Can I stop paying spousal support when I retire?
By Millad Ossudallah, Vancouver Family Lawyer
A question that often comes up in family law is whether payment of spousal support can end upon retirement. Moving to a fixed income must have an impact on spousal support, right? It’s a good question given that one’s financial situation typically changes drastically upon retirement.
Factors the Courts Will Consider
The courts will determine whether the retirement is described as ‘early.’ An ‘early’ retirement is either a retirement on a reduced pension or a retirement on a full or unreduced pension before 65 years of age, in the absence of health issues or other special circumstances. If the courts see the early retirement as ‘voluntary’ and not necessary or reasonable, then it is likely that spousal support will not be changed.
The courts will acknowledge whether the decision to retire was voluntary, and factors such as a party being ill, disabled, dismissed, or laid off will be considered. The courts will also look at a person’s work history to determine if there was a consistent long-term employment in place. This will factor into the decision making of whether an applicant retired voluntarily.
The courts will then address the economic consequences of the marriage and its breakdown. The courts will look at several factors that are also referenced in the Divorce Act, including:
- Whether the economic consequences have been equitably shared
- Whether both parties are at an acceptable age for retirement
- Asset division
- Whether a party is in good shape financially
- Contributions paid in support since separation
- Future incomes
- Economic self-sufficiency
When the courts determine that the retirement was voluntary and the above factors are taken into consideration, there will be a ‘material change in circumstance.’
What is a Material Change in Circumstance?
A material change in circumstance is a change that ‘if known at the time, would likely have resulted in different terms.’ One example of a material change in circumstance could be if the receiving spouse, who was previously unemployed or underemployed, has since found a well-paying job and no longer needs as much support to maintain their standard of living. Once this threshold has been met, the courts must then determine what variation is appropriate in light of the change in circumstance.
In the British Columbia Court of Appeal decision of Hague v Hague, the court found that in view of the reasonableness of Mr. Hague’s decision to retire, there can be no serious context that his retirement and resulting reduction in income amounted to a material change in circumstance.
In the decision of Hague v Hague, the court went on further to state that Mr. Hague’s retirement was not contemplated when the support order was made. There was no evidence that the level of support was adjusted to account for his anticipated retirement.
Can the Courts Impute Income Upon Retirement?
In situations where a party is unable to pay an appropriate amount of spousal support due to a lack of income, the court may consider imputing a "notional income" based on the party's capital assets. This means that the court may attribute a hypothetical income to the party based on the value of their assets, even if they are not currently generating income from them. This can be a way for the court to ensure that the party is contributing an appropriate amount of support, taking into account their overall financial situation.
Upon determining whether an imputation of income is practicable, the courts will assess several factors, examples of which are as follows:
- Compensation and consequences of the marriage and its breakdown
- Apportionment of family property
- Payments of support and the duration
- Equalization of Canada Pension Plan(s) and/or employment pension(s)
- Similar economic benefits from the division of family property
Each case is decided on its own unique facts, and the courts will look into each fact upon determining whether spousal support should be terminated.
What is the Best Way to Approach a Termination of Spousal Support?
It is important to discuss the issue of terminating spousal support with your family lawyer to ensure that the appropriate steps are taken to determine whether the above factors have been satisfied. It is prudent that you have the following information for your family lawyer to review:
- Court orders
- Previous Form F8 Financial Statements
- Equalization of all family assets
- Work history
- Duration and amount of support payments
Once the above information has been provided, your family lawyer can provide an opinion as to whether or not a termination of spousal support is practicable.
To learn more about reduction or elimination of spousal support at the time of retirement, it is important to consult with a family law professional as each case is unique. They can walk you through the various options and potential outcomes. The family lawyers at Crossroads Law are ready to help you with your case today. Book your free 20-minute consultation online or by phone.