Is a divorce affecting your entire family? Was there financial income inequality in marriage?
As a parent, you expect married children to work out their own divorce issues. That all could change if you have deep pockets.
Do you prefer watching videos to reading blogs? Then go to our Youtube to watch videos about family law. We have created many videos about family law
Money issues can come up with married couples. Also, when someone is a stay-at-home husband or wife, there is often an income gap. Everyone deserves to have a financial future. Therefore, you should speak to a top lawyer about your financial goals. You can also talk to them about your money issues and long-term goals. If you are planning to go through a separation, information is key.
Money Issues and Income Inequality in Marriage
“Gunter” and “Maria” were happily married in 2000. Who could have guessed that, 19 years later, Maria would be asking Gunter’s father to effectively pay child support? This was for his 13- and 10-year-old grandsons. The Ontario couple divorced in 2012. Further, the boys’ paternal grandfather paid their father’s share of the court-ordered expense.
You can learn about how getting divorced works. Income inequality in marriage can lead to massive court battles. Therefore, it’s best to get legal advice from a lawyer.
It was in 2017 when Maria asked the court for around $21,000 annually. These payments were for extracurricular activities and counselling for the boys. Therefore, the court had to decide who would pay. The question was complicated by her ex-spouse’s evidence. “Incomplete and unresponsive” was how the court described the unemployed Gunter’s accounting of his lavish lifestyle.
Maria, 37 and university educated, worked full-time. Gunter, who was unemployed, lived an extravagant lifestyle by comparison. There were gifts, personal loans and payments from his father’s companies. Further, there were two family trusts that gave him $806,666 annually. His wealth came mostly from his father and they could easily afford to pay the boy’s expenses.
Not providing timely, complete, and accurate financial disclosure distorted Gunter’s income. His own business corporation distributed income to him. Also, he charged related expenses to it. Neither Maria nor a financial expert could calculate how much he made. Therefore, that meant her ex-spouse’s income couldn’t be used to figure out what child support he owed.
Income Inequality in Marriage and the Income Gap
Gunter only contributed to the kids’ expenses when pressured or to satisfy the court. Ordering him to pay a fixed monthly sum would stop constant litigation or delayed payments. Gunter, also 37, fired back that he had an MBA. While it was true he was often unemployed, he complained of a bad back. His corporation had filed for bankruptcy six months ago. And, while he had a luxury SUV, he owed creditors. His $1 million home had a $600,000 mortgage.
Maria’s ex-spouse had a different version of his income. He said the family trusts paid him $12,500 monthly or $150,000 a year. Those payments had stopped after his bankruptcy. Gunter’s father testified that it was time for his son to fend for himself and his family. He had cut off gifts, loans, and distributions from trusts and family businesses.
Income Inequality in Marriage and Talking About Money
Maria had estimated his annual income at around $806,000. Gunter countered that he had made, at most, $169,000 in his best of the past three years. His financial expert agreed.
Looking at his total income, the court reviewed Gunter’s personal tax returns for 2015 to 2017. The judge also considered his employment expenses, dividends from taxable Canadian corporations, and business investment losses.
Federal child support guidelines take into account if an ex-spouse is intentionally unemployed or underemployed compared to their children’s needs and their own education or health.
The judge also reviews if a party has failed to provide legally required income information. Also, the judge looked at deducted unreasonable expenses, received trust income and benefits.
Do you have questions about financial income inequality during a separation? You can reach us via the live chat function in the bottom right of the screen.
Married Women and Your Financial Future
Failing to disclose financial information like tax returns can lead to a problem. Also, you must disclose trust agreements or corporate financial statements. If not, it can result in the court deciding your income for you. Further, this was exactly the outcome for Gunter. Maria asked the court to infer his income and personal spending.
Both ex-spouses agreed Gunter’s reported income and taxable dividends were $116,779 in 2016. Also, that the income was $104,474 in 2017. Maria relied on her financial expert’s advice that Gunter had a total income of $1.19 million in 2016 and $710,000 in 2017. The judge concurred that Gunter’s financial breakdowns were error-ridden. Further, they were inadequate and failed to divulge facts like his girlfriend was on his payroll. Gunter’s own financial expert agreed.
Maria’s father-in-law had other puzzle pieces. He had withheld information about his son’s family trusts. The court ordered the grandfather to disclose the trusts’ financials. Armed with this information and Gunter’s reluctance to comply, the court had “no option” but to weigh the available evidence.
The judge’s ruled that his lifestyle was inconsistent with his reported income “without a good explanation”. Gunter’s MBA flew in the face of unreliable financial statements. He seemed unable to set his statements right for the court or Canada Revenue Agency, the judge observed.
Was there financial income inequality in your marriage and you are getting a divorce? Contact us.
Business deductions can be discounted. Firstly, the ONSC can add back 20 to 100 percent of any unreasonable business deductions (car, Internet, entertainment) to calculate child support. Maria wanted 75 percent of Gunter’s deductions included in his income, while his financial expert suggested 50 percent was appropriate.
Gunter had deducted trips for business conferences but failed to include registration fees. He had also been inconsistent in how he deducted expenses for his home-based business. While the court accepted some receipts as legitimate, the lack of timely disclosure compromised his case.
Gunter’s father’s testimony was key to the judge’s decision. The income Gunter received from his father’s companies outweighed any contributions he made. Yet, his father had gifted him shares and cash of close to $2 million as loans against his inheritance.
That generosity enabled Gunter to live well without working. Although his father testified he disagreed with many of Gunter’s financial and lifestyle decisions. He had said that he hoped it would be repaid. However, Maria’s father-in-law had no way to enforce it.
Weighing all of the testimony, the judge rejected Maria’s contentions about Gunter’s income. He found her ex-spouse had an annual income of just $463,000. Further, the judge ordered Gunter to pay $5,843.36 a month for child support. Also, a $28,000 lump sum for special and extraordinary expenses was to be paid.
As for the boys’ grandfather, he expressed disappointment at their parents’ decisions. His son and daughter-in-law were “selfish and immature“, he testified. As he told the court, “when polite requests are ignored and rude and insulting remarks are made to the benefactor, then the benefactor feels less generous.”
In conclusion, do you have questions about financial income inequality? Are financial struggles are causing your family to argue? We’ll connect you with a lawyer who will tell you how to make things better.
Author: Alistair Vigier is the CEO of ClearWay Law