Retirement: When A Payor Elects to Retire Early
Walts v. Walts 2016 ONSC 4777
In this recent decision by the Ontario Superior Court of Justice, the Court analyzes the issue of support obligations post-retirement when the payor has elected to retire early. Particularly in cases where the payor is facing a long-term support obligation following a long-term marriage, support payor’s must be cautious when electing to retire early. If claiming that early retirement was not voluntary, the support payor must be prepared to provide the Court with sufficient evidence accordingly. If a support payor seeks to vary spousal support post-retirement in reliance upon a recipient’s obligation to draw upon their own assets, the payor must ensure that a material change in circumstances has occurred such that the recipient would reasonably be expected to do so.
The parties were married for 28 years and separated in 2007. They entered into a Separation Agreement whereby the wife received $342,561.00 from the husband’s employment pension, which was placed directly into a locked-in retirement account (LRSP). Pursuant to the Agreement, the husband also paid the wife spousal support of $1,584.00 per month, based on his annual income of $87,763.00 and the wife’s annual income of $24,771.00. These provisions were included in the parties’ divorce Order. However, the Agreement was entered into as subject to a material change in circumstances.
The husband suffered a heart attacked in 2012, followed by an angioplasty. He claimed that his work was very stressful, and he was concerned about the impact on his health.
The husband chose to retire in August of 2013 at age 55. Accordingly, in preparing for same, he brought a motion to vary spousal support. At the time the motion was brought, the husband was earning an income of approximately $100,000.00, and the wife was earning an income of approximately $30,000.00, derived primarily from long-term disability and CPP benefits, having been medically unable to work since 1998. Spousal support had increased to $1,754.00 per month and the wife’s LRSP had matured to $480,000.00. This motion was dismissed as the Court found that the husband’s retirement was voluntary in that there was no evidence that he was medically unable to work. The motions judge also noted that the wife, at the time 53 years of age, was too young to draw upon the LRSP.
In May, 2015, the husband brought the current motion to change. The husband claims that the wife, at 56 years of age, can now access the LRSP. He also provided the Court with a letter from his former employer, and a medical report, which were not before the motions judge during the previous motion to change, which he claims support his position that part-time employment is medically appropriate for him. He claims that since the 2013 Order, he has obtained part-time employment in the amount of $25,000.00 per year, and that combined with the undivided portion of his pension, his current income is $46,702.00, which should be used to determine his spousal support obligation.
In response, the wife submits that although she is eligible to draw upon the LRSP at age 55, she should not be expected to do so, as she had received advice from her investment advisor that doing so would deplete the funds, not providing her with sufficient income for her probable life expectancy. She claims there had not been a material change in circumstances, and that the husband’s retirement had been found to be voluntary. Accordingly, she submits that spousal support should be not be based on the husband’s current income.
The Court provides a review of the test for changing a spousal support order made pursuant to the Divorce Act. The test for a material change as confirmed by the Supreme Court of Canada in Droit de la famille – 091889 2011 SCC 64 [L.M.P.], is a change that is substantial, continuing, and if known at the time, would likely have resulted in a different order. The Court preferred this test to one which asks whether the support payor’s retirement would have been foreseeable at the time the Order was made. Retirement, the Court notes, is not an unusual or unexpected event.
Given the nature of the parties’ 28 year marriage, the husband had a significant long-term obligation to the wife. In consideration of same, the Court was not satisfied with the husband’s evidence, and does not find the further medical evidence convincing enough to conclude that the husband’s retirement was anything but voluntary, nor that his current employment was the only feasible option given his age and his employment background. While the letter from the husband’s doctor does provide some evidence to suggest that the husband has benefitted from a less stressful employment position, it does not go so far as to conclude that the husband can only reasonably earn the $25,000.00 he is claiming, particularly in consideration of the large discrepancy between that amount and his previous income.
The Court acknowledged the Supreme Court of Canada ruling in Boston v. Boston 2001 SCC 43, in which the Supreme Court affirmed a support recipient’s obligation to use their own assets to generate income after the retirement of the payor. However, in the current case, the Court noted that Boston should not be taken as an affirmation that any retirement, however early, will trigger a recipient’s obligation to draw upon their own retirement savings.
The Court concluded that in the current case, the husband had not established that the wife’s entitlement to draw from the LRSP amounted to a material change in circumstances. The Court stated that the husband must prove that the wife should reasonably be required to do so. Given the wife’s circumstances as a 56 year old woman who is disabled from employment, with ongoing health needs, her needs may increase as she ages. The LRSP is her primary retirement asset, which is subject to changes in the market. Further, she does not have access to her own pension until she reaches 65 years of age, as this would terminate her long-term disability payments.