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Spousal Support as a lump sum? Any down-side to this?

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  • Spousal Support as a lump sum? Any down-side to this?

    Ok - I need to do some math but this is the basics....

    Spousal support for 20 year marriage - on the low-end this should be for 10 years correct?
    My ex has offered me his share of equity in the home (approx $150,000) in lieu of SS. But his income will be calculated at $165,000 (that's current but I have been told by a mutual friend he just had a new offer of $200,000 + partnership bonuses) and my income, once I allow him to takeover our business 100% will be <$10,000 until I go back to school and look for work again (3-4 years from now)

    This looks like it would be quick and easy but very short-sighted on my part. My lawyers is on vacation this week so I won't be responding in anyway until I discuss this with her. Would love to hear from both sides on this - I'm thinking he feels he's being generous BUT it only serves him financially until I'm able to work full-time again?? Very unsure about this....

  • #2
    First off, know that Spousal support isn't automatic, you have to make a case for it. Did you sacrifice your career for his, is one test.

    Second, do you meet the rule of 65? If we add your age and the number of years of marriage, do they add up to 65? If they do then generally any SS is considered indefinate.

    Thirdly, if you go back to school, he can very likely impute a full time minimum wage to you when doing the calculations.

    Fourthly, do you have a formal ownership stake in his business? Did you make an income from there? Share profits? Do you have a copy of the business records for the last year? Is he buying you out of the business?

    I would punch the numbers into Mysupportcalculator.ca and figure out what your income would be versus what he is offering you as a lump sum.

    Know that a lump sum is not taxable, versus monthly spousal support, where you will be taxed, and he will get a deduction.

    Then factor in what a court battle might cost.

    As you can see there are a lot of factors and it isn't cut and dried.

    Comment


    • #3
      Are you sure you want to discuss SS on this forum? You're likely to attract many rude, not-so-nice posts. People have a hard time accepting that SS is part of the Canada Divorce Act.

      If you feel comfortable with the offer and feel he is being generous then that is ultimately what is most important in the end.

      Do you have good health and have a game-plan on how you can support yourself over the next 4 years?

      How are you going to fund your education for the next 4 years?

      Look at the support calculator and input the numbers for your ex having a 165k salary and you having a 20k salary (minimum wage). Multiply that by the 4 years your think it will take you to get educated to re-enter the work force in your chosen field.

      Deduct what you estimate it would cost you to rent a place (include utilities)
      Deduct your educational costs

      So how good does that one time 150k seem to you now?


      You definitely need to get advice from your lawyer. Your lawyer will put the numbers in Divorcemate or ChildView or whatever software his law firm uses.

      Something to consider is a combined 1 x lump sum along with a decreasing monthly amount (or any combination that suits your situation, for example, monthly amount could be based entirely upon a % of his bonus, etc.).

      There is no hard and fast rule here. It is entirely negotiable.

      Keep in mind the tax implications of one time lump sum vs. monthly/yearly. As you are planning to go to school for the next 4 years the tax payable on a monthly SS would be reduced. A chat with a financial planner isn't a bad idea. Good to get all the information you can before you make any decision. Remember lawyers are good for the law and accountants are good for taxes. Some lawyers aren't up-to-date on tax law and can't offer much advice.

      Comment


      • #4
        Originally posted by DowntroddenDad View Post
        First off, know that Spousal support isn't automatic, you have to make a case for it. Did you sacrifice your career for his, is one test.
        Yes - stayed home for 17 years. (same education initially but now my skills are VERY out of date. When I was ready to return to school and then work 9 years ago he lost his job and then started a business that he needed me to help him run

        Originally posted by DowntroddenDad View Post
        Second, do you meet the rule of 65? If we add your age and the number of years of marriage, do they add up to 65? If they do then generally any SS is considered indefinate.
        No - just short. Adds up to 63

        Originally posted by DowntroddenDad View Post
        Thirdly, if you go back to school, he can very likely impute a full time minimum wage to you when doing the calculations.
        I would assume that. But his income would also increase substantially from where it is now and I would need help to pay for school and an income while I'm attending. I would have hoped if I received ss that would have carried me through those few years at least.

        Originally posted by DowntroddenDad View Post
        Fourthly, do you have a formal ownership stake in his business? Did you make an income from there? Share profits? Do you have a copy of the business records for the last year? Is he buying you out of the business?
        Business is 50/50 shareholders (incorporated). My income is $70,000 his is the same (he has a 2nd part-time teaching job on top of that). I did all the financials so I have copies of all financial statements. I've already contacted a business evaluator to have them look at the business. He hasn't offered to buy me out because he thinks it has no value. (Partly true - as he is the creative person and main contact for the clients so if he leaves there is no business)

        Originally posted by DowntroddenDad View Post
        I would punch the numbers into Mysupportcalculator.ca and figure out what your income would be versus what he is offering you as a lump sum.

        Know that a lump sum is not taxable, versus monthly spousal support, where you will be taxed, and he will get a deduction.

        Then factor in what a court battle might cost.

        As you can see there are a lot of factors and it isn't cut and dried.
        I know - it's almost worth talking to a financial adviser vs a lawyer.
        Based on the calculator = his lump sum offer is $150,000 but if I use his current income and the low-end of the calculation only lasting for 9.5 years instead of indefinitely it would be $268,000 paid to me over that time. So this is a great bargain to him.

        Comment


        • #5
          If you are just shy of the rule of 65, then the tendency of judges would be to award more than the 2:1 ratio, so you would in all likelyhood get better than 10 years SS. Of course an experienced lawyer could better guide you, I'm going by my lawyers advice to me, my ex was one year shy, and he indicated that she would likely get indefinite if it went to court.

          I don't think for a second that a business that generates 70 K a year for each of you is worth zero. Don't downplay your role. It is tough to value those non tangible assets.

          Don't forget your monthly SS gets taxed, so that $268K becomes substantially less after tax.

          It isn't simple, but I wouldn't make any decisions until you get his business evaluated.

          Comment


          • #6
            If there is this much money at play I'd get the advice of two lawyers.

            Comment


            • #7
              If his income goes down will you take less?

              Comment


              • #8
                It is the tax rates/adjustments that I think you need to be wary of, and receive not only legal but financial advice on. In addition, a financial advisor might want to see you investing the monthly ss payments towards your future retirement.

                Are you sure you want to discuss SS on this forum? You're likely to attract many rude, not-so-nice posts.
                Not today.
                Start a discussion, not a fire. Post with kindness.

                Comment


                • #9
                  Although I wholeheartedly think spousal suport is legal robery here is a link you might want to read.
                  http://www.jml.ca/wp-content/uploads...Instrument.pdf

                  Given the intricacies involved in the legal theft from your ex it might Be prudente to invest some of your Exes money on legal advice.

                  Comment


                  • #10
                    Originally posted by Once.is.enough View Post
                    Although I wholeheartedly think spousal suport is legal robery here is a link you might want to read.
                    http://www.jml.ca/wp-content/uploads...Instrument.pdf

                    Given the intricacies involved in the legal theft from your ex it might Be prudente to invest some of your Exes money on legal advice.
                    Once.is.enough ---------- put a sock in it!!!!

                    Comment


                    • #11
                      In all fairness - others have said and consistently done worse and no one has said boo to them. If we are going to call people out we should hold them all to the same standard no?

                      Comment


                      • #12
                        Originally posted by Janibel View Post
                        Once.is.enough ---------- put a sock in it!!!!
                        Why? Because you don't like my opinion? I provided a usefull link with relevant information. This I believe is in accordance with the board rules.

                        Suck it up buttercup.

                        Comment


                        • #13
                          As surely as the sun rises in the east, a thread about spousal support gets hijacked by an individual with his own particular drum to beat.

                          To the OP: I think what you need is first a financial planner and then a lawyer. The former will help you figure out the tax implications of a lump-sum payment vs ongoing spousal support (in my non-expert view, this is the biggest unknown in your situation), as well as providing advice about planning for retirement (if you're just shy of rule-of-65 and you need to spend a few years to retrain, you don't have that many years during which you can save for retirement). A lawyer can advise you how much it might cost to push for monthly payments, which can help you decide whether it's worth the court costs to fight for something other than a lump sum.

                          If you don't know a financial planner, ask your bank to recommend one.

                          Also, without knowing anything about your business, I find it hard to believe that your contribution to it is worth $0. You should be entitled to a share of that asset, independent of any spousal support calculations.

                          Comment


                          • #14
                            I don't mind the differing opinions. Quite honestly, if I were him, I'd be trying to get away with paying as little as possible too. That's human nature isn't it? And spousal support would not even be a question if all things were equal - but they are NOT. And that's as much his doing as mine.

                            The fact is, without me being home - providing free childcare during the early years of our marriage and allowing him all the opportunities he could to advance his career during those years (remember we started out on the same career path 20 years ago) and then supporting and contributing to the growth of our business over the past 9 years when instead, I wanted to return to school and go back to work full-time. I would have been mid-level in my field by now instead of worrying about starting all over by going by to school now (without his financial support) and looking for entry-level positions. While he gets to reap the financial benefits of now being at a senior management level.

                            And yes, it does tick me off that after supporting him in every way possible all these years he is ready to walk away knowing he has a partnership waiting in the wings. Frankly, I contributed to that too and should at least have an opportunity to benefit from it while I take the time I need to become independent.

                            I'd love to be financially independent. But the choices we BOTH made over 20 years have made it not so. He isn't just knowingly reducing me to little to no income he's taking it for himself. I would consider that theft.

                            Comment


                            • #15
                              How is it that the OP has a salary of 70K and is "unemployable" or requires SS? If the onus is on her to *prove* her entitlement - How does she work around this?

                              Comment

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