Blended families! Who pays for what?

Jill’s sister Anna went through a difficult divorce.  Everything has been settled with her ex-husband and she has been in a new relationship for the past two years.  Tom, her new beau, has two children.  They are planning to move together come Summer time but Anna is nervous about moving in with a new spouse, particularly with one who has two dependent children to take care of.  In the end, all she wants is for her new family to be happy!

Stepfamilies now make up approximately 13% of Canadian families with children. Almost half of those are blended families with children from the new and former relationships, or from which one partner brings children from a previous relationship. Blending might result in some financial challenges, particularly when one spouse has children and the other does not.  Here are a few tips to insure that financial issues do not get in the way of your happy blended family:

• Be proactive. Have an open and frank discussion about your financial position before moving in together.  Disclose your assets, your debts and talk about your budget, your lifestyle and your financial habits, goals and preferences;

• Meet with a lawyer to discuss whether or not a cohabitation or marriage contract would be necessary in your case to protect your existing assets or to determine in advance what you will or will not share financially during your relationship and in the event of a separation;

• The spouses should be clear about what they are prepared to contribute, if anything, to assist with raising the other spouse’s children.  If your understanding is that you will never be called upon to support your spouse’s children, during and/or after the relationship, put that understanding in writing (normally in a cohabitation agreement or marriage contract);

• Consult an accountant to discuss how you may be able to organize your financial affairs to minimize the tax consequences of living together.  For instance, after 12 continuous months of living together, you are required by the Canada Revenue Agency to change your marital status to common law partner.  One’s ability to claim certain tax credits and benefits may be affected by that change.

Blended families can be very successful both for the new couple and for the children who form this new family, particularly when the spouses take the time to plan ahead and discuss in an open and honest manner about what each of them expects from the relationship. Life is giving you a second chance, so start on the right foot and plan!

Could a parenting coordinator help us?

Jack and Jill have been able to reach an interim agreement about parenting issues and the care of their two children.  Unfortunately, this has not stopped them from fighting about the kids. From Jack’s perspective, Jill is completely inflexible in her thinking and she refuses to follow the agreement with regards to access, consent to travel with the children, payment of the children’s expenses and so on.  Jack wonders what is the point of having an agreement if he needs to run to his lawyer and take legal action every time Jill does not follow the rules.

In high-conflict separations or divorces, parenting issues may arise frequently even if the parents have signed a comprehensive parenting agreement. Going to court every time a dispute arises is both untimely and expensive.  However, “Parenting Coordination” could be your best option to manage those day-to-day disputes in a timely and cost-effective manner.

How does parenting coordination work?  A Parenting Coordinator is a neutral person to whom parents can turn to when they cannot agree on matters relating to their children. The Parenting Coordinator is usually a psychotherapist, social worker, family lawyer, counsellor or mediator who has a significant expertise in parenting and divorce conflict management and who has obtained a Parenting Coordination certification. The Parenting Coordinator is hired by the parents (by contract) or appointed by the family court (on consent of the parents).  His/her role is to help parents come to a successful resolution of ongoing disputes as they arise between themselves. If the parents are unable to resolve the dispute, the Parenting Coordinator is empowered to impose a decision on them. In other words, the decision of the Parenting Coordinator must be followed by the parents, as if ordered by a Court.

While the cost of the Parenting Coordinator is assumed by the parents equally (or as otherwise ordered by the Parenting Coordinator when required to impose a decision on the parties), that cost is, without a doubt, cheaper than the cost of two lawyers and months of court proceedings to resolve the dispute!  Most importantly, the matter will be resolved very quickly (sometimes in a matter of days) as opposed to taking several months through the court process.  Keep in mind that, according to a wide body of research, while separation and divorce may be a hard transition for children, in the end, it is parental conflict that is the most harmful to children.

He should pay for my lawyer’s fees!

Jill is really frustrated.  Jack has failed to provide the financial documentation she needs to determine his “true” income for support purposes.  As a result, Jill’s lawyer has recommended that she obtain a court order forcing Jack to provide the information.  Since it is Jack who is refusing to comply, Jill feels that he should be responsible to pay for all the legal fees associated with this court proceeding. However, Jill’s lawyer made it clear that although she will make the request, the final decision is within the judge’s entire discretion.  The judge may, or may not, make an “award of costs” forcing Jack to pay some or even (more rarely) all of Jill’s legal fees. 

 

The number one frustration encountered by a client in a separation process is when he/she is obligated to pay an important amount of legal fees to start a court proceeding just to compel an ex-spouse to do things that he/she should have been doing readily and willingly (i.e., providing financial disclosure, paying child support, paying their share of joint debts, signing a consent to travel abroad with the children, etc.). In Ontario, the court process is designed to promote settlement discussions between the spouses.   Thus, to move the matter towards settlement, the spouses have the obligation to participate in various types of conferences (i.e., case conference, settlement conference, and trial management conference) before they can proceed to adjudication processes (processes where evidence is presented to the judge and the judge imposes a decision on the parties).  While a conference is a less costly settlement oriented process than an adjudication process, judges do not usually award costs in the context of those conferences, unless it is very clear that one party has abused the process. 

 

As a result, it is important to understand that before engaging into a court proceeding (conference or adjudication), you must be able to pay for all the legal fees stemming from the process as you may, in the end, only be able to recover a slim portion from your ex. Court should always be the last alternative in a separation process because the cost of the process may very well exceed the benefit that you gain in the end.

Love is sometimes blind… Marriage and immigration

Jack’s brother, Romeo, called him last night in a crisis.  His new wife Julia, whom he met in Cuba two years ago and whom he married the week after she arrived in Canada two months ago, stormed out of their home last night wanting a separation.  Romeo explained that their marriage was rocky from day one.  It would appear that, after the marriage, Julia became a completely different person than the sweet, kind and amusing woman he had dated long distance for the past two years.  Romeo believed that, with time, they would be able to work things out.  However, he has since found out that Julia never loved him and manipulated him into marriage solely to immigrate to Canada. Having sponsored Julia to become a Canadian resident, Romeo now faces years of financial responsibility towards her even after a divorce.

Romeo’s story is unfortunately similar to that of many other Canadians, and the options available in those situations (until recently) were non-existent.  At the moment, when someone sponsors a non-Canadian to become a Canadian resident, that person must give financial support to their immigrating spouse for three years, even if the marriage or relationship fails. If the immigrating spouse uses social assistance to meet his or her basic needs, the Canadian spouse will have to repay the money to the government, as sponsorship is a legal contract with the Government of Canada. You must meet its terms. It does not matter whether or not a judge would deny the immigrating spouse financial assistance pursuant to Canadian family law principles or whether the parties had signed a marriage contract confirming that no spousal support would be payable in case of separation or divorce.  If the immigrating spouse requires financial assistance to meet his or her needs, the Canadian spouse is 100% responsible, not Canadian taxpayers. Until very recently, there was nothing a “manipulated” spouse could do in this unfortunate situation.

However, in October 2012, the Canadian immigration laws have changed.  In an ongoing effort to deter people from using marriages of convenience to enter into Canada, the Canadian immigration authorities introduced a new regulation that requires certain sponsored spouses to live in a legitimate relationship with their sponsor for at least two years from the day on which they receive their permanent resident status in Canada.  If the sponsored spouse leaves prior to the two year requirement, its status may be revoked.  Canadian authorities can also lay criminal charges against the sponsored spouse.

Based on this new regulation, Romeo will not have to prove that Julia manipulated and married him for the sole purpose of immigrating to Canada, given that she left prior to the two year requirement.  Her status as a permanent resident will be revoked and Romeo’s obligation to financially support her will end since she will have to return to Cuba.  If you are a Canadian citizen or permanent resident and have met someone from another country on the Internet or while travelling, think carefully before marrying them and sponsoring them to come to Canada. Otherwise, blind love could completely turn your world around…

Should you try to make Christmas perfect?

Last year was the first Christmas after the separation.  Although the holidays went fairly well given the circumstances, Jill is feeling the pressure of making Christmas perfect.  The children are asking for an IPOD, and IPAD, and IPHONE, an XBOX just to name a few big ticket items on their wish list. Jill earns a lot less money than Jack and cannot afford the luxurious gifts he buys the children.   She also feels guilty that she will not spend Christmas morning with the kids and thinking of the loneliness is just overwhelming.   She knows that she has to stick to the budget and that money does not buy love. However, when it comes to the children Jill usually overspends.  

 

In preparation for Christmas Jill made a list of 5 goals she will try to respect during this holiday season:

 

1.  Make a list of gifts. Set a budget and stick to it.  Shop early – avoid last minute temptations and overspending. 

 

2.  Talk to the children and Jack about Christmas and New Year arrangements well in advance – good planning and realistic expectations can prevent frustrations and disappointment.

 

3.  Remain flexible during the holidays - avoid disagreements, dramatic people and uncomfortable conversations after all “it’s the season to be jolly”.

 

4.  Enjoy myself – spend quality time laughing with family and friends, the support of loved ones can provide strength to move past a difficult situation.

 

5.  Remain positive – Choosing to learn from this hurtful life experience can help you grow into a stronger, wiser person.

 

I work for my-self and don’t earn much income!

Jack is self-employed as a human resource consultant for various companies and organizations in the Ottawa area, a business he started to operate when he was laid off from his long-time position with the federal government. As a self-employed business owner, Jack is able to enjoy freedom and many tax benefits that are not available to “regular” employees.  However,  being self-employed also means that he must bear the risks associated with the ups and downs of market demands and fluctuating annual income that “regular” employees do not have to assume. That is what he responded to Jill when her lawyer had the nerves to suggest that his income was actually higher than the amount he declared in his annual income tax return.

Jill’s lawyer had no intention to insult Jack, or to insinuate that he was defrauding Canada Revenue Agency.   For the purpose of determining the annual income required to calculate both child and spousal support, the court is not limited to the revenue declared by  a tax payor in his or her income tax return.   In fact, the tax and other financial benefits flowing from being self-employed, being the sole owner of your own company or living in a country with much lower tax rates (to name only a few) can and will be taken into consideration and will often result in the court attributing a higher income than what is reported on line 150 of the income tax return.  This is because the child and spousal support guidelines (those tables, charts and software that determine how much support is payable) are based on income earned by “regular” employees who are subject to source deductions and less flexible taxation rules, and who must pay for personal expenses with after-tax money.  This is not the case for self-employed people who usually also  enjoy the following (non-exhaustive) benefits;

• paying for personal expenses (such as car expenses, cell phones, meals and entertainment, travel, etc.) through their businesses, thus allowing them to pay with “before-tax money”;
• leaving important sums of money in their company, for reinvestment or future use; 
• investing through their company with “before-tax money”; and
• receiving income as dividends, which brings about a lower taxation rate.

As a result, when assessing a self-employed payor’s income judges and lawyers must look beyond the income tax return to avoid comparing  apples (“regular” employee payors’ income) with oranges (self-employed payors’ income). 

An offer to settle? Is my lawyer losing trust in my case?

The trial in Jill and Jack’s family matter is approaching.  They have not yet been able to settle their disputes over financial matters and the judge overseeing their court case has advised them that he was “setting this matter down to trial”. Family judges often do that to force the parties to be reasonable and be pro-active about settling their affairs. As a result, Jack’s lawyer has recommended that an offer to settle be made to Jill, emphasizing the fact that the offer is a significant compromise on Jack’s part. In other words, Jack’s lawyer is proposing to settle financial matters for an amount significantly less than what Jacks believes he is entitled to.  Jack wonders why he would do that and is beginning to think that his lawyer may not be advising him properly.

 

In fact, this is really good advice that Jack is getting. The role of offers to settle in a family court proceeding must not be understated, as they can have a significant impact on the dollars you might be able to recoup at the end of the day.  If accepted by your ex-spouse, an offer to settle will end your court case definitely.  This means, among other things:

• No more legal fees to pay (thousands and thousands of dollars of savings);
• You will not have to go to trial (no need to spend an entire week – or more – under stress, telling a perfect stranger about your most private affairs with your ex-spouse);
• No more stress over the legal proceedings (sleep at last); and
• The right for you and your children to live in peace, and finish grieving the end of your relationship. 

If your offer is not accepted by your ex-spouse, then making a « low ball » offer to settle will have the effect of protecting yourself against the high costs of divorce litigation. At the end of a full-blown trial, the judge will have the obligation to consider costs spent by each party in the court proceeding, and to award costs in favour of one party against the other.  This means that the judge will have the right to order one party (usually the party who “lost”) to pay to the other party (the “successful” party) an amount to compensate him or her for the legal fees paid throughout the proceeding.  The judge will look at the offer to settle that was presented before trial. If some of the terms of the offer were more beneficial to the other party then what was ultimately offered by the judge, the court is directed by law to make a cost order against the party who failed to accept this most beneficial offer for the time wasted going to trial. As a result, a “low ball” offer to settle can become very beneficial in the end. 

 

Everything in family court is about being reasonable.  While you may think that you have a 100% chance of success in the position that you are advancing in court, history has shown that, in every single case, at least one of the parties end up disappointed.  Making every possible effort to settle your family issues out of court could mean accepting a bit less than what you think you are entitled to. Most importantly, it could mean finding peace of mind. Often, settlement is a question of perception:  is your glass half-empty or half-full?