On Thursday, January 27th,
2005, Professors Carol Rogerson and Rollie Thompson released
their Spousal Support Project report titled: “Spousal
Support Advisory Guidelines: A Draft Proposal”. They’re
asking for feedback and if you have any comment (plaudits or
gripes) they’re reachable at Spousal Support Project, P.O. Box
2310, Station D, Ottawa, Ontario, K1P 5W5.
There’s a great Executive
Summary and an Introduction
which are well worth reading. But if you don’t do anything
else, take a look at the Table
of Contents so you’ll know what specific questions they’ve
dealt with.
This Commentary will deal
with matters under these headings:
1.
What are the SSAG?
2. Income
Sharing as the Basic Structure
3. The
Without Child Support Formula Approach
4. The
With Child Support Formula Approach
5. Ceilings
and Floors
6. Variation,
Review, Remarriage, Second Families
7. Other
Interesting Parts of the Report
| 1.
What are the SSAG? |
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They’re 2 formulas (without
child support and with
child support) designed to produce a figure for spousal
support in normal situations for support payors in situations
where there is and where there isn’t child support. The report
goes into detail about the without child support formula in
Chapter
5 and the with child support in Chapter
6.
They’re “advisory” – not legislated
or mandatory. This means the SSAG are set out for people to
look at and decide to adopt or not as they may jointly wish.
Obviously the thinking is that once there’s a formula which
is accepted as being reasonable unless there’s some reason for
an exception, more and more people will just look at the formula.
The authors take pains to
point out that they’re not suggesting something new of different
from what we’re already doing in Canada, and they’re not replacing
the existing legislation and case law, but that they’re trying
to come up with a set of formulas that assist lawyers, judges,
and clients in arriving at a fairly uniform result for spousal
support without having to go through expensive litigation.
They recognize that this won’t work for everyone, but believe
that it will work for lots of divorcing couples.
Because this is a Federal
initiative the suggestions really only apply to married people
who are divorcing. But it’s pretty obvious that once these
advisory guidelines begin to be applied for married couples
the same lawyer and judges will be looking to them for unmarried
couples separating in the same situation.
Go through he report and look
at the proposals carefully. Then ask yourself how they’d apply
to various closed cases in your office. How different would
the results be under the appropriate formula from the result
negotiated between two lawyers or as determined by the court
in any particular file? And if there would be a difference,
ask yourself which of the 2 results is more aligned with your
sense of what’s right – as opposed to what was the best deal
for your client? There’s no suggestion in the report that parties
can’t continue to proceed as we now do without the SSAG. But
there is the clear suggestion that using the SSAG will bring
about greater uniformity of spousal support results, with the
ability to reasonably predict the general end-result subject
to certain limited adjustments.
We’re done with budgets if
we use the SSAG. At least they won’t play a primary role any
more because the key consideration will be how to share the
income of the parties. If you don’t like that as a basis approach
you won’t like the SSAG. But it simplifies matters.
Firstly it’s fundamental to
realize that “income sharing” doesn’t mean “equal sharing”.
And secondly, it’s important to recognize, as does the report,
that the formulas set out are intended to be starting points
and that there will be scope for variations, exceptions, and
adjustments so that the formula doesn’t become a straightjacket.
This formula embraces the
“merger
over time” principle which is that the longer the marriage
lasts the economic and non-economic lives of the parties become
more deeply merged with each spouse acting and making a variety
of decisions based upon, or taking into consideration, the situation
of the other spouse. The authors state that the “merger over
time” concept captures both the compensatory and non-compensatory
spousal support objectives set out in the Moge and Bracklow
cases.
The Without Child Support
Formula therefore is built around 2 key factors:
The difference in gross income of the
parties, and
The length of the marriage.
The box set out below is how
the report summarizes the formula which is intended as the starting
point after which one looks at such things as where in the range
any particular case fits, what restructuring
should be considered (higher payments for a shorter period of
time, lump sum adjustments, etc.) and what exceptions
apply. The formula is advisory only and should be the first
step in dealing with the issue of spousal support if there isn’t
child support being paid.
|
The Without Child Support Formula
Amount ranges from 1.5
to 2 percent of the difference between the spouses’
gross incomes (the gross income difference) for each year
of marriage (or, more precisely, years of cohabitation),
up to a maximum of 50 percent. The range remains
fixed for marriages 25 years or longer at 37.5 to 50 percent
of income difference.
Duration ranges from
.5 to 1 year for each year of marriage. However, support
will be indefinite if the marriage is 20 years or longer
in duration or, if the marriage has lasted 5 years or
longer, when the years of marriage and age of the support
recipient (at separation) added together total 65 or more
(the rule of 65).
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When you’re in a situation
where the spousal support is being calculated where there aren’t
any children, then you use the gross income of the parties and
work with the gross income difference. (1.5% - 2% of the gross
income difference for each year of cohabitation up to 25 years.
The range of support remains fixed for marriages 25 years or
longer at 37.5% - 50% of the income difference. There are examples
below.)
This formula also sets out
a calculation to fix the duration of the support. (.5 – 1 times
the number of years of marriage but indefinite for marriages
of 20 years or longer, or if the marriage and age of the recipient
at separation totals 65 of more. There are examples below.)
However there report suggests
that there would be factors affecting the precise amount or
duration of the ranges of support produced by the formula.
These include such things as a strong compensatory claim, the
recipient’s needs, property division, the needs and limited
ability to pay on the part of the payor spouse, and self-sufficiency
incentives.
And the report also sets out
various methods of “restructuring”
so that you can move around the amounts and duration of support
to increase one and decrease the other. Most lawyers do this
one way or the other in drafting separation agreements but the
report provides some actual examples to assist those who might
not otherwise have thought of it.
And it also deals with
various “exceptions”
or “categories of departures” from the ranges for amounts and
duration. If looking within the suggested ranges doesn’t satisfy
the particular case you’re dealing with and restructuring doesn’t
lead to the “right” solution, then as a final step you’d want
to see how the exceptions can assist in shaping a resolution.
The report sets out several “exceptions” but comments that they
anticipate the ones they didn’t set out will create more discussion
than those they did.
This formula recognizes the
obvious fact that spousal support in a situation where there
is child support being paid is different from where there isn’t
any child support obligation. Child support needs to be paid
as a first priority, it isn’t tax deductible or includable,
it isn’t a function of the length of the marriage, it needs
to take into consideration that both parents – not just the
support paying parent – are contributing to the cost of raising
the children, it must recognize that most often there are forgone
economic advantages resulting from the child raising activity
within the marriage. As well, this formula needs to deal in
the after-tax disposable income of the family – not gross incomes.
The box set out below is
how the report summarizes the formula which is intended as the
starting point after which one looks at such things as where
in the range any particular case fits, what restructuring
and exceptions
might apply. When there are child support obligations the amount
and nature of restructuring will be less relevant but because
this report deals with the spousal support piece of the overall
support obligations it might well be adjusted once the child
support piece has been set because of the particular circumstances
of the family.
|
The Basic With
Child Support Formula
(1) Determine the individual
net disposable income (INDI) of each spouse:
Guidelines Income minus
Child Support minus Taxes and Deductions = Payor’s INDI
Guidelines Income minus
Notional Child Support minus Taxes and Deductions Plus
Government Benefits and Credits = Recipient’s INDI
(2) Add together the
individual net disposable incomes. Determine the range
of spousal support amounts that would be required to leave
the lower income recipient spouse with between 40 and
46 percent of the combined INDI.
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But we all know that dealing
with a formula for spousal support when there’s also chid support
involved isn’t very simple. What about when the parents are
sharing the children or there’s split custody or when the parent
paying the spousal support is the one receiving the child support?
The report deals with these
questions in sections titled “Custodial
Variations: Shared and Split Custody” and “A
Hybrid Formula for Spousal Support Paid by the Custodial Parent”.
These sections should be looked at carefully if you’re in one
of these situations so that you’ll be able to develop a starting
point for spousal support discussions which take your particular
situation into account.
The report states quite
clearly that there’s a range above and below which formulas
just don’t work. So they suggest that if the support payor’s
income is over
$350,000 the payment move away from the formula to judicial
discretion and that if the payor’s income is below
$20,000 no spousal support should be paid. Remember that
the floor for child support is set at $7,500 so that if a support
payor has children then child support will be paid based upon
the payor’s income between $7,500 - $20,000 and once the income
exceeds $20,000 both child and spousal support would be paid
under the formulas if there weren’t to be any adjustments because
of restructuring or exceptions considerations.
This is clearly going to
be an area of intense examination for people concerned with
the effect of the SSASG. When can the formula be adjusted in
light of changed circumstances. What about the remarriage or
re-partnering of the parties (no change if it’s the payor re-partnering)
or if either of the parties have a second family? Theses aren’t
new questions but they are certainly vexing. The report recognizes
that they are troublesome and attempts to address each of these
situations. In some cases they acknowledge that there isn’t
any consensus and they don’t have a suggestion. But if you
have one of these situations you need to take a close look at
Chapter
10.
7.
Other Interesting Parts of the Report
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This report is fun to read.
It’s full of interesting and provocative thoughts and discussions,
as well as setting out various conclusions and the reasoning
behind those conclusions.
Apart from discussing the
various things mentioned above it goes into other relevant topics
such as dealing with Interim
Support, and it has an interesting Appendix
A setting out cases in Canada where the courts have already
applied some sort of income sharing in determining spousal
support.
Appendix
C sets out “Detailed Calculations Under The Basic With Child
Support Formula” and there are lots of examples throughout the
report to show how what’s being discussed would apply in this
or that situation.