Spousal Support Advisory Guidelines July 2008
The Spousal Support Advisory Guidelines were developed to bring more certainty and predictability to the determination of spousal support under the federal Divorce Act. The Advisory Guidelines project has been supported by the federal Department of Justice. The Advisory Guidelines were released three years ago, in January 2005, in the form of a Draft Proposal and have been used across Canada since then. Comments and feedback were provided and some revisions made. This document is the final version.
The Spousal Support Advisory Guidelines are very different from the Federal Child Support Guidelines. They have not been legislated by the federal government. They are informal guidelines that will operate on an advisory basis only. The Advisory Guidelines will be used to determine the amount and duration of spousal support within the existing legal framework of the Divorce Act and the judicial decisions interpreting its provisions. The Guidelines are not legally binding and their adoption and use will be voluntary. They are intended as a practical tool to assist spouses, lawyers, mediators and judges in determining the amount and duration of spousal support in typical cases. The various components of the Guidelines — the basic formulas, restructuring, and exceptions — are intended to build upon current practice, reflecting best practices and emerging trends across the country. The process of developing the Advisory Guidelines is described in Chapter 2.
An overview of the structure of the Guidelines is found in Chapter 3.
The Advisory Guidelines do not deal with entitlement, just amount and duration once entitlement has been found. A mere disparity of income that would generate an amount under the Guidelines does not automatically lead to entitlement. As is set out in Chapter 4, there must be a finding (or an agreement) on entitlement, on a compensatory or non-compensatory or contractual basis, before the formulas and the rest of the Guidelines are applied. The basis of entitlement is important, not only as a threshold issue, but also to determine location within the formula ranges or to justify departure from the ranges as an exception. Entitlement issues also arise frequently on review and variation, especially applications to terminate support.
Some limitations on the application of the Guidelines are dealt with in Chapter 5. The Advisory Guidelines have been developed specifically for use under the federal Divorce Act. Provincial/territorial laws differ in some respects and any use of these Guidelines in the provincial/territorial context must take account of these distinctive statutes, especially on matters of entitlement for unmarried couples and agreements. A prior agreement may limit the application of the Guidelines, as the Advisory Guidelines cannot be used to override existing agreements, especially agreements that time limit or waive spousal support.
There are two basic formulas in the proposal: the without child support formula and the with child support formula. The dividing line between the two is the absence or presence of a dependent child or children of the marriage, and a concurrent child support obligation, at the time spousal support is determined. Both formulas use income sharing as the method for determining the amount of spousal support, not budgets. The formulas produce ranges for the amount and duration of support, not just a single number. The precise number chosen within that range is a matter for negotiation or adjudication, depending upon the facts of a particular case.
The starting point under both formulas is the definition of income used in the Federal Child Support Guidelines, subject to some minor adjustments for spousal support purposes, explained in Chapter 6.
The without child support formula, set out below, is built around two crucial factors: the gross income difference between the spouses and the length of the marriage. Both the amount and the duration of support increase incrementally with the length of the marriage, as can be seen in the summary box below. The idea that explains this formula is merger over time: as a marriage lengthens, spouses more deeply merge their economic and non-economic lives, with each spouse making countless decisions to mould his or her skills, behaviours and finances around those of the other spouse. The gross income difference measures their differential loss of the marital standard of living at the end of the marriage. The formulas for both amount and duration reflect the idea that the longer the marriage, the more the lower income spouse should be protected against such a differential loss. Merger over time captures both the compensatory and non-compensatory spousal support objectives that have been recognized by our law since Moge and Bracklow.
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 maximum range remains fixed for marriages 25 years or longer at 37.5 to 50 percent of income difference. (The upper end of this maximum range is capped at the amount that would result in equalization of the spouses’ net incomes–the net income cap.)
Duration ranges from .5 to 1 year for each year of marriage. However, support will be indefinite (duration not specified) 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).
Chapter 7 contains examples of the application of the without child support formula and the ranges it produces for marriages of different lengths and incomes.
Cases with dependent children and concurrent child support obligations require a different formula, the with child support formula, set out in Chapter 8. These cases raise different considerations: priority must be given to child support; there is usually reduced ability to pay; and particular tax and benefit issues arise. The rationale for spousal support is also different. Where there are dependent children, the primary rationale is compensatory, as both Moge and Bracklow made clear. What drives support is not the length of the marriage, or marital interdependency, or merger over time, but the presence of dependent children and the need to provide care and support for those children. This parental partnership rationale looks at not just past loss, but also at the continuing economic disadvantage that flows from present and future child care responsibilities, anchored in s. 15.2(6)(b) of the Divorce Act.
There are three important differences between the without child support formula and the with child support formula. First, the with child support formula uses the net incomes of the spouses, not their gross incomes. Second, this formula divides the pool of combined net incomes between the two spouses, not the gross income difference. Third, the upper and lower percentage limits of net income division in the with child support formula do not change with the length of the marriage.
Set out below is a summary version of the basic with child support formula, used to determine the amount of spousal support to be paid where the payor spouse pays both child and spousal support to the lower income recipient spouse who is also the parent with custody or primary care of the children.
The Basic with child support formula for Amount
- 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
- Add together the individual net disposable incomes. By iteration, 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.
Net income computations like these require computer software. Basic to this formula is the concept of individual net disposable income, an attempt to isolate a pool of net disposable income available after adjustment for each spouse’s child support obligations. This is done by deducting or backing out their respective contributions to child support. The details of these calculations are set out in Chapter 8, along with several examples.
Duration under this basic with child support formula also reflects the underlying parental partnership rationale. Initial orders are indefinite (duration not specified), subject to the usual process of review or variation. The formula does, however, provide a durational range which is intended to structure the process of review and variation and to limit the cumulative duration of spousal support. The durational limits under this formula can be thought of as "soft" time limits. There are two tests for duration and whichever produces the longer duration at each end of the range is to be employed:
- First is the length-of-marriage test, which is modelled on the duration under the without child support formula, i.e. one-half to one year of support for every year of marriage, and which will likely govern for most marriages of ten years or more.
- Second is the age-of-children test. The lower end of the durational range is until the youngest child starts full-time school. The upper end of the durational range is until the last or youngest child finishes high school. This test will typically apply to marriages of less than ten years.
Shared and split custody situations require slight variations in the computation of individual net disposable income, as the backing out of child support obligations is a bit more complicated. There is also a different, hybrid formula for cases where spousal support is paid by the custodial parent. Under this formula, the spouses’ Guidelines incomes are reduced by the grossed-up amount of child support (actual or notional) and then the without child support formula is applied to determine amount and duration. Finally, there is one more hybrid formula for those spousal support cases where the child support for adult children is determined under section 3(2)(b) of the Child Support Guidelines.
The formulas provide ranges for the amount and duration of spousal support. The location of a precise amount or duration within those ranges – what we refer to as using the ranges – will be driven by the factors detailed in Chapter 9: the strength of any compensatory claim; the recipient’s needs; the age, number, need and standard of living of any children; the needs and ability to pay or the payor; work incentives for the payor; property division and debts; and self-sufficiency incentives.
Restructuring allows the amount and duration under the formulas to be traded off against each other, so long as the overall value of the restructured award remains within the total or global amounts generated by the formula when amount and duration are combined. Chapter 10 shows how restructuring can be used in three different ways:
- to front-end load awards by increasing the amount beyond the formula’s range and shortening duration;
- to extend duration beyond the formula’s range by lowering the monthly amount; or
- to formulate a lump sum by combining amount and duration.
"Ceilings" and "floors" in Chapter 11 define the boundaries of the typical incomes to which the formulas can be applied. The ceiling is the income level for the payor spouse above which any formula gives way to discretion, set here at a gross annual income for the payor of $350,000. The floor is the income level for the payor below which no support is usually paid, here set at $20,000. To avoid a cliff effect, there is an exception for cases where the payor spouse’s gross income is more than $20,000 but less than $30,000, where spousal support may not be awarded or may be reduced below the low end of the range. An additional exception is also necessary, to allow an award of spousal support below the income floor in particular cases.
Any formula, even with restructuring, will have its limits and there will always be exceptional cases. Because the Guidelines are only advisory, departures are always possible on a case-by-case basis where the formula outcomes are inappropriate. The Guidelines do contain a short list of exceptions in Chapter 12, intended to identify common categories of departures:
- compelling financial circumstances in the interim period;
- debt payment;
- prior support obligations;
- illness and disability;
- the compensatory exception in short marriages without children;
- reapportionment of property (British Columbia);
- basic needs/hardship under the without child support and custodial payor formulas;
- non-taxable payor income;
- non-primary parent to fulfil parenting role under the custodial payor formula;
- special needs of a child; and
- section 15.3 for small amounts and inadequate compensation under the with child support formula.
Self-sufficiency is a central concept in the law of spousal support and Chapter 13 draws together in one place all the aspects of the Advisory Guidelines that promote self-sufficiency, one of the objectives of the Divorce Act.
The formulas are intended to apply to initial orders and to the negotiation of initial agreements, including interim arrangements. Given the uncertain state of the current law, it is not possible to make the Advisory Guidelines apply to the full range of issues that can arise on variation and review, issues that are considered in Chapter 14. The Advisory Guidelines can be applied on applications to reduce spousal support because of changes in income, for example, when the payor spouse’s income goes down or the recipient spouse’s income goes up (or ought to have gone up). In some cases, one spouse may wish to apply to vary to cross over between the two formulas, mostly in longer marriages once the children are no longer dependent, where the without child support formula produces higher ranges.
More difficult issues arise where the payor’s income increases or the recipient’s income is reduced after separation. The most the formula can do is to establish an upper limit upon any increase in spousal support in such cases. At the present time, no formula can be constructed to resolve issues around the recipient spouse’s remarriage or re-partnering, or subsequent children.
Quebec has different guidelines for determining child support, which have an impact on spousal support determinations. The application of the Advisory Guidelines to Divorce Act cases in Quebec raises special issues that are dealt with in Chapter 15.
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