Marriage, Divorce,and Obligation
When a marriage is over, which party is obligated to pay ongoing financial support to the other? And why?
In the course of investigating Canadian living standards, I have been struck by the rather dramatic adverse economic implications of separation and divorce. In some cases, even high income earners face financial ruin. While few will question the need for shared ongoing support for any children in a marital breakdown, the issue of spousal support and the apparent asymmetry in the law (in the treatment of the two former spouses) raises both economic and moral questions. Moreover, the issue of spousal support is particularly relevant in a society with a no-fault divorce legal regime where one in two marriages ends in divorce.
A not uncommon hypothetical example illustrates these economic and moral questions prompted by divorce settlements. Consider the case of Barbara. She is 46 years old, and has been a medical doctor for about 20 years. She married Jack, five years her junior, 15 years previously. Jack was not employed at the time of their marriage. Barbara never put any pressure on Jack to find employment because she loved him and because she felt proud of being the sole breadwinner. Her income certainly allowed both of them to live very well. Unable to conceive, Barbara nevertheless wanted children in her life. Barbara and Jack adopted two newborns seven years ago. The couple agreed that Jack would be the primary care-giver for the children and would also do most of the housework and meal preparation.
About a year ago, Jack told Barbara that he wanted out of the marriage. Barbara was devastated and tried to persuade him to stay and work at their marriage. Jack was adamant and the couple separated within a few weeks. They both agreed that they did not want lawyers or courts unnecessarily involved in the matter. Barbara requested up-to-date financial information from her bankers and her employer (a university hospital). She had been a diligent saver over the years, and had accumulated over $800,000 during the marriage, mainly in the form of a pension, RRSPs, and mortgage-free ownership of the matrimonial home. The couple agreed to split the pension, the RRSPs, and the contents of their home, and Barbara borrowed $200,000 to buy out Jack's share of the home, while Jack used those proceeds to buy a house of his own. Barbara, solely because of her demanding work schedule, agreed that Jack be the custodial parent as long as she would have liberal access to the children. She also agreed to pay Jack $2,000 per month for the care and support of the children. This amount, given her average annual income of $110,000, turned out to be well above the child support guidelines. Jack did promise to acquire employment "soon" and assist in the support of the children. None of this was formally written into an agreement.
About a year after separation, Jack initiated legal action against Barbara for ongoing spousal support, asking for a further $2,000 per month, to continue until Barbara reached the age of 65. Confused and angry, Barbara hired a lawyer, who informed her that Jack, as a matter of law, held the upper hand. Barbara was outraged. She had to take time off work to brief her lawyer, read over legal documents, and attend hearings. Her work suffered. Her personal life suffered. She was despondent.
Her lawyer further explained that spousal support is a throwback, designed essentially to protect women with poor employment prospects who were abandoned by their husbands. All of this was of little comfort to Barbara. The spousal support her husband had requested would dramatically lower her income.
Because spousal support (and Barbara's medical association fees, say, $3,000) are tax-deductible, her income tax bill is $28,000. Once these taxes and the debt payments that were a result of the loan needed to effect the asset splitting ($16,000) and child support payments ($24,000) are subtracted away, she has about $42,000 per year to live on. This is her true disposable income, based on her gross income of $110,000. Her ex-husband lives on about $28,000 per year, composed of the $24,000 she provides in child support plus child tax benefits and other tax credits of about $4,000. All of his income is tax-free. If she was forced to pay the requested spousal support amount (which, her lawyer tells her, has been awarded in some cases) she will be left with about $346 per week to live on.
Barbara's case highlights a rather obvious flaw in Canadian divorce law. It is wholly one-sided, punishing the high-income earner alone for the demise of the marriage, and imposing absolutely no obligation on the lower-income earner. People like Barbara are penalized for being productive, income-earning members of society. If she were unemployed or on welfare, she would not be penalized. Her only mistake was to marry the wrong person.
Important questions remain. Why is spousal support the norm rather than the exception? Why is there any ongoing obligation after the assets have been split?
Barbara's case is not unique. Countless thousands of Canadians, both men and women, are in this predicament every year. It seems clear that automatic spousal support is inconsistent with the concept of no-fault divorce. Longer term, we may wish to consider a new marriage contract: one that dispenses with the exchanging of vows and one that views the couple as composed of two independent persons with independent financial lives.
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