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I am in the midst of trying to come to some sort of a settlement via a mediator regarding SS. We have equity in the home and from that equity I am tempted to put forth an offer for a lump sum payment - yes - I realize that it is not tax deductible - I just want to move forward. I want to provide a fair lump sum amount given the potential tax implications. Is there a general rule of thumb as to how much of the SS I can get back?...is it roughly 30%...40%...? I have contacted Revenue Canada and while they simply state that there is no prescribed percentage (it gets deducted from you and added to her and then taxes are assessed) has anyone here figured out how much - percentage wise - that equates to? For example 1K per month per year for 7 years (as a monthly payment) equals 84K...if I can collect back approx 40% of this each year if it were monthly installments - I would offer her 50,400.00 to walk away now (adding the tax - brings it to 84K). Suggestions? AM I waaaaay out in left field?
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Quite a few variables....
-you could have an accountant do an "official" calculation; likely wouldn't cost much. From your ex's perspective, I don't think she would care would YOU would save in taxes, focus on HER marginal tax rate; ie what would SHE save in taxes in a lump sum vs. having to declare monthly installments.
-also, keep in mind there is more than just tax considerations. Most people prefer cash "up front" and personally I think that's worth a further discount in your favour.
-also, SHE may prefer money up front to perhaps make a down payment on a house , etc. How much of a premium is that worth to her ?
-my point is, I think you should discount (in your favour ) even MORE than the marginal tax rate for the very attractive "money up front" offer. HOwever, make bloody sure you have a good lawyer to prevent her from trying to come back for MORE once she blows it !
Good luck ! -
You mean from YOUR share of the equalization payment right? Since the equity in the matrimonial home would be part of equalization ANYWAY she'd get a share of it. If you have sufficient equity, and she would already be getting a lump sum as part of equalization, you are FAR better off negotiating the amount of spousal with a pre-set end date on it, and then tossing that "lump sum" into a bank account and simply issuing her the monthly amount from it.We have equity in the home and from that equity I am tempted to put forth an offer...
Otherwise, like has been mentioned, you need a rock solid agreement to prevent her from coming back for more down the road. Has entitlement to spousal been determined or is it still in doubt? She has to PROVE she's entitled to it, it's NOT automatic.Comment
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You raise an interesting point....
Let's say we take into account the loss of tax deductibility of a lump sum spousal amount (ie. we discount the lump sum to reflect this).
Let's say the payor is "neutral" as to a big lump sum (discounted to reflect loss of tax advantage) OR a fixed term SS period and amount.
Does one option pose less risk of her "coming back for more" at a future date ? I've heard a viewpoint that its better to avoid lump sum since if she pisses it away foolishly the courts will "find a way" to get her more money from the payor whereas paying her over a number of years is less of a risk of her screwing you over for more since it prevents her from blowing it all at once. For both options, I'm assuming proper Sep Agmet, independent legal advise, full disclosure, yada yada yada.
Thoughts ?Comment
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Sorry I wasn't explicit enough. Yes - I meant from my share of the equity of the house. I had also entertained the thought of socking the equity away and pay her out of that. My concern would have been the amount of monthly SS payment. If she seeks or is offered 1500/mth - my equity will soon run out. I would like to gradually decrease her SS from year to year...1500/for say two years...then drop to 1000/mth...for two years etc....for a finite period of time. I had simply been trying to formulate a 'reasonable' total payment....I thank you for the thoughts....am meeting with mediator Saturday....stay tuned. If a lump sum is discussed will CERTAINLY have it iron clad agreed upon.Comment
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Be VERY,VERY careful offering a lump sum buyout!
A few important caveats to be concerned about:
a) Know what the supreme court has ruled concerning spousal support in this great land ( this link is a good primer take the time and read it twice or more! Emerging Trends in Spousal Suport - Part I | Gene C. Colman Family Law Centre | Toronto, Ontario and http://www.law.utoronto.ca/documents...ummitpaper.pdf )
b) Carefully consider the possibility of your income dropping in the next 7 or so years. If this indeed happens, you may need to gamble and put forth an expensive motion to change to avoid crippling financial pressure.
c) you will also have the notorious " change in circumstances" hanging over your head! an example is if years from now your ex experiences health problems and her lawyer can prove you had prior knowledge, before getting married, that the health problem was 'on the radar' sort of speak, a judge coulds set aside the agreement and order further spousal support. Here is why, the courts will lean , if your ex becomes a public charge ( disability or welfare), on you to alleviate the taxpayers burden.
d) Agreeing to monthly payments now will likely insulate you from this happening!
Good luckComment
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How does one prove, or disprove entitlement? It's more opinion and/or perspective. There is no hard and firm line that outlines whether entitlement to SS exists or not. It's so very ambiguous......Originally posted by NBDad View Post
I keep reading and hearing about the theory behind SS, and how someone can be entitled to it based on compensatory grounds (ie/ career sacrifice), or, by using the needs vs. means approach. However, what I'm slowly starting to conclude, is that in practice, SS can simply be triggered based on income disparity.
Potential SS payors get stuck between a rock and a hard place: If they truly believe that the other party is not entitled to SS, do they stick to their guns, stand by that belief, and not pay SS?
Or, do they pay some sort of SS (in essence, ADMIT entitlement), in an attempt to settle the issue and move forward with their lives?
Canada Gold 2010Comment
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Thanks StaySingle - good points expressed and I WILL read the Case referred to...twice. The more information I am getting the more I think I am leaning towards just keeping my portion of the equity aside and paying her from there. That way...should circumstances change...in her life or mine...and we re-evaluate on a year or bi-yearly basis I am better prepared. Excellent.
And to Canada Gold...yep - seems as though it is automatic...as you indicate - I just want to MOVE ON...Comment
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Your instincts are good on this Canada Gold. It's my experience that the income disparity triggers entitlement in practice/reality.
If the other side wishes to 'come after you' for SS, there is no bottom in the bag of bullshit a lawyer will present.
The heaviest rock they throw at you is the others 'sacrifice' they endured whilst married/common law with you. If one stayed home for the children's sake...you pay. If the other has no post secondary education....you pay! If the other has health problems...you pay!!!Comment
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I agree it's difficult to deny SS from the family law perspective. In my opinion, best bet is to try and put an END DATE to how long you will pay. Otherwise the nightmare never ends and you go through loads of $$$ fighting about it every couple of years. Of course, the system is DESIGNED with this in mind to maximize legal fees.
I like the idea of $X for Y amount of time. If you leave it open to "review" down the road, my fear is it will never effing end !!!Comment
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