What the economic downturn means for your spousal support:
With the economic downturn in Calgary as a result of low oil prices and COVID-19, we’ve been guiding clients through the challenging questions around spousal support. Whether you’re a payee (receiving spousal support) or a payor (paying spousal support), you’ll want to know the implications of a drop in income for both parties.
We’ll start with the key questions.
Firstly, who is entitled to spousal support?
Though women are more likely to receive spousal support due to their historically lower participation in the workforce, either party could be eligible for support. Spousal support is determined and paid in two categories:
- Where a spouse has sacrificed their own earning potential to support the other person. For example, a stay at home husband who has been out of the workforce because he’s been caring for the children. The wife took the primary earning role in the relationship, to the detriment of the husband’s career. The wife has been able to increase her income and future earning potential, because of her husband’s support. In the event this couple divorces, support would likely be paid from the wife to the husband. This is known as compensatory support.
- When there is a discrepancy between the spouses’ incomes. For example, the wife has a lower-earning career with an income of $40,000 per year, and the husband has a higher-earning career with an incomes of $200,000 per year. The issue here is the discrepancy between the income of the couple and the higher earner may be required to pay support to the lower earner. This is known as non-compensatory support.
I’ve lost my job and don’t have the same income any more. Do I still have to pay spousal support?
If you’ve lost your job or have had a significant reduction in income, you can speak to your lawyer about renegotiating the agreement. Spousal support is determined on your income, if this changes a material amount (for example, a reduction of work hours or a total loss of job), then the spousal support amount may change. It will also depend on if you’ve already signed an Agreement or entered into a court order that stipulates your payments in a set amount for a set amount of time. In those cases, you may not be able to vary your spousal support payments.
As Diana J. Richmond said in a recent family law webinar: “You can’t make someone pay support on an income they are no longer earning.”
I pay spousal support and don’t think the payee is trying to find work. Do I still have to make payments?
The answer is ‘probably’. Unless you can prove that they are intentionally unemployed, or intentionally underemployed, then yes, you may still have to make payments. Proving underemployment is particularly hard, and in light of our current economic situation, this will be even more challenging. Jobs are scarce, and not everyone who wants to work can work.
My working situation has changed significantly recently. Can we renegotiate the spousal support arrangement?
This will depend on whether the spousal support arrangement you entered into was fixed or flexible. A fixed agreement is created to give all parties certainty about the arrangement. It cannot be renegotiated in the event that things change.
A flexible agreement means that parties can reevaluate the arrangement on a regular basis, say yearly or every three years. If you have a flexible agreement you may be able to adjust your spousal support payment amounts.
I’m not sure what the future holds. Should I make a fixed arrangement for spousal support or keep it flexible?
No one has a crystal ball and no one can predict what the future will bring. Whether you should enter into a fixed or flexible arrangement will depend on your own circumstances and the legal advice you receive.
Factors to consider that will impact your support payments if you opt for variable support:
- If your children are still in school / need support
- If you expect your income or your ex-spouse’s income to change
- If you plan to enter/leave the workforce or anticipate a change in income
Not sure of the best spousal support solution for your situation?
If you’d like to arrange a consultation to discuss your spousal support needs, please contact us.