• Burnaby Deer Lake Law Group Lawyers & Notaries Family Mediation
  • Burnaby Deer Lake Law Group Lawyers & Notaries Family Mediation
  • Burnaby Deer Lake Law Group Lawyers & Notaries Family Mediation
  • Burnaby Deer Lake Law Group Lawyers & Notaries Family Mediation

When the "I do" becomes "I don't" we will protect your Assets, your Children and your Sanity.

  • Burnaby Deer Lake Law Group Lawyers & Notaries Family Mediation
  • Burnaby Deer Lake Law Group Lawyers & Notaries Family Mediation
  • Burnaby Deer Lake Law Group Lawyers & Notaries Family Mediation

Question: I am thinking of entering into a new relationship. Will the new relationship affect the spousal support I receive?

Answer: Spousal support can be compensatory and non-compensatory. The following cases may be helpful in understanding and predicting how the Court may deal with an application to vary or terminate an existing spousal support order or arrangement currently in place:

• In Rimmer v. Adshead, 2012 SKQB 500 (CanLII) the recipient remarried approximately six years after the support order was granted. The recipient’s new relationship and the “possibility of remarriage” was not “contemplated or taken into account” at the time the support order was made.

The Court held that the remarriage was a “material change in circumstances” stating that “remarriage does not automatically result in the termination of an order for spousal support. However, the payee must demonstrate that there is continuing basis for spousal support.”

The Court ultimately terminated spousal support as of the date of the application, nearly one and a half years after the remarriage.

• In Morigeau v. Moorey, 2013 BCSC 1923 (CanLII) the parties were involved in a long marriage in which the recipient took a leave from her employment for 12 years to raise the parties’ children. At the time the spousal support order was made the recipient’s new relationship was known to all of the parties. The recipient’s new partner had an income of approximately $155,000.

The Court found that, although the order was unclear, the spousal support was, at least in part, of a compensatory nature and that payer had not “satisfied his obligations to pay spousal support on a compensatory basis”.

The Court refused to change the support order.

Commonly called Travel Consent Forms or Travel Affidavits, the Travel Authorization Letter is a document that the non-traveling parent should provide to the parent that will be traveling with the child or children.

The Government of Canada strongly recommends that Canadian children carry a Travel Consent Letter if they are travelling with only one parent / guardian, with friends or relatives or with a group. The Travel Authorization Letter should include:

1. Full legal name of the non-traveling parties;

2. Residential address of the non-traveling parties;

3. Declaration of their relationship to the child (mother/ father/ lawful guardian);

4. Full legal name of the child;

5. Date of birth of the child;

6. Dates of travel (departure/ return);

7. Destination for travel;

8. Appointment of temporary guardian (if applicable); and

9. Emergency contact (telephone numbers / address) for non-traveling parties.

It is recommended that copies of travel documents be attached to the Travel Authorization Letter and that the Authorization is notarized by a Lawyer or Notary Public.

For a Free Travel Authorization Letter, please call or email us. Deer Lake Law Group lawyers will notarize the Letters at no cost.

Most people know that child support payments are calculated based on income. But what does “income” include? Specifically, should Capital Gains on the sale of a property be included?

The short answer is that in most cases the non-recurring Capital Gain should not form part of your income for the purposes of calculating child support. The analysis starts by considering what the total income is and then adjusting the income to exclude the Capital Gain when appropriate to do so.

For example, if you bought and sold properties regularly and had Capital Income every year, then you might find that the Court might consider the Capital Gain a regular part of a fluctuating income. In that case, I would expect the Court to average your income over the course of three years.

The long answer is …

[24] The most complete consideration, provided to me, of how to analyse the implications for the assessment of Guideline income of a non-recurring capital gain is found in Ewing v. Ewing, 2009 ABCA 227 (CanLII), 2009 ABCA 227. That case considers many of the cases cited to me in argument. It is clear from that case that the ultimate question is whether a non-recurring capital gain should fairly be treated in substance as enhancing the income or financial means of a parent. Each case is fact specific and there are cases in which, given the nature of the capital gain, the court has determined that a non-recurring gain should not be included in income for Guideline purposes: see, for example, Anderson v. Anderson, 1997 CanLII 1163 (BC SC), [1997] B.C.J. No. 2496; 32 R.F.L. (4th) 177; Krupa v. Krupa, 2010 BCSC 1400 (CanLII), 2010 BCSC 1400. In other cases, a non-recurring gain has been brought into income for Guideline purposes because the capital gain is properly seen in substance as income that enhances the financial means of the payor parent: see, for example, Shields v. Shields, 2006 ABQB 368 (CanLII), 2006 ABQB 368; Shick v. Shick, 2008 ABCA 196 (CanLII), 2008 ABCA 196.

[25] In Ewing it is recognised that the starting point for the calculation of annual income is s. 16 of the Guidelines. Presumptively, appropriate income for child support purposes is what is shown on a payor parent’s tax return including any capital gain. However, a court has a discretion under s. 17 of the Guidelines to determine that a s. 16 calculation would not be a fair determination and, if it does so, s. 17(10) requires the court to determine a “fair and reasonable amount” having regard to the payor’s income over the last three years and any “pattern of income, fluctuation of income or receipt of a non-recurring amount during those years”.

[26] After considering the authorities, including the principal authorities relied on by J.M.D. before me, the Alberta Court of Appeal summarized its analysis in the following terms:

[33] Thus, the nature of the sale of a capital asset, or other extraordinary gain or fluctuation in income, should always be considered when determining fair income. Frequently the fairest method of income may be to exclude the gain. On the other hand, where a non-recurring gain is in the nature of an employment bonus, in the sense that it is truly income for work done, its inclusion in section 16 income may not make that method of calculation unfair. The sale of stock options as part of annual compensation may be such an example.

[34] In addition to considering the nature of the non-recurring gain, or fluctuation of income, it is also important to consider the purpose of support orders when deciding whether a section 16 calculation of income is fair. Support orders are directed at ensuring that, to the extent possible, that children enjoy the same standard of living they would have experienced if the marriage had not broken down. Thus, when determining a fair and reasonable income, the day-to-day standard of living the family would have enjoyed, had it remained intact, is relevant. A court might want to consider whether a specific non-recurring gain would have resulted in a change in lifestyle of a particular family, had it remained intact. For instance, if the family’s standard of living is high to begin with, the unusual gain may not affect the family’s standard of living at all but may simply be seen as a means of providing security for future years. Thus, notwithstanding a large gain, a section 16 calculation which includes the gain might not be the fairest method of calculation.

[35] While the courts have the discretion to determine whether the section 16 income calculation is fair, having regard to non-recurring gains and patterns of income, the following, although not an exhaustive list, outlines some of the matters a court might consider: Is the non-recurring gain or fluctuation actually in the nature of a bonus or other incentive payment akin to income for work done for that year? Is the non-recurring gain a sale of assets that formed the basis of the payor’s income? Will the capital generated from a sale provide a source of income for the future? Are the non-recurring gains received at an age when they constitute the payor’s retirement fund, or partial retirement fund, such that it may not be fair to consider the whole amount, or any of it, as income for child support purposes? Is the payor in the business of buying and selling capital assets year after year such that those amounts, while the sale of capital, are in actuality more in the nature of income? Is inclusion of the amount necessary to provide proper child support in all the circumstances? Is the increase in income due to the sale of assets which have already been divided between the spouses, so that including them as income might be akin to redistributing what has already been shared? Did the non-recurring gain even generate cash, or was it merely the result of a restructuring of capital for tax or other legitimate business reasons? Does the inclusion of the amount result in wealth distribution as opposed to proper support for the children?

[27] R.M.J.D. deposes that, after trial, he did live in the Granville Avenue property at certain times. He was living in it as his principal residence when he sold it. Not having lived in the Granville Avenue property continuously since it was purchased, some significant portion of the appreciation in the value of the property is a taxable capital gain and is reportable on his income tax returns.

[28] He says that he has sold the property and invested the proceeds, intending to purchase a new home in which he will live. In effect, he has temporarily substituted one capital asset [the Granville Avenue property] for another capital asset [the invested monies].

[29] In my view, had R.M.J.D. immediately bought a new home with the proceeds of the sale of Granville Avenue there would be no legitimate basis to consider taking any capital gain into income for child support purposes. The capital gain would not be akin to income and including the capital gain would not be necessary to provide proper child support. If R.M.J.D. moved into the new home as his primary residence, he would have simply substituted one piece of property for another; one capital asset for another. If he did not move in, but rented the new home, the income generated from the substituted capital asset would be income for child support purposes, but not the capital gain associated with the transaction. The substitution of one capital asset for another of similar value would not represent an increase in financial means. [30] The issue is somewhat more complicated because R.M.J.D. has not substituted like asset for like. He has sold real estate and is holding financial assets. It appears that R.M.J.D. may be speculating on a decline in real estate values, given that he has not reinvested the proceeds in real estate in nearly 18 months. If this is correct, and R.M.J.D. is successful, then his financial means may be materially altered. He may be able to buy a similar property to Granville Avenue for significantly less money. But whether this will turn out to be the case is not yet known. In the meantime, the sale proceeds of Granville Avenue are invested and to the extent that they yield a return that return will constitute income, just as rent would have done, if a new property had been bought and rented.

[31] On the facts before me, I am not persuaded that the capital gain on sale of the Granville Avenue property should be treated as income. I am influenced in reaching this conclusion by the fact that any return generated by the sale proceeds will be taken into income or if other real estate is purchased and rented then the rent will also be considered income. The Granville Avenue property was a capital asset used to generate income. It was not income itself. Both capital assets are capable of generating income and it is more appropriate to focus on the income generated by the asset for support purposes, not the asset itself.

[32] The sale of Granville Avenue is not akin to income; it is not analogous to a bonus or incentive income in the form of stock options. R.M.J.D. is not in the business of buying and selling assets as a source of income. The proceeds of the sale are not being used as income (except marginally to defray legal costs). They are being held at a financial institution, waiting, apparently, to be reinvested. [33] If R.M.J.D. buys a new primary residence one asset will have been substituted for another. Only if there is a significant fall in real estate values will R.M.J.D.’s financial means be materially affected and only then will any remaining surplus proceeds potentially acquire the character of income for child support purposes. Only then will it be apparent whether the capital generated from the sale of Granville Avenue and not reinvested in real estate provides a source of income for the future.

[34] The fact that an illiquid asset (real property) has been converted to a liquid asset (financial assets) does not necessarily convert the asset from capital to income. Here it is of some significance that the proceeds of the sale of Granville Avenue have not been used to finance an increased standard of living by R.M.J.D. Had they done so, then the children may well have been entitled to share in that increased standard of living because through his conduct R.M.J.D. would have converted a capital asset into income for child support purposes. This has not happened.

[35] Accordingly, I decline to include the capital gain on the sale of the Granville Avenue property as income in 2010. I order, however, that R.M.J.D. report to J.M.D. within 30 days of closing when he purchases a substitute property and provide full financial disclosure of the purchase. He will also in his financial disclosure fully disclose the information about the status and use of those funds. I will deal with reporting requirements more generally later in these reasons. [36] In reaching this conclusion I have not disregarded the attack made on R.M.J.D.’s credibility. It was argued, amongst other matters, that R.M.J.D. had given evidence in 2005 that he had no intention of using the Granville Avenue as a primary residence, but deposed that he had lived there in 2006 and claimed it as a primary residence in his tax filings even for 2005.

[37] Goepel J. had accepted R.M.J.D.’s evidence that he did not intend to live in Granville Avenue when he valued the family assets for the purpose of asset division. I note that R.M.J.D. was not cross-examined on his affidavits. In my view, it would not be appropriate to make adverse findings of fact based on a lack of credibility without R.M.J.D. being given a fair opportunity to respond to the criticisms levelled against him. In any event, the question whether R.M.J.D. did or did not intend to live in the property when he gave evidence or whether it was or was not his primary residence for the periods he claimed is not relevant to his child support obligations. As has been noted, the division of assets dealt with the distribution of family wealth between the spouses, not with their child support obligations. Whether a greater or lesser portion of the capital gain is taxable does not affect the issue whether in principle the capital gain should be taken into income for child support purposes. In summary, I have not found it necessary to rely on R.M.J.D.’s credibility or lack of credibility in resolving this particular issue.

×
Chat Support

Lana: Hello, I am the Client Services Manager at the Deer Lake Law Group. How can I help you today? Please leave me a message (with your phone number) - I will return your call shortly.