Jack’s work environment has changed considerably lately and he feels lots of pressure to work excessive hours with short timelines. He is currently experiencing health issues and his doctor has asked him to explore the possibility of taking an early retirement. His employer has made it clear that hiring temporary help is out of the question. Jack is seriously considering his doctor’s suggestion but wonders if, by taking an early retirement, his monthly support payments to Jill would be reduced or terminated. After all, why should he stress with work while Jill spends his money relaxing at the spa!
If Jack is retiring for the sole purpose of reducing his support obligations, a court may impute him a higher salary than his retirement income, and calculate his support obligations based on what he used to earn before he retired. This same principle applies to a payor who intentionally reduces his/her income to avoid paying support. However, if Jack’s decision to retire is deemed reasonable (because it was prompted by medical reasons or some other « reasonable » cause), then his support payments may be reduced or even terminated. In that case, the courts would look at many factors, including the following two important principles:
1. The nature of spousal support - Spousal support is an important and necessary means to share the financial impacts of separation which sometimes go well beyond the payor’s retirement. In deciding whether or not the support obligation should be modified once the payor retires, the court will consider the nature of the support received by the recipient: (i) was the support ordered to compensate a spouse who stayed home throughout the marriage and who, as a result, did not have the opportunity to advance his/her career and earn a reasonable income? or (ii) was the support meant to alleviate a financial need, where a spouse is unable to meet his/her personal monthly needs? When support is based on compensation, the courts have often concluded that a spouse is considered to have been fully compensated by the time the payor retires. However, when the support is based on needs, the courts have at times extended the obligation to pay beyond retirement.
2. The “double dipping” principle - The court will consider whether or not the payor’s pension was divided at separation through an “equalization payment” (the payment made between married spouses after a separation ensuring that each spouse ends up with assets of equal value for the period of the marriage). If the pension was already divided as part of the property settlement agreed to by the spouses at separation, the court will try to avoid « double dipping ». In other words, the court will avoid dipping again in the same source of funds (i.e. the pension) when granting support, unless the recipient has a significant need that cannot be addressed otherwise.
Spousal support is a very complex area in family law and the payor’s retirement can add to the complexity. If retirement is a factor to be considered in your situation, you must consult a lawyer to ascertain your options and the impact your retirement may have on your financial situation. Prior to meeting with your family law professional, take the time to understand the basic concepts of spousal support to use your time with your lawyer more efficiently (Knowledge is power and time is money!). Visit our website at www.familylawinabox.com and listen to our program on Spousal Support (click here).
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