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Opinions on lump sum SS Proposal

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  • Opinions on lump sum SS Proposal

    Hi,
    I am negotiating with my spouse on how to proceed with SS. Her situation is that her current situation is around 40K a year. She just recently completed her masters whose average salary in Ont is 63K a year. Married 16 years, age 47. took 2.5 years off to care for one child, has worked part-time at her insistence for last 6 years. Has practised in the field she received her masters in. My stance is her compensatory entitlement is weak as she is still very employable but she does have claim to non-compensatory based on need. I make 115K a year. Shared custody for our 14 yr old. I would prefer to pay a lump sum out of proceeds from my portion of the sale of the house.
    Low end of the ss with child support table puts her at 1100 mth. I have looked at case law and it states that lump sum payments are discounted based on present value approx 5%, tax rate of payee approx. 25% and inability of payer to change for material changes in the future of 30% approx. Question one is how many years to calculate the SS over? Is the minimum half length of marriage every time? that puts me at owing 112K in monthly payments over 8.5 years which, having the above discounts applied, looks at a lump sum award of around 50K. Question two is does this seem right to those who know something about this? Question three is do I have a right to pay out as a lump sum if I want? or some combination of lump sum plus monthly for a set amount of time?
    I think this looks like a good deal for her but I might not being seeing it right. Any opinions?

    Also, I would state that no review of income are requested by me so when she gets a better job, her lump sum definitely not affected and if there are short term monthly payments are not affected either. My biggest concern is monthly income for me. If I get less of the sale form the house, so be it.
    Last edited by hdc1894; 03-19-2016, 02:29 PM. Reason: addition:

  • #2
    cant really give an opinion on what you an asking. All I can say is to offer the least amount and in fact let her prove that she needs it. That way you can negotiate up if need be. Never give your best offer first.

    Comment


    • #3
      Personally, I wouldn't.
      1. There is a major tax advantage to spousal support and your case it makes a difference.

      2. In terms of non-comp - how long have you been earning 115k and has it been really getting all "used" on your lifestyle or have you putting aside. If her quality of life will not decrease with divorce there is no non-compensatory entitlement.

      3. If the part-time work is related her career then I would argue that it shouldn't be considered the same as if she stayed at home completely. If here career path is very established I would try to retroactively calculate the impact the marriage had on her career and pay her half the difference.

      4. Staying home "at her insistence" is irrelevant.

      5. If you sold the house put the money in a bank account and then paid her out of that money in a tax deductible way but had the chance to terminate if you lost your job etc.... and also if she gets married or gets a major promotion it will easily end entitlement

      6. Also if you happen to get full custody it could have an impact on her entitlement.

      I am not a fan of paying up front. Let them suck the money out of you 1 penny at a time over 10 years and let all the possible circumstances of life help you terminate.

      I would play very hardball here, the case isn't clear cut as far as I am concerned and in court I would push as hard as possible for review dates and have the judge describe what would constitute a change or trigger termination - this strategy helped me immensely.
      Last edited by Links17; 03-19-2016, 06:18 PM.

      Comment


      • #4
        I'm not a big fan of spousal, nor of lump sum payout when SS is actually necessary.

        Frankly, your wife sounds perfectly employable to me. The marriage is over, she is educated (on your dime!) employed in her field to some extent already, and is well able to support herself. Maybe her working wasn't as necessary during the marriage because that's one of the advantages of marriage. Now that you are separated, that advantage is over for her. Why does she think she's entitled to SS? Why are you even considering it?

        As for lump sum payouts, while I can see the lure of severing those financial ties immediately for the sake of moving on, there are advantages to making regular payments. First of all, the SS you pay her is deducted from your income before taxes. So she pays the tax on the SS income, not you. Second, with proper termination clauses (she gets into a new relationship, or finds full-time employment would be two biggies to come to mind), the amount you pay may be much less overall. It would absolutely SUCK to give her a giant payment and then have her run out and get full-time hours a month or two later, don't you think? Plus, if something happens to you, job loss, injury or health problem, and you can't earn your income anymore, you can also try to terminate or lower SS then. You can never get a lump sum back from her.

        Comment


        • #5
          Originally posted by hdc1894 View Post
          Her situation is that her current situation is around 40K a year. She just recently completed her masters whose average salary in Ont is 63K a year.
          I'm not sure why you keep on bringing up that higher salary. Are you trying to help her make a compensatory claim for SS?

          Low end of the ss with child support table puts her at 1100 mth.
          For negotiation purposes, I would obviously offer low end, but midrange for a marriage of your length is of course almost certain.

          I have looked at case law and it states that lump sum payments are discounted based on present value approx 5%, tax rate of payee approx. 25% and inability of payer to change for material changes in the future of 30% approx.
          Do you happen to have the case law for that 30% discount?

          Question one is how many years to calculate the SS over? Is the minimum half length of marriage every time?
          For a shorter marriage yes. I would not describe your marriage as short.

          That said, I would offer half, but expect to pay more.

          I think this looks like a good deal for her but I might not being seeing it right. Any opinions?
          It is a shitty deal for her. You are offering low end for minimum duration. Still worth a try though!


          Also, I would state that no review of income are requested by me so when she gets a better job, her lump sum definitely not affected and if there are short term monthly payments are not affected either. My biggest concern is monthly income for me. If I get less of the sale form the house, so be it.
          She also doesn't get to benefit from your income increasing. Reviews can cut both ways.

          Comment


          • #6
            for me it was worth ripping the bandaid off and paying a lumpsum up front - both financially and mentally. I had a similar length of marriage with similar part-time work however there was also a medical condition card risk of being played that might have made me stuck paying SS forever. I feel much better not paying (in my mind) gross sums monthly whereas the lump sum out of the home sale was easier to swallow.

            I made my offer at arbitration which was a completely biased shitshow. They made a bunch of magical calculations to more than double what I was offering (all based on precedent the arbitrator said).

            Comment


            • #7
              I think there is a very big legal issue with taking the SSAG as law...

              Comment


              • #8
                With regards to SSAG ... it's just a guideline. Depending upon province you are in there are different rules judges have to adhere to... as far as I know in Ontario judges have to specify in their decisions if/when/why their decisions deviate from SSAG. In Alberta they do not. This can make a big difference when things go to appeal.

                I'd recommend considering a combination of lump and declining SS over a specified term. With this in the agreement it doesn't leave any ambiguity WRT to either party acknowledging the end date for SS.

                Comment


                • #9
                  Thanks all. This is certainly proving to be a very complicated issue. I have attached here a link I found that discusses lump sum spousal support and how they are discounted. STBX (very liberating to call her that!) has talked to a lawyer now who told her that based on length of marriage, SS at a mid range is her right. Not sure where this is going now as discussions have now moved from "what is best for our child" and "fairness" to this current state.

                  here is the link if you are interested.

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

                  I guess my next step is figuring out how much lawyering up will probably cost us if there will be a fight versus negotiating this out of court and away from lawyers. Wish me luck.

                  Comment


                  • #10
                    Originally posted by hdc1894 View Post
                    STBX (very liberating to call her that!) has talked to a lawyer now who told her that based on length of marriage, SS at a mid range is her right. Not sure where this is going now as discussions have now moved from "what is best for our child" and "fairness" to this current state.
                    Sadly, there are many lawyers who tell their clients things like this. It prolongs the legal battle and drives up their fees. The more complicated and longer the legal battle becomes, the more money the lawyer makes. It's a big incentive for a lawyer to tell their client what they could dream of getting, rather than what is realistic.

                    While it's true that in some cases, SS at a mid range is appropriate, that does not make it the right of every single divorcing client.

                    SS is not automatic like CS. You each have to argue your case for or against it. And this means that you have to keep in mind what your bottom line is. It won't do you any good to spend $10,000 on a lawyer to save $5000.

                    Comment


                    • #11
                      self-rep, she will cry herself to sleep over her legal fees - you will lose more from legal fees than any other financial aspect of divorce.

                      Comment


                      • #12
                        Originally posted by hdc1894 View Post
                        Thanks all. This is certainly proving to be a very complicated issue. I have attached here a link I found that discusses lump sum spousal support and how they are discounted.
                        It was an interesting read, thanks for the link!

                        I didn't see the 30% figure as a discount for negative contingencies. There seemed to be a range from 25% to 50% as a discount for negative contingencies. Personally, if I was a recipient, I think I would roll the dice, 30% seems like a huge discount.

                        A lot depends on how likely I would think it would be the payor would either leave the country or become unemployed.


                        STBX (very liberating to call her that!) has talked to a lawyer now who told her that based on length of marriage, SS at a mid range is her right.
                        Yes and no.

                        As posters here will be quick to point out, SSAG are just guidelines, not mandatory.

                        However, negotiations happen under the shadow of the case law, and the case law right now generally awards midpoint spousal in your situation. So negotiate, but recognize that her lawyer is telling your STBX that she can go to court and get midpoint. Your deal has to be in the range where going to court is not worthwhile for her.

                        Not sure where this is going now as discussions have now moved from "what is best for our child" and "fairness" to this current state.
                        Yeah, that usually happens when people go to the lawyers.

                        I guess my next step is figuring out how much lawyering up will probably cost us if there will be a fight versus negotiating this out of court and away from lawyers. Wish me luck.
                        The problem is that lawyering up probably doesn't save you much money. The legal default is midpoint periodic spousal, and based on what you have said in this forum, you haven't provided much of a basis to deviate from that default.

                        Comment


                        • #13
                          Length of spousal support

                          Hi, thanks again. I took the middle of the road on negative contingency discounting but could be wrong. One other thing i got from that is one spouse does not have to agree that lump sum is the best for this to happen. I also may be able to argue that there are some good reasons why she should take a lump sum due to possible but may be not probably job loss on my part and potential long term health problems ( i am insulin dependant diabetic). Also, i am not totally opposed to some support even if it is midrange if it is for shorter (half the time of marriage ) and can be paid in lump sum.

                          Comment


                          • #14
                            The jurisprudence is to award indefinite support. I don't think you can convince a judge to award her a lump sum, its only when the recipient asks for a lump sum that the judge might award it.

                            Comment


                            • #15
                              Originally posted by Links17 View Post
                              The jurisprudence is to award indefinite support. I don't think you can convince a judge to award her a lump sum, its only when the recipient asks for a lump sum that the judge might award it.
                              Links may be correct. No case law jumps to mind where I have seen a judge order lump sum spousal. But, I could be wrong.

                              Comment

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