On breakdown of a marriage, BC spousal support is commonly paid on a periodic basis, which means that one spouse pays the other spouse a set amount per month for a period of time – sometimes indefinitely. However, there are situations where it may be preferable to seek BC spousal support in a lump sum, which means that there is a one-time payment from one spouse to the other, after which there is no claim future spousal support. When making a BC spousal support award, the court must weigh the advantages and disadvantages of a spousal support order in lump sum form compared to those of an order made in the more common periodic payment form. This article will discuss the pros and cons of lump sum spousal support awards.
Advantages of BC spousal support in lump sum
In some cases, a lump sum BC spousal support award is preferable to an order for periodic payments. The advantages of making a lump sum spousal support award include:
- Terminating ongoing contact or ties between the spouses for any number of reasons (for example, short-term marriage; domestic violence; second marriage with no children, etc.);
- Providing capital to meet an immediate need on the part of a recipient spouse;
- Assisting the recipient spouse to achieve self-sufficiency and an appropriate standard of living;
- Ensuring adequate support will be paid in circumstances where there is a real risk of non-payment of periodic support or a lack of proper financial disclosure;
- Ensuring adequate support where the payor spouse has insufficient income to pay spousal support on an ongoing basis, but has capital assets from which to make a lump sum payment; and
- Immediately satisfying an award of retroactive spousal support.
For example, in Parton v. Parton, 2018 BCCA 273, the payor spouse had the ability to pay lump sum but not periodic spousal support. The spouses (both age 61) separated after a 33-year long marriage. The wife had given up her career to raise their now-adult children, while the husband had built up an insurance brokerage. At the time of trial the wife had been out of the workforce for 23 years and was partially disabled. The husband argued that since he was planning to retire within six months to three years, spousal support should be periodic and not payable beyond that short term. The court took into consideration that the husband would be unable to make periodic payments for long given his (voluntary) impending retirement, but also recognized that the husband had a capital asset base from which he could pay lump sum spousal support without undermining his future self-sufficiency.
Disadvantages of BC spousal support in lump sum
The disadvantages of a lump sum spousal support award can include:
- The real possibility that the means and needs of the parties will change over time, leading to the need for a variation – when a lump sum award is made, the parties are effectively deprived of the right to later apply for a variation of the lump sum award;
- The difficulties in calculating an appropriate amount of lump sum spousal support where lump sum support is awarded in place of ongoing indefinite periodic support; and
- The potential that a lump sum payment may undermine the payor spouse’s future self-sufficiency.
Connection between division of property and BC spousal support orders
Property division and spousal support orders are closely connected, but the fact that a spouse has received assets via property division does not defeat a claim for BC spousal support. Even where property has been substantially reapportioned in favour of a support-seeker, he or she is entitled to adequate compensation for the economic consequences of the marriage and its breakdown, including any spousal support claims. For that reason, it is important to distinguish the purpose of a lump sum spousal support award from the effect of such an order (i.e., the transfer of property from one spouse to another).
The trial judge in Parton v. Parton erred by confusing the effect of the spousal support award with its purpose. In that case, the trial judge found that found equal division of family property would be significantly unfair and decided that instead of reapportioning assets, a lump sum spousal support could remedy the unfairness. However, in calculating the amount of the lump sum, the trial judge took into account the husband’s substantial excluded property claim, an ordered lump sum spousal support of $250,000 – an amount well below the low end of the Spousal Support Advisory Guidelines range (based on the spouses’ ages and current incomes, the range for BC spousal support provided by the SSAG was $334,209 at the low end and $413,364 at the high end.).
Wife entitled to compensation for economic consequences of marriage
On appeal, the lump sum spousal support award in Parton v. Parton was increased to $388,000 (the mid-point in the SSAG range). The Court of Appeal found that the trial judge’s $250,000 lump sum award coupled with the wife’s half share of the family property did not result in an equitable sharing of the economic consequences of the marriage and its breakdown, nor did it place the parties in roughly equal positions following their 33-year marriage. The objectives of spousal support were not met. It was an error for the trial judge to take into account the husband’s substantial excluded property claim when determining the quantum of spousal support. The “means” of a spouse for spousal support purposes include his or her capital base, employment income or earning capacity and any other available source of benefits or gains. The character of the assets from which the spousal support order may be paid (i.e., family, excluded, or other property) is irrelevant to the proper quantum of lump sum spousal support.
The bottom line on BC spousal support payable in lump sum
It is for the presiding judge to weigh the pros and cons in determining whether a lump sum award is appropriate and the appropriate quantum of such an award. In making an award for BC spousal support, what matters is the purpose of the spousal support order – that is, compensatory and non-compensatory support — not the effect of such an order (i.e., the transfer of property from one spouse to another) or the source from which the spousal support order may be paid.