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CBA Live Online CLEPutting Your Best Case Forward: A Practitioner's Guide

to the Spousal Support Advisory GuidelinesMarch 25, 2009

Presented by the CBA National Family Law Section

D. A. Rollie ThompsonProfessorDalhousie Law School(Halifax)

Scott BoothPartnerJenkins Marzban Logan LLP(Vancouver)

TODAY’S AGENDA

(1) Introduction(2) Income Determination(3) With Child Support Formula: Tips & Traps(4) Location Within the Range(5) Duration(6) Exceptions(7) Transparency, Counsel’s Obligations

FOCUS AND LIMITS

You’ve used SSAG, familiar with software

We assume entitlement: our focus on amount and duration

Not case law, but methods and use

Avoid complex issues, e.g. agreements, remarriage

YOUR PRACTICE?

(1) I practice exclusively family law

(2) I practice family law more than half my time

(3) I practice family law less than half my time, but it’s a significant part of my practice

(4) I do some family law

YOUR USE OF SSAG?

(1) every case where spousal support

(2) most cases, but not every time

(3) some cases only

(4) rarely or never

USE OF SOFTWARE?

(1) DIVORCEmate

(2) ChildView

(3) AliForm

(4) No Software

(5) What? There’s Software?

YOUR REASON FOR TAKING THIS ONLINE PROGRAM?

(1) I’m a sophisticated user, just looking for tips

(2) I’m comfortable with the basics, but I feel I’m missing some more advanced points

(3) I’m still trying to get comfortable with SSAG

(4) I have little or no experience with SSAG

LEARNING OBJECTIVES

(1) Common errors in use of SSAG:

how to avoid them, how to find them

(2) More sophisticated use:

income determination, location within range

duration, restructuring, exceptions

(3) Advocacy: presenting, probing

THE BASICS

Final Version: Released July 2008

Basic formulas continued, tweaking

Exceptions added

No, won’t be “legislated”

Project completed: monitoring by Justice

THE STATE OF THE SSAGACROSS CANADA

BC: Yemchuk, Redpath, endorsed, wide use

AB: varying use, lukewarm appeal use, Sawatsky

SK: varying use, no appeal decision

MB: extensive use, no appeal

ON: Fisher, endorsed, wide use

THE STATE OF THE SSAGACROSS CANADA (EAST)

QC: little use, G.V. c. C.G. appeal critical

NB: wide use, Crosman endorsed

PEI: regular use

NS: extensive use, some Hfx. judges critical

outcomes upheld on appeal

NL: wide use, no appeal decision

INCOME DETERMINATION• Income determination is a crucial first step and must be done

for both parties.

• The starting point is to determine income using the provisions of the Child Support Guidelines:

– Subject to Imputing provisions, sources of Income from T1 General – s. 16 CSG

– Schedule III adjustments – s. 16 CSG

– Imputing provisions, ss. 17-20 CSG

– Include tax benefits and credits received for children of the marriage:

• Child Tax Benefit (SSAG s. 6.3)• GST Credit (SSAG s. 6.3)• UCCB (SSAG s. 6.4)

– Properly account for the custodial situation:

• Sole, Split: custodial parent has benefit for child in their custody if otherwise eligible.

• Shared per s. 9 CSG: rotated benefits or not?

INCOME DETERMINATION

• Do Not Include:

– Social assistance income (SSAG s. 6.2).

– Benefits and credits for children other than children of the marriage (SSAG s. 6.3).


• Commonly missed adjustments:

– Union Dues (CSG Schedule III, s. 1)

– Actual dividend income received (CSG Schedule III s. 5)

– Compulsory deductions for life, disability, health insurance coverage that benefit recipient spouse or children of the marriage (SSAG s. 7.4.1 and s. 8.3.1)



• Software Limitations:

– ChildView does not directly handle imputed income.

– DivorceMate handles it in a limited way.

• Tax effects of imputed income NOT calculated.

• “Consult your family law accounting professional if “imputing income” is an issue.”

INCOME DETERMINATION – IMPUTING

CSG, s.19(1)(a). The spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse. Input a reasonable amount of income according to the person’s education, abilities and experience. Parties must make an effort to maintain employment suiting their education, experience and abilities, or income may be imputed. In Drygala v. Pauli (2002), 61 O.R. (3d) 711, the Ontario Court of Appeal held that there is no need to find a specific intent to evade child support obligations before income can be imputed. This is consistent with the approach adopted by the Manitoba Court of Appeal in Donovan v. Donovan (2000), 190 D.L.R. (4th) 696. However, in Hunt v. Smolis-Hunt (2001), 20 R.F.L. (5th) 409, the Alberta Court of Appeal held that s.19(1)(a) requires proof of a specific intent to avoid child support obligations or circumstances which permit the court to infer a specific intent. Spouses should be aware of the other spouse working part-time, or a 4-day workweek. A court will not tolerate payors who arrange their affairs so as to avoid paying child support. Clients should be advised accordingly. See: Abdilla v. Abdilla, 2004 CarswellOnt 4524 (S.C.J.), White v. Comeau, 2003 CarswellOnt 1140 (S.C.J.), Egan v. Egan, 2003 CarswellBC 1 (S.C.), Kaye v. Kaye (2002), 32 R.F.L. (5th) 368 (Ont. Div. Ct.) and X.(R.L.) v. X.(J.F.), 2002 CarswellBC 1934 (S.C.). However, a parent is not intentionally underemployed where he or she is unemployed because of ill health or misfortune: see Metzler v. Metzler, 2002 CarswellOnt 3149 (S.C.J.). Evidence of lifestyle may be used to impute income. See: Orszak v. Orszak, 2000 CarswellOnt 1574 (S.C.J.), Chen v. Chen (2000), 5 R.F.L. (5th) 288 (Ont. S.C.J.) and Currie v. Currie (1999), 2 RFL (5th) 153 (Ont. S.C.J.). In a clear case, a court may impute income on an interim motion. See: Gillett v. Smyth, 2002 CarswellOnt 3737 (Ont. S.C.J.). However, generally the Courts take a conservative approach on interim motions. See: Bedard v. Bedard (2003), 36 R.F.L. (5th) 10 (Ont. S.C.J.) and Kadikoff v. Kadikoff, 2003 CarswellOnt 1251 (S.C.J.). The amounts input increase the party’s Income for CSG and SSAG purposes, but not for SUPPORTmate purposes. IMPORTANT: The tax implications of this increased Income, however, are NOT taken into account in the calculation of spousal support under the “With Child Support” Formula of SSAG, nor in the calculation of NDI in SUPPORTmate. Therefore, instead of inputting this amount in this field, you may want to input this amount under “Gross employment income” on the Start Page. We strongly suggest you contact your family law accounting professional if “Imputing Income” is an issue.

• Section 17 CSG – Patterns of Income, Fluctuation

• Either:

– Method 1: Calculate the average of income from all sources and use that result as total employment or self-employment income in the Software.

OR

– Method 2: Use a best estimate of current income from all sources and add to it the difference between that estimate and the averaged income from fluctuating sources.



– Method 1 should only be used where all income is being taxed at the same rate (e.g., it is all employment income).

– Method 1 will not give you accurate cash flow information since actual income received will be different than the averaged income.



• Use Method 2 where income is earned from a number of sources taxed at different rates and where you want to be more precise about net disposable income available to the parties.


• EXAMPLE Section 17 CSG – Patterns of Income, Fluctuation

– John Doe has steady employment income of $125,000 per year. He has fluctuating dividend income which was $48,000 in 2006, $100,000 in 2007, and $72,000 in 2008. He expects that the dividend will be about $55,000 in 2009.



– Method 1:

– $125,000, plus

– ($48,000+$100,000+$72,000)/3 (=$73,333)

– Equals $198,333

• If you insert this average into employment income in the software your result will wrong because:

a. You have mixed dividend and employment income which are taxed differently.

b. You have attributed cashflow to the payor which they will not likely receive so that annual net disposable income calculations will be inaccurate.



– Method 2:

– $125,000 input into employment income.

– $55,000 into actual dividend income (gross up if taxable amount is being input).

– $73,333 - $55,000 = $18,333 input in imputed income.

• The imputed income will be included in the Divorcemate SSAG calculation but it will not be included net disposable income or tax calculation.


• S. 19, CSG

– Common Examples:

• Underemployment (CSG s. 19(1)(a))– Sufficiency Incentive under SSAG

• Unreasonably deducts expenses (CSG s. 19(1)(g))

• Non-taxable/Cash income (CSG s. 19(1)(d))

– Remember to gross up income where appropriate.

– Be cautious about adding these figures to employment income.


• S. 18 CSG – Corporate Income

– Impute income where “the court is of the opinion that the amount of the spouse’s annual income as determined under section 16 does not fairly reflect all the money available to the spouse for payment of child support”

– If it is appropriate to impute under this section, consider:

• Will the payor actually draw some of this income in order to pay the increased level of support.

• How will the payor draw the income? Will it be employment income, dividend income, repayment of shareholder loans or an advance to shareholder?


• Under the “without child support formula”, the Advisory Guidelines assume:

– “spousal income difference serves as a convenient and efficient proxy measure for loss of the marital standard of living, replacing the uncertainty and imprecision of budgets.”

INCOME DETERMINATION – CSG vs. SSAG

• Example:

– Assume H & W in second marriage, no children. Both working full time. W at $45,000. H at $120,000. Assume this family are “savers” and lived on about $3,500 per month. H has corporate asset - Holdco. He has not done so during the marriage but, if he chose, H could withdraw $60,000 per year from Holdco without affecting its operation.


• Under CSG’s, a court would readily impute the $60,000 that H can draw from Holdco in H’s Guideline Income.

• Advisory Guidelines range is for support is $1688 per month to $1969 per month. W’s net disposable income is now $4052 to $4443 per month.


• Is it appropriate to impute the corporate income pursuant to CSG s. 18 for SSAG purposes?

– How does this potentially available income relate to the marital standard of living?

• Does it matter whether Holdco is an asset for division between spouses or a separate asset of the H?


CAN A PAYOR HAVE TWO INCOMES?

Yes, in 3 situations:• Post-separation income increase of payor: full sharing for

child support not automatic for spousal: none, some, all?• Income above $350,000: more likely full income for child

support than spousal• Imputing income in some situations: underemployed,

retained earnings, stock options greater duty to maximize income for child

Other situations?

THE WITH CHILD SUPPORT FORMULAS:PICK THE RIGHT ONE!

Really a “family of formulas”Look to parenting arrangements, child support(1) Basic formula: primary care, support recipient(2) Shared custody version(3) Split custody version(4) Step-children version

Then two “hybrid” formulas:(5) Custodial payor formula: often missed(6) Adult child formula: section 3(2)(b), rare

THE WITH CHILD SUPPORT FORMULA:TRAPS AND TRICKY ISSUES

• What about “mixed custody” cases?

• Who gets the Child Tax Benefit, etc.?

• Did you take into account section 7’s?

• If shared custody, should you adjust?

• If step-child, don’t adjust for s. 5 reduction

• If custodial payor, is child support paid?

• If custodial payor, do exceptions apply?

LOCATION WITHIN THE RANGE

• With Child Support Formula

– Relative Strength of Compensatory Claims

• Primary care parent with very young children or out of the workforce longer to raise their children.

• Are there children with special needs?

• Don’t forget about compensatory factors unrelated to children:

– Relocations– Primacy of one spouses career

• With Child Support Formula

– Needs and Means must still be examined. The formulae don’t replace the Divorce Act.

• Budget analysis should permit basic needs to be met for both spouses.

• Effect of property division should be taken into account.

– Realistic self-sufficiency incentives should be taken into account.


• EXAMPLE – With Child Support Formula:

– 9 year marriage. H 39, W 40. Two children, aged 4 and 6. H earns $90,000. W, zero income, homemaker and caregiver to the Children. W was a chemical engineer and left work with the birth of the parties first child. Children will reside primarily with W post separation. Net assets of $500,000 to be divided equally.

– SSAG range (in BC): $1417 to $1817 per month – duration indefinite with ultimate minimum of 4.5 yrs to ultimate maximum of 14 yrs.



– Compensatory factors suggest upper half of range for quantum

• Young children and primary care responsibility• Interrupted career path

– Asset division neutral factor?

– H’s income will likely be strained by the requirement to support two households in the near term.

• H’s NDI range: $3134 to $2852• W’s NDI range: $3407 to $3747



– What about duration?

• Review when youngest starts full time school too soon?

• What is the evidence re: W’s return to engineering?

– What happens to the analysis if:

• There are very high s. 7 expenses which decrease H’s ability to pay spousal support?

• It is shared custody?

• W receives 75% of assets?


THE WITHOUT CHILD SUPPORT FORMULA: LOCATION WITHIN THE RANGE

Use the Fisher v. Fisher facts: 2008 ONCA 1119-year marriage, no childrenWife $35,500, husband $89,825

incomes averaged over 4 years, incl. year of separation Early 40’s now, wife worked while husband to schoolWife worked part-time for half marriage, full-time at endHusband teacher, then union rep, new partner

Range for amount: $1,290 to $1,720/mo (mid $1,505/mo)or $15,483 to $20,644/yr (mid $18,063/yr)

Range for duration: 9.5 to 19 yearsGlobal range: amount times duration

$147,088 to $392,236 (mid $269,662)

MORE FISHER FACTS

Wife worked 1985-89, while husband B.A., B.Ed.

Wife done most credits towards B.A. Fine Arts by trial

Husband new partner, her 2 children, home,

but American physiotherapist, child support

Wife’s income: 2001 $30,000; 2002 $41,000;

2003 $41,000; 2004 $30,000, 2006 $30,000

Husband’s income: 2001 $75,000; 2002 $77,000;

2003 $81,800; 2004 $125,000; 2006 $140,000

THE WITHOUT CHILD SUPPORT FORMULA: LOCATION WITHIN THE RANGE

Factors most important in determining location?

(1) Compensatory vs. non-compensatory?

If compensatory, strength of claim?

(2) Ages of parties, i.e. duration?

(3) Her needs/standard of living?

(4) Her self-sufficiency?

(5) His ability to pay? His income? His needs?

(6) Property division? Debts?

THE FISHER OUTCOME:RIGHT OR NOT?

Time limit: 7 years… but restructuring

Amount: $3,000/mo. for 3.5 years (above range),

then $1,500/mo. for 3.5 years

Global amount $189,000,

lower end of global range

Would you have given the wife more?

(1) Yes

(2) No

DIFFERENT FISHER FACTS?

What changes to location within range, if:

• husband had just finished MBA and got new job at separation?

• couple made multiple moves for husband’s work

• wife wanted to return to school, to be teacher?

• wife disabled, receiving only CPP $15,000?

• should CA have used 2006 incomes at trial?

why? why not?

BASICS OF DURATION: THE WITHOUT CHILD SUPPORT FORMULA

• Basic principle: ½ to 1 year for each year of marriage/cohabitation

• Indefinite if together 20 years or more

• Indefinite if “rule of 65”:

years together plus age of recipient 65 or more

• “Indefinite (duration not specified)”

• “Indefinite” subject to review/variation time limit later, retirement of payor

Same duration principles for custodial payor formula

BASICS OF DURATION:THE WITH CHILD SUPPORT FORMULA

Initial orders/agreements “indefinite”

Importance of reviews: Leskun

Time limits “softer”, effected by review/variation

Two tests under basic formula:

(1) length-of-marriage test: ½ to 1 yr per yr

marriages 10-plus years, older children

(2) age-of-children test: shorter marriages

start school full-time, finish high school

DURATION ISSUES:THE WITH CHILD SUPPORT FORMULA

• Most cases tend to upper end of range• When lower?

(1) short marriage, step-child(2) small loss, quick return to

employment(3) shared/split custody(4) restructuring: front-end loading

Again, distinguish custodial payor formula

RESTRUCTURING

can be used in 3 ways:

(1) to front-end load awards by increasing amount beyond range and shortening duration eg. Fisher (Ont. CA, 2008)

(2) to formulate a lump sum payment by combining amount and duration

(3) to extend duration beyond the ranges by lowering the monthly amount

lump sums: remember different tax treatment (discount!)

EXCEPTIONS, EXCEPTIONS

• First clue: other lawyer likes formula range

• Second clue: family lawyer’s gut instinct

Most frequent exceptions:

• Illness and disability: shorter marriages

• Interim circumstances

• Basic needs/hardship

• Reapportionment (only in BC)

EXCEPTIONS: EXISTING, CONTINUED(1) Compelling financial circumstances in interim

(2) Debt payment:debts exceed assets

(3) Prior support obligations:support for prior child or prior spouse

(4) Illness and disability:beyond restructuringextend durational limit, amount within range

(5) Compensatory exception in shorter marriages:disproportionate loss/advantage

(6) Non-Primary Parent, to Fulfill Parenting Role: Custodial Payor Formula

EXCEPTIONS: NEW, ADDED

(7) Property Division:Reapportionment (B.C.), High Property Awards? Boston v. Boston

(8) Basic Needs/Hardship:Without Child Support, Custodial Payor Formulas

(9) Non-Taxable Payor IncomeNon-deductibility, balance tax positions

(10) Special Needs of Child

(11) Section 15.3: Small Amounts, Inadequate CompensationWith Child Support Formula

PROPERTY AND DEBTS

• No exception for unequal division, except where it is lump-sum support

• Boston: double-dipping after retirement• What about high property awards?• Debt exception not that broad:

debts must exceed assets, or payor’s“family” debtspayments “excessive/unusually high”otherwise, factor within rangegenerally, not for equalization payment

TRANSPARENCY

– It is not sufficient for counsel to exchange or pass up calculation results without:

• DivorceMate: SupportMate AND ChequeMate printouts.

• ChildView: Calculation report AND Schedule C Summary of Data Input.

TRANSPARENCY• Where the results do not seem right or counsel disagree:

• How was income determined? From what sources? What deductions and credits and who were they allocated to?

• Were components of the income imputed? Tax implications?

• What s. 7 expenses have been included, at what amounts, and who is being credited for paying them?

• Have any adjustments been made to calculated child support (CSG s. 9, 5, 3(2)(b),or 4)?

• Do the net disposable income figures reflect what is actually available to a party?

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