How is spousal support calculated for high-income earners?
By Seamus Cowan, BC Family Lawyer
Spousal support is a common consideration upon the breakdown of a marriage or cohabitation. The income of the payer is only one factor judges and lawyers use to determinate the amount of spousal support payable. However, where a spousal support payer has a gross income exceeding $350,000, unique considerations come into play. Before discussing these unique considerations, it is important to briefly review the guidelines used by judges and lawyers to determine the amount for any spousal support claim.
What are the Spousal Support Advisory Guidelines?
The Spousal Support Advisory Guidelines are a practical tool voluntarily used by judges and lawyers to calculate the amount and length of a spousal support obligation. The Guidelines have not been legislated and are not law but function as informal guidelines with the purpose of making spousal support awards more predictable and consistent. The Guidelines are advisory in nature. However, following the Guidelines can enhance the legitimacy of a spousal support award and aid in the avoidance of arbitrary decision-making.
What formulas are used to determine spousal support?
The Spousal Support Advisory Guidelines provide two formulas for calculating the amount of spousal support payable: the without child support formula and the with child support formula. The formulas produce a range of possible spousal support amounts based on the length of the relationship and the gross income of the payor.
The Guidelines also establish a floor and ceiling in terms of the income levels to which they are applicable. The floor is set at a gross annual income of $20,000 and the ceiling is set at a gross annual income of $350,000. The without child support formula and with child support formula are optimal where the gross annual income of the payor falls within the floor and ceiling amounts.
The ceiling amount does not impose a cap on the amount of spousal support to be awarded when a payor’s income exceeds $350,000. Instead, the Guidelines identify two approaches for determining the amount of spousal support for high-income earners: the “minimum plus” approach and an approach of “pure discretion”.
The “minimum plus” approach is used to determine a minimum spousal support range. A notional calculation is used to calculate spousal support at the $350,000 ceiling using either the without child support formula or the with child support formula. This determines the minimum spousal support range. Where the gross annual income of the payor exceeds the $350,000 ceiling, the minimum plus approach allows for discretion to add to the minimum spousal support range.
The second approach is one of “pure discretion”. Where the gross annual income of the payor exceeds the $350,000 ceiling, the pure discretion approach foregoes the calculation of a minimum spousal support range. Instead, judges and lawyers will use their discretion to settle upon a dollar figure for spousal support using an individualized, fact-specific analysis of the payor and the recipient’s respective situations.
Exercising discretion: an individualized, fact-specific analysis
The minimum plus approach and the pure discretion approach for calculating spousal support amounts for high-income earners both involve discretionary analysis. This discretionary analysis has been described as an “individualized, fact-specific analysis” by the authors of The Revised User’s Guide to the Spousal Support Advisory Guidelines.
An individualized, fact-specific analysis takes into account numerous factors. It is important to note that consideration of the following factors depends upon the unique factual circumstances each party brings to a spousal support claim. Factors include:
- The strength of the recipient’s entitlement to spousal support (compensatory, non-compensatory, or contractual). See section 15.2(6) of the Divorce Act (“Objectives of Spousal Support”).
- The conditions, means, needs and other circumstances of each spouse, including: the length of cohabitation, the functions performed by each spouse during cohabitation, and any order, agreement, or arrangement relating to support for either spouse. See section 15.2(4) of the Divorce Act (“Factors for Spousal Support”).
- Child support obligations, or any obligations extending to dependents.
- The active income and expenditures for each spouse, including an assessment of the payor’s ability to pay support in relation to their debt obligations.
What are the guiding principles for spousal support obligations for high-income earners?
The caselaw dealing with spousal support decisions where the payor’s income exceeds the $350,000 ceiling are varied and highly specific to the facts the parties bring to a spousal support claim. However, the caselaw has enunciated some clear principles for structuring spousal support awards where the payor’s income exceeds the $350,000 ceiling. The principles stated include the following:
- The without child support and with child support formulas are not presumed to apply where the payor’s income exceeds the $350,000 ceiling.
- The $350,000 ceiling is not an absolute cap, as spousal support can and usually does increase where the payor’s income exceeds $350,000.
- The formulas are not to be applied automatically above the ceiling, although the formulas may provide an appropriate method for determining spousal support in an individual case, depending on the facts.
- Above the ceiling, spousal support cases require an individualized, fact-specific analysis involving evidence and argument.
- Where the payor’s income is not too far above the ceiling, the formula ranges will often be used to determine the amount of spousal support.
- Where the payor’s income is far above the ceiling, the formula ranges may still be used to determine the amount of spousal support, but this is a matter of pure discretion.
Spousal support is a complex area of law which becomes less predictable the higher the income of the parties. While the Spousal Support Advisory Guidelines provide approaches to calculating spousal support amounts for high-income earners, and the caselaw provides principles for structuring a spousal support award, the application of these approaches and principles is highly flexible where incomes exceed the $350,000 ceiling.
Crossroads Law will soon be launching a free spousal support calculator where you can enter your information to get an estimate on spousal support you need to pay or would be owed. Additionally, the team family lawyers at Crossroads Law have extensive experience handling high-income spousal support claims and can help you understand your rights and responsibilities. Contact us today to book a free consultation to learn more.