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

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  #1  
Old 03-19-2016, 02:22 PM
hdc1894 hdc1894 is offline
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Default 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 at 02:29 PM. Reason: addition:
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  #2  
Old 03-19-2016, 03:42 PM
standing on the sidelines standing on the sidelines is offline
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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.
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Old 03-19-2016, 06:15 PM
Links17 Links17 is offline
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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 at 06:18 PM.
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Old 03-20-2016, 10:15 AM
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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.
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Old 03-21-2016, 09:21 AM
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Quote:
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?

Quote:
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.

Quote:
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?

Quote:
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.

Quote:
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!


Quote:
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.
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Old 03-21-2016, 01:15 PM
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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).
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Old 03-21-2016, 01:30 PM
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I think there is a very big legal issue with taking the SSAG as law...
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Old 03-21-2016, 07:26 PM
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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.
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Old 03-22-2016, 09:18 AM
hdc1894 hdc1894 is offline
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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.
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Old 03-22-2016, 11:44 AM
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Quote:
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.
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