Spousal Support Question

[Tbaga]

Wow, thanks for all the replies everyone. It sheds some light on this situation for me at least. I do think there are a few paths forward and it does look like my stock options may be safe as most of them are vesting after date of separation, but I will disclose that.

To the last poster's point, the idea of a lump sum is to create financial separation as quickly as possible. This means i only pay child support and then I'm no longer financially responsible for her once that obligation is met. I have no real attachment to the house or anything in it besides my kids, so I see that as a tool to go down that road given the equity built into it. I am more interested in moving on with my life as quickly and cleanly as I possibly can as I am sure many of you have been as well.

It does look like there are some benefits in paying monthly from a financial (tax) perspective, but then i have that constant payment hanging over my head for x years.

Do not think for a moment that whatever spousal support arrangement you have will be final, even when at the moment meant to be that way. Your spouse can always come back in the future and ask the court for spousal support variation, or even initiate a new application for spousal support. Therefore, to reduce the chance of that happening in the future, and when it happens reduce your ex chance of succeeding, you will need to draft a very good, fair, and according to the Divorce Act and Ontario Family law act separation agreement. For that you will need the advice of two independent counsels, one representing you and one representing your ex. Make sure to both have full financial disclosure, independent counsel advice/witness, and a fair terms in the agreement. That will make it very difficult for her or the court to challenge the agreement in the future.

[ott_dad1]

Wow, thanks for all the replies everyone. It sheds some light on this situation for me at least. I do think there are a few paths forward and it does look like my stock options may be safe as most of them are vesting after date of separation, but I will disclose that.

To the last poster's point, the idea of a lump sum is to create financial separation as quickly as possible. This means i only pay child support and then I'm no longer financially responsible for her once that obligation is met. I have no real attachment to the house or anything in it besides my kids, so I see that as a tool to go down that road given the equity built into it. I am more interested in moving on with my life as quickly and cleanly as I possibly can as I am sure many of you have been as well.

It does look like there are some benefits in paying monthly from a financial (tax) perspective, but then i have that constant payment hanging over my head for x years.

[lorely]

Interesting reference on lump sum vs periodic spousal support.

Seems determining the amount would logically involve the same steps as for periodic i.e. need, compensation, duration, quantum, then tax effecting it (at the payor or recipient's incremental rate? if payor's then the present value is less) and then discounting the periodic cash flow to arrive at a present value. The incremental rate is important where there is a wide difference as spousal support is one of the few remaining income splitting provisions of the ITA
The present value is an easy excel calculation using the XNPV function.

Seems easier, but in practice probably not. Why not simply agree to spousal support and pay monthly? you could always take the net property amount and buy an annuity so you know the cash will be available. Plus the argument about incremental tax rate is moot.

http://www.jml.ca/wp-content/uploads...Instrument.pdf

Search "lump sum" here
https://www.ottawadivorce.com/forum/...highlight=lump

The reasoning behind the lump sum is to get the monkey off your back for the payor....

[Abba435]

Interesting reference on lump sum vs periodic spousal support.

Seems determining the amount would logically involve the same steps as for periodic i.e. need, compensation, duration, quantum, then tax effecting it (at the payor or recipient's incremental rate? if payor's then the present value is less) and then discounting the periodic cash flow to arrive at a present value. The incremental rate is important where there is a wide difference as spousal support is one of the few remaining income splitting provisions of the ITA
The present value is an easy excel calculation using the XNPV function.

Seems easier, but in practice probably not. Why not simply agree to spousal support and pay monthly? you could always take the net property amount and buy an annuity so you know the cash will be available. Plus the argument about incremental tax rate is moot.

http://www.jml.ca/wp-content/uploads...Instrument.pdf

Search "lump sum" here
https://www.ottawadivorce.com/forum/...highlight=lump

[shellshocked22]

With respect to the spousal support situation, don't forget that monthly SS paid under an agreement or court order is a tax DEDUCTION for you (she has to pay tax on it). If you're in the $120K plus tax bracket, keep in mind that effectively you're getting around a 45% discount (ie. you'll save 45% of the SS amount on your taxes).


Also, have an accountant calculate the "net present value" of the extra house equity you may give her (ie. over the 50% she normally would get). Basically, a $100 NOW is worth more than a $100 5 years from now.


As you noted earlier, try to get a GOOD family law lawyer for feedback on your idea (ie less spousal in return for more house equity).


Hope it works out for you

[blinkandimgone]

I thought of something else; what about assets like stock options? I don't actually own anything until they vest. If we separated in Sept does anyone know what happens to options that haven't vested yet if I convert them to shares? Cash (I assume that is regular income?) What about funds I put into my RSP after the separation date? Is that a shared asset?

Since it appears we'll need to split her debts I figure I could also just sell some shares to pay off all the debt (do i seem stressed about this ha ha?)

Valuation date accounts for anything jointly accumulated (debt or asset) between the date of marriage and the date of separation. Anything after the seperation date, including RSP, is excluded.

[Abba435]

Stock options are not simple.
If not vested they have no value technically but you should disclose them as an asset with zero value in good faith.
You might call an experienced CPA firm and ask. They deal with option valuation regularly in family matters. Might cost you a few hundred bucks for an opinion. Or nothing.

[ReFrame]

Someone else will have to answer about stock options, but keep in mind the debt that will be split, is only debt that still exists at the date of separation; if either of you accumulated debt during the marriage that was also paid off during the marriage (does not matter by who) it won't factor into anything. If either of you accumulated debt during the marriage that was not paid off as at the date of separation, the amount of the debt belongs to you both.
Financially you are viewed as a single entity from the date of marriage through to the date of separation.

[ott_dad1]

I thought of something else; what about assets like stock options? I don't actually own anything until they vest. If we separated in Sept does anyone know what happens to options that haven't vested yet if I convert them to shares? Cash (I assume that is regular income?) What about funds I put into my RSP after the separation date? Is that a shared asset?

Since it appears we'll need to split her debts I figure I could also just sell some shares to pay off all the debt (do i seem stressed about this ha ha?)

[ott_dad1]

Interesting, thanks for the reply. This situation sucks, and clearly nobody plans for it, but at some point these tough decisions have to be made.

I think my best course of action is to try not to speculate or guess and speak with a lawyer and see what they think. My home holds quite a bit of value so one option I think to reduce support would be to let her have the house and divide the rest of the assets and debts 50/50.

[ReFrame]

Assets and debts that were brought into the marriage will be taken into account when you do equalization, but those that were accumulated during the marriage will be considered joint (some exception such as inheritance or legal settlements etc).

Hard to say with spousal as each case is so individual, but the fact that you encouraged her in her business and that you paid more bills than she did during the marriage would have little relevance in my opinion. What is more important would be the disparity in income, the "lifestyle" you have both experienced during the marriage, and her ability to be/become self supporting. Remember spousal support can be both/either compensatory or needs based.

[ott_dad1]

Hoping to speak with a Lawyer once all of this COVID craziness ends, in the meantime I was wanting to see if anyone had experience with a similar situation to mine.

Married 11 years, together about 13 years -- seperated, but cohab since Sept (it's not working well for me, but I'm stuck for now)
2 children, older but not above 18
I make 120k wife makes about 50k

Here is the interesting part. When I met her she was on long term disability, I finally talked her into opening up a home business which she still runs today. In addition, she has wracked up more than $100k in debt over the years which I have paid off (and can prove -- I keep detailed financial records).

I pay about 98% of our home expenses, outside of that we split food about 50/50 and she pays home insurance. I pay 100% of mortgage, utilities, car payments, car insurance, car repairts, home repairs, cell phone bills and so on. Literally every bill except the home insurance, about half the vet bills and clothing every year for the kids.

I have assets (mainly some stock options and an RSP) -- all but the house are in my name only (even the car) and her debt is in her name only. I don't have any besides car and home.

Given she was not working and on disability when I met her and did not start working (was on disability) until a couple of years after we married, I am wondering if that is taken into account by a judge, or if I should be prepared to start paying full ss and cs? (funny enough, even full amount will likely be cheaper than the way I'm living right now) Is there any chance the judge may see how much I have contributed and how lopsided it was over the years and take that into account? Or does that actually work against me?