Not Understanding Child and Spousal Support “Ceilings”
Child support is determined using the legislated Child Support Guidelines (CSG) and the payor’s income affects the support amount owed. The CSG has a specific calculation for when the income of the spouse against whom an order for the support of a child is sought is over $150,000. The court can use the Table formula for calculating the additional amount or if the court considers that amount inappropriate, they can use their discretion to set a different amount based on the condition, means, needs and other circumstances of the children and the financial ability of each parent to contribute to the support of the children. Judges rarely use their discretion to lower the amount of support owed.
Spousal support is determined using the recommended Spousal Support Advisory Guidelines (SSAG). Although these are technically just recommendations, they are very influential and courts will want justification to vary them. The SSAG has a “ceiling” for a payor with a gross annual income of more than $350,000 but the ceiling is not actually a hard cap. Spousal support can and usually does increase for a payor income above $350,000 and as such, automatically applying the formulas to incomes above the ceiling will not give you an absolute figure that you will have to pay. Support can depend on the specific facts of the case and circumstances of the parties.
Ignoring the Tax Consequences
The way you file taxes is different as a single person than it is as a married couple. Further, spousal support payments are generally deductible to the payor and taxable to the recipient, providing it is a periodic payment set out in a written agreement or court order. Child support payments are tax-free to the recipient and not deductible by the payor. Lump-sum payments are taxed differently than periodic payments. Research how the separation or divorce will change your tax obligations and engage a tax professional for further help in this area.
Not Hiring Specialists
In a high net worth separation or divorce, the value of the assets is greater and businesses may be involved, therefore complicating the proceedings. If you have a business, it will need to be valued. Other complicated issues include valuing stock options, RSUs, trusts, real estate holdings or other properties. High-net worth earners should consult a family law lawyer, a financial planner and an accountant during a separation or divorce for assistance with these complex matters. These professionals will protect your interests and increase your chances of a fair settlement.
Failing to Investigate for Hidden Assets
Your spouse may try to hide assets from you, or transfer assets to a third party. This is fraudulent and illegal behaviour that you should investigate, especially if you suspect that assets are being hidden. Collect all financial records, track where money is being spent and be vigilant about accounting for you and your spouse’s assets.
For more information about high net worth separation or divorce, please contact Feldstein Family Law Group to book a free in-office consultation.