Former Red Hot Chili Peppers Guitarist's Onetime Support Payment to Ex-Wife
John Frusciante, former guitarist of the Red Hot Chili Peppers is officially divorced. According to TMZ, the guitarist is smiling because he is making a one time spousal support payment of $1.6 million to his ex-wife and then he's off the hook. Apparently, John will keep four properties in L.A. while his ex-wife will keep four paintings, her Toyota Prius and a mini travel studio that John built for her.
In Ontario, periodic spousal support is treated as taxable income for the recipient spouse and as a tax deduction for the payor spouse. In order to qualify as a tax deductible expenditure, the spousal support award must be embodied in a court order or written separation agreement. However, spousal support paid as a lump sum, or one-time payment, is neither taxable nor deductible.
Both the Divorce Act, 1985 and Family Law Act provide that a court may order periodic or lump sum spousal support. A court may consider it appropriate to order a lump sum payment in cases where the recipient spouse fears that a periodic payment will not be made by the payor spouse and enforcement may prove difficult.
Typically, the court's primary consideration in ordering lump sum spousal support is whether there is a risk of non-payment of a periodic support order. In Davis v Crawford, 2011, the Ontario Court of Appeal found that the payor spouse had significantly greater means than he had disclosed and he was purposely attempting to shelter his assets from the recipient spouse. As such, the Court was concerned about the risk of non-payment of an award of periodic support and found that a lump sum payment was not only desirable but also promoted a "clean break" between the parties.
The risk of non-payment of a periodic support payment is not the only justification for lump sum spousal support awards. The court will also consider whether personal contact between the parties should be terminated, whether there is a significant disparity in the financial positions of the parties, or whether there are sufficient assets from which a lump sum may be paid.
In John Frusciante's case, he certainly has the means to pay a lump sum support award and it may be advantageous to minimize contact between him and his ex-wife. However, it is not clear whether a lump sum award will benefit his ex-wife who may require on-going support later in her life.