former partner. Keep in mind in some cases you did not have to reside together during the relationship to pay support. Especially if you provided financial support to them when you were living apart.
2)The age of your ex- partner at the time of separation. For example, if you are the person receiving support what are your prospects for being financial independent and finding employment after age 60 versus 29? Chances are a person over 60 may have less chances to earn an income and rely more heavily on support.
3)A material change in the financial circumstances of your ex- partner. Spousal support will continue unless there is a change in your ex- partner’s ability to be self supporting.
What happens of there is a change in the financial circumstances of the payer?
If the payer were to experience a significant drop in their income, they would be able to make an application to the court to reduce your support payments in this case. As a payer you can also negotiate directly with your partner to make changes to the original spousal agreement.
What are the tax implications?
Child support payments are not deductible and taxable in the hands of the payor. Spousal support, on the other hand, is a tax -deductible expense. This means you will be able to deduct the support payment from your income and any associated taxes owing on it. Your ex- partner however, should report the income on their tax return. They would be responsible for any taxes owing.
When a relationship ends it is important to take the financial needs of both spouses or common-law partners into account. Spousal support attempts to make up for the gap in income between spouses so that neither suffers undue hardship. If you are required to pay or will be relying on spousal support as the main source of income, it’s important to understand your rights and obligations. Need more help? Contact your lawyer and they should be able to assist with any questions and concerns.