For people who are high-income earners, a separation or divorce may come with significant spousal support or child support obligations. For those who own their own business, determining how much support needs to be paid can be difficult due to year-to-year changes in income. A recent decision from the Ontario Superior Court of Justice shows how courts approach such situations.
The parties were a mother and father who were married in 1989 and have two adult children. Once they had kids, the mother worked inside the home raising their children while the father worked first as a lawyer before starting his own company which ended up being extremely profitable. The family enjoyed a privileged lifestyle which saw the children attending private schools, and the family traveling first-class and staying in luxury hotels.
The father’s business was structured in such a way that the mother owned a number of the father’s companies in order to reduce tax liabilities as well as any potential liability due to his background as a lawyer. They funded their lifestyle through these corporations.
There was no dispute about whether or not the father should be responsible for paying spousal support. Instead, the issue was about the amount of money he makes and how much support he should pay.
The mother and father each hired an expert to determine what the father’s income was over the prior four years. It shouldn’t be surprising that they arrived at different numbers. The mother’s expert found that the father’s four-year average income was $2.264 million, while the father’s expert came up with a four-year average of $1.80 million.
During the four-year period, the father’s income varied considerably, with swings of as much as $800,000 between some years. This was because the father’s business was related to mini-tenders. He got paid only when his clients were successful in the tender process. He said that it has been his practice to keep capital in the business due to the unpredictability of it as well as to leave a cushion for his family should he not earn income.
Since this was a motion for interim support (permanent support would be determined at a later trial) the court was not privy to all the information needed to determine spousal support. The court was sensitive to the father’s claim that he needed to keep some operating capital within his companies in order to get through low points in income. However, at the same time, it was clear that the husband was very successful in business, with some investments netting him at least $1 million. The court decided to take the father’s expert’s average income figure and set his salary at $1.8 million. While the mother technically owned the corporations, she clearly wasn’t in charge of them and the court stated she has no personal income.
The amount of spousal support payable on a monthly basis for an income of $1.8 million annually is $65,652, which should provide her with an after-tax income of $33,674 per month.
Contact the family lawyer at NULaw as soon as possible if you are contemplating a separation, or have already begun the process. We are dedicated to pursuing your interests and getting exceptional results. Let us focus on your rights and negotiate the best possible outcome for you while you focus on rebuilding and moving on. Contact us online or at 416-481-5604 to book a consultation.