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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 04-10-2006, 03:10 PM
mgh mgh is offline
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Default Child Support / Early Retirement, Lump Sum Payout

Brief history:

My ex-husband & I separated in August 2001; divorce finalized in July 2002.

I have 2 children (18 & 19) who live with me full time; very limited contact with dad, though he lives in the same town..

I receive child support to the table based on my ex-husband's 2003 Tax Return amount.

My ex-husband, who turned 58 on December 30, 2005, accepted early retirement from his employeer, effective January 1, 2006. He immediately sought reduction in the support payments to his, now, "lower" pension income, via a letter sent to me from his attorney the middle of February, requesting my "consent" to the variation, under threat of returning to court, where, by the way, they will be seeking costs.

I understand that the company was offering early retirment incentives in order to affect labour force reduction; while I'm not positive of the actual numbers, I believe him to have been in receipt of 2 weeks salary for each year of service, which would amount to around $95,000. Several questions arise......

1) Of the lump sum payment, is there a precedent in law for me to have claim to any portion of that - considering the association with years of employment (we were married for 15 years) I'm wondering if there would be entitlement, much like CPP contribution splitting; can it not be considered income that accrued during our period of marriage that paid out at a later date? Of course, at the time of our separation, he was NEVER going to be able to retire, because I had destroyed him so financially; obviously, there would have been no ability to anticipate this potential future income.

2) How will he report this "income" for 2006 - I've spoken with several CA's & done some research on investment options for lump sum payouts, and understand there is the ability to roll this into some form of RRSP; will this income show reported on his 2006 income tax return, and if so, where?

3) What impact, if any, this income potentially has for re-assessing child support payments in 2007 (under court order, we are to reassess each June based on previous years earnings, but I have never pursued this), as well as how it would be used in pro-rating extraordinary expenses (our youngest will be off to university in the fall); I understand through case law review that extraordinary expenses are normally split based on pro-rated income, although, to this point, I have never pursued anything more than a 50/50 split (I am entitled to 67/33 based on income levels)

4) Also, because he insisted at the time of our separation agreement that he would not be able to retire until 65, the value of his pension at 65 was used in the valuation of our marital assets. There was a several thousand dollar difference in the valuation at 58 vs. 65; is it possible to re-evaluate the maritial assets based on his actual retirement age? I've read through the act, and it appears that any change to marital asset valuation must be accomplished within 2 years of the agreement, which, of course, we are past.

Would appreciate hearing from anyone with knowledge or experience with this type of situation.
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Old 04-10-2006, 06:53 PM
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My first question to you would be: what are you trying to achieve here? There are a few issues blended into your question.

First, there is his severance pay. When you separated/divorced, the severance pay should have been valued and you should have received "your share" based on the estimated value at the time. Unless he was dishonest in the valuation at the time, it doesn't matter what the actual value is now and it doesn't matter what he does with his money.

If the severance pay only became avaialable as a result of this "package deal" then it is a result of circumstances unpredictable at the time of your divorce and I doubt that you have any claim to that property.

Coupled with the severance pay is the question about whether child support should be paid on the severance amount. That's a question for a lawyer but, to me, it would seem that this is a one time payout and it won't repeat year after year during his retirement. You might get a one year increase. You'll probable have to work that out with him (or go to court).

When you settled your divorce, the assumption was that he would retire at 65 and you based the pension valuation on that. I assume that you agreed to that valuation and you were advised by your lawyer that it was appropriate for the circumstances. Can you show that somehow he misled you and therefore undervalued the pension back in 2002? Unless you can, then it's a done deal. Things happen in people's live that they don't necessarily predict - such as retirement age. It sounds like an opportunity was available to your ex and he took it. If it wasn't available or reasonable to assume that it would become available, then why should you benefit somehow when your lives are now separate and apart?


As for child support, in the very few years left that you will receive it, it will be based on his income which will reduce to his retirement level.

You might try to go for a one year increase due to the severance pay but then I suspect it will go down.

Let's assume that you could do what you propose in your point 4. That is, go to court and have the pension revalued based on the current situation.

If that were acceptable, then what about the following corollary. Let's say that person "A" valued his/her pension at separation based on the assumption that he/she would retire at age X and receive a 50% pension. The severance pay, Z, was also calculated based on the same retirement age X. A couple of years later, A retires earlier that X but is now only entitled only to a return of contributions to the pension minus the payout to ex-spouse at the time of separation. In addition, because of the early retirement, let's say the severance is only half of the value assumed at separation.

In this case, it is the payor, A, who has lost in the separation/divorce because of the early retirement. Do you think it would be ok for A to go back to court and ask for a refund because life didn't pan out the way he/she expected? The answer is no. Why? Very simply: a deal is a deal.


If you want to get more money, then you might want to focus on the section 7 expenses which you say he undercontributes.
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Old 04-11-2006, 12:15 AM
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What is funny is Jeff has a entry in his blog about non recurring income right now- from it

Quote:
3. Severance Packages. These are normally included in income for support purposes, even if you find a job right away and so have an unusually high income in the year the severance package was paid.
So that should help you with one years child support. I wonder though even though you could pursue a pro rated section 7 expenses - which in the case of university could be quite substantial! it could bite you in the butt the following years - what will your income be like compared to his retirement income-will it be substantially higher than his? if it will be and you think he actually will not be getting another job to supplement it you might think twice about it. All about number crunching.

It seems to me that if he wants the child support reduced right away - you should have the right of full financial disclosure, including what he received from his employer as severance.

It sounds frustrating about the pension. I know my ex was claiming that he wouldn't retire until he was 65 and I doubt that. ( we are in our 30's) I made my deal with spousal support and took closer what his pension would be worth somewhere in the middle. It can make thousands and thousands of dollars difference. For us it was our biggest asset and the difference between 58 and 65 was like 70 grand. A big chunk of change.
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Old 04-11-2006, 12:40 AM
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Severance Pay is treated as income in the year it is received and is taxable. I suspect he would have a hard time claiming a hardship. and a reduction of the current child support obligation due to a voluntarily reduction in income such as early retirement. On the opposite side of the fence, if perhaps he never took an early retirement, he may of been laid off, but I hardly suspect this was the case.

Major employers offer early retirement incentives when they attempt to avoid to lay off younger staff with less seniority especially when others are willing to retire with a bonus. You need a concise statement from the employer as to the reason of his retirement.

Employment Standards Act in Ontario can be found here. This act applies to non-unionized employees. For unionized employees, theri respective union contract would govern their severance

http://www.e-laws.gov.on.ca/DBLaws/S...e41_e.htm#BK86
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Old 04-11-2006, 09:43 AM
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Your children are 18 and 19? Personally, I can't imagine the money you would receive would be more than what your court costs would be. Doesn't seem worth the headache to me. If I was that close to my kids being self sufficient I think I'd just leave well enough alone.
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Old 04-11-2006, 10:39 AM
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Sk8r- university costs are section 7 expenses and child support may continue while they are living at home and attending post secondary education. That is probably why both of them are concerned and willing to take on court costs. Education costs plus child support will end up being more than just plain old child support. Big time expense. Trust me.... after paying off student loans for like 10 years
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Old 04-11-2006, 12:50 PM
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Here's a question: are parents obligated to pay for their children's post secondary education? There are many of us who's parents did not contribute for whatever reason.
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Old 04-11-2006, 01:26 PM
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Parent's are obligated under the child support guidelines to contribute to their child's post secondary education in proportion to their respective incomes at least until the child or children receive their first post secondary degree or diploma.

Intact families is a different story. I know of no law that compels a parent to pay for their child's education beyond secondary. I believe every parent wants the best for their child or children and often will assist their child to get a good head start in life, hence without hesitation they contribute to the post secondary education cost. Some intact families do not have the means to make this contribution and this is why the government does have Canada student loans and also programs such as grants available through OSAP.

I think and feel one of the best gifts you can give your child is a good foundation and start in life. No better way than an education.

It is ironic to say the least that some families have spent small fortunes equivalent or more than a child's post secondary education expense litigating family law issues.
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Old 04-12-2006, 09:18 AM
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Default University costs

Why is university a free ride for children of divorced parents?

My parents were not obligated to send me to post-secondary school. I paid my own way - along with the majority of my classmates.

My children will be expected to pay their own way as well - which isn't to say that I won't help them, but I don't get why it should be assumed that the parents will pay.
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Old 04-12-2006, 09:54 AM
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Usually when intact families have the money they will pay. Divorced parents may be bitter, may pay for later born children with the second spouse but not the first family.


I know of a couple people with the first kids are like second class citizens- they get the support and that's that. The "access" parent basically has walked away and is "done" with them. If anything isn't written in the agreement - they don't get it- Sad but it happens.

I know that Osap takes into account the parents income and your children may not even qualify for a loan because you make too much and are expected to contribute- even if you were in an intact family.
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