When to Consider Lump Sum Spousal Support

After a couple separates, a number of factors are considered when determining whether or not a spouse is entitled to receive support from their former spouse, including but not limited to: the nature of the roles that each of the parties played within the family during the relationship, as well as the relative means and needs of the parties upon separation.

If there is entitlement to spousal support, then determining the appropriate amount of support, and the length of time that it should be paid, becomes the focus of the next stage of the analysis. Typically, spousal support is paid on a periodic basis or, in other words, a specified amount is paid on a regular, often monthly, basis. These monthly payments may by made for a specific duration of time (i.e.: for 7 years) or, in the case of more lengthy relationships, spousal support may be paid on an "indefinite basis”. In those circumstances, support is paid until one or both parties have experienced a material change in their circumstances, at which time spousal support may be reviewable.

In circumstances where the parties, or the circumstances favour finality – or a clean break – a one-time lump sum payment may also be appropriate.   The Court typically exercises its discretion to make an order for lump sum when some or all of the following factors are present:

• A payee is only entitled to support for a short duration;
• There is minimal risk that either party’s circumstances will vary materially (i.e.: changes to employment, income, health status);
• There is risk of a payor spouse leaving the jurisdiction, thereby creating difficulty in enforcing an ongoing support award;
• There is risk of the payor spouse intentionally altering their employment status as a means to avoid paying support (for example, becoming intentionally unemployed or underemployed);
• A lump sum would most benefit the payee and help them to obtain self-sufficiency (for example, to pay for re-training, or educational program);
• The dynamic of the parties’ relationship calls for a “clean break” between the parties, rather than ongoing support. For instance, in cases where there was a significant power imbalance or a history of abuse during the relationship.

To illustrate, in 2011, the Ontario Court of Appeal released its decision in Davis v. Crawford, which clarified that the Court has both the jurisdiction, and the discretion to award lump sum spousal support, when appropriate. Nonetheless – and for myriad reasons - lump sum spousal support awards remain rare.

It appears that the courts are reluctant to award lump sum spousal support largely due to the uncertainty of future material events. In other words, lump sum spousal support awards require the assumption that the circumstances of the parties will not change regardless of what our collective lived experiences would otherwise tell us is true. These assumptions, therefore, carry a heightened level of risk given the finality of a lump sum payment.

Additionally, former spouses, and courts alike, must take into account the income tax implications for both parties as a result of a spousal support settlement or order. When spousal support is paid on a periodic basis, it is taxable as income for the recipient and tax deductible to the paying spouse. However, lump sum spousal support awards are, with limited exceptions, not taxable or tax deductible.

Spousal support remains one of the most complex and nuanced areas of family law and the circumstances of each situation need to be considered on a case-by-case basis. If you have questions about your rights or obligations, contact SorbaraLaw and speak with one of our lawyers.

 

 ** This article is intended only to inform and educate and is not intended to be relied upon as legal advice.  Please contact a lawyer if you have any specific questions or require assistance with a family law matter.