The first stated objective of the Federal Child Support Guidelines is to establish a fair standard of support for children that ensures they continue to benefit from the financial means of both spouses after separation. For some parents, determining their ‘financial means’ is as easy as looking at the Line 150 of their tax returns. For other parents, that determination is a much more complicated process.
Line 150 income might not be an accurate reflection of your financial means if you run your own business. It might not be accurate if you have income from dividends or capital gains. But, a question that we are often asked as family law lawyers, is whether or not the income or assets of a new partner or spouse can be used to determine ‘financial means’.
We understand that this can be scary – are payors being punished for the financial situation of their new partners? What if finances are kept separate? Well, the recent Alberta case of CRC v DAJC (2020 ABCA 143) set out to clairfy that yes – a court can impute income to a payor of child support based on their new spouses contributions to their lifestyle.
In this particular case, the payor Father, DAJC, and the recipient Mother, CRC, had four children. When the parties separated in 2007, the Father was earning about $200,000. In 2008, the Father went on a disability leave receiving benefits of $84,000 and in the same year, started to reside with his new partner, IR who ran her own company.
In 2009 the Father commenced work for IR’s company at a salary of $52,000. In 2012, DAJC and IR were married and they had a Pre-Nuptial Agreement that specified that DAJC had no claim to IR’s company and that neither party had any interest in the other’s property.
Following their marriage, IR’s income was at least $1 million per year. DAJC’s Line 150 income never exceeded $77,800 – never reaching the income level afforded by even his disability benefits. However, IR and DAJC lived an extravagant lifestyle. IR had homes in Fort McMurray, Calgary, Penticton and Kelowna. She paid all the day to day costs of the family including food, gas, housing and vehicles. Each month, DAJC had approximately $4,000 in charges on his credit card for things like golf, shopping and travel. IR paid off these credit card charges monthly. The Court noted that DAJC lived a “lifestyle of someone with much more than an income of $78,000” (Para 12).
Ultimately, the court held that DAJC’s financial means were not properly represented by his Line 150 income. In these circumstances, it was appropriate to impute a higher income to DAJC based on his lifestyle and the ‘gifts’ he received from his new spouse. The court noted that “as a general rule, gifts are not included in the payor parent’s guideline income…gifts to payor parents have been attributed when they are regular, long standing, materially affect the payor parent’s standard of living and are likely to continue” (para 20).
The Alberta Court of Appeal agreed with this finding and also posed the appropriate way to determine the amount of income to be imputed to DAJC: the court looked at the specific evidence on expenses being paid by IR which was the $4,000 per month credit card bill. This amount was grossed up for taxes and added back to DAJC’s income. The purpose of grossing up these amounts is for DAJC’s pre-tax income to reflect what he would actually have had to earn to be able to spend that money after tax. That is the amount that would properly reflect his financial means for child support. If there had been specific evidence about the amounts IR paid for DAJC’s other living expenses the court suggested that those amounts would have been added back too.
This case suggests that the Court will look beyond a payor’s Line 150 income and beyond the legal relationship with a spouse that might exist on paper. DAJC was employed and there was a pre-nup that kept all assets separate. However, the court will look at a payor’s lifestyle and for specific evidence of regular and long standing gifts that materially impact a payor’s lifestyle. When those conditions are present, it is possible that a payor will be required to pay a higher level of child support.
Courts across Canada have long found that child support is the right of the children. They will make an effort to examine the money available to payors of child support to ensure that the objectives of the Guidelines are met and that the children are being supported with the financial means of both parents.
As we alluded to above, gifts from a spouse are just one of the things that might impact ‘financial means’. If you have questions about determining income for the purposes of support please don’t hesitate to contact us.
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