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.
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 and received trust income and benefits.
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Financial development and income inequality
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, 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.
Married couples and financialization and income inequality
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 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.
Money inequality in marriage
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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.
Marriage income disparity
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.”
Let’s say things get bad, and now you are heading towards divorce…
Divorce is a stressful and disruptive time for many couples, particularly if you’re unsure about what your rights or entitlements are when it comes to property settlement and asset division. Even once your divorce is finalized, there’s still the matter of financial settlement.
Many of us are scared of the financial consequences of divorce and we’d like to protect what we feel is our money or assets. This is understandable as you’ve no doubt had to put up with nasty behaviour from your spouse for the entirety of your marriage, but rushing into court without knowing the facts will put you at a disadvantage.
But don’t worry – we’ve done our research and put together this article which covers everything you need to know regarding your rights and entitlements after a divorce, so keep on reading to find out more.
What Is A Financial Settlement?
Simply put, a financial settlement is the division of a couple’s combined net assets. These assets can include but are not limited to, real estate, cars, houses, investments and inheritances.
It is important to note that during a financial settlement, there is no set formula used to divide your property. The Family Law Act states that the purpose of dividing your assets is to ensure that neither party is left in a disadvantaged position. However, the exact proportions that your property will be divided into will vary depending on your situation.
However, if you have in-depth questions or concerns about this matter, it is vital that you seek out spousal maintenance legal advice from an experienced family lawyer.
What Are The 4 Steps Of Financial Settlement?
Generally, financial settlement involves four main steps:
Identifying and valuing net assets;
Considering both the financial (eg income) and non-financial (eg caring for the home and children) contributions of both parties;
Factor in the future needs of both parties such as financial resources, health, age, ability to earn an income and care of children;
Agree on a percentage split of the net assets that is “just and equitable” in the eyes of the Courts.
Important Note: Full and frank financial disclosure is required as part of the financial /property settlement process. Each individual is required to share all and any material that is relevant to their current financial position and a lack of transparency may result in an unfavourable outcome for your case.
Once these factors have been taken into careful consideration, there are four options couples have when splitting their assets after divorce:
- A non-legal arrangement;
- A binding financial agreement;
- Consent orders; or
Do I Have To Go To Court?
In most cases, mediation is always recommended as the first choice when it comes to a financial settlement. Generally speaking, mediation is faster, less stressful and more accessible than a Family Law Court case.
Although most cases are resolved with the help of mediation, in some instances where ex-partners cannot come to a mutual agreement about the division of assets, an application for consent orders can be lodged in Family Court. The court must review and approve these orders, the vast majority of cases do not require either party to be present as part of the process.
How Will The Courts Decide On My Rights and Entitlements?
If you and your ex-partner have decided to apply for financial/property settlement consent orders, the following process is used in determining a fair settlement:
Step 1: The courts will first work out the matrimonial asset pool. They will identify and value each party’s property, liabilities and financial resources. As mentioned above, some of the resources that are taken into consideration include the family home, motor vehicles, gifts, inheritances, superannuation, shares, mortgages, personal loans and more.
Step 2: The Courts will examine the contributions made by either party, both financial and non-financial, direct and indirect. Non-financial contributions include taking care of the family home, caring for children etc. Past contributions and contributions made after separation are both taken into consideration.
Income Inequality in Marriage
Step 3: The Courts will analyze the future financial needs of each party and adjust the percentage of the asset pool appropriately.
Some deciding factors include, but are not limited to:
- Future income and financial resources of each party;
- Age and health of each party;
- Duration of the relationship;
- Capacity for future employment;
- Care of any children involved;
- Provision for child support;
- Eligibility for pensions, allowances or benefits; and
- Terms of any existing financial agreements binding upon the parties.
Step 4: The last step of this process is for the Courts to evaluate whether the proposed order for financial and property settlement is just and equitable. The Court must be satisfied with the proposed settlement before it is finalized.
Am I Entitled To Spousal Maintenance?
As outlined in the Family Law Act, a legal or de facto spouse may claim spousal maintenance after separation. In most cases, you may be entitled to spousal maintenance if there is a substantial difference in the incomes of you and your spouse at the time of separation. Spousal maintenance may be paid as one lump sum, or periodically depending on the circumstances.
Under Section 72 of the Family Law Act, a spouse has the right to maintenance if they are unable to adequately support themselves due to:
- Age or physical/mental incapacity
- Care of children
- Any other adequate reasoning
How Can I Apply For Spousal Maintenance?
It is always advisable for parties to come to a mutual decision regarding spousal maintenance during mediation. However, if you and your former spouse or partner are unable to come to an agreement, there are other options available. You can file an application seeking spousal maintenance orders via the Federal Circuit and Family Court of Australia.
What Will The Courts Take Into Consideration?
When assessing your spousal maintenance claim, the court will take the following factors into consideration:
- Age and health of both parties;
- Duration of the relationship and to what extent it has affected the earning capacity of the applicant;
- Income and financial resources of both parties;
- Capacity for future employment;
- Eligibility for pensions, allowances or benefits;
- Care of any children involved;
- What is a reasonable standard of living;
- Present or future liability pertaining to child support payments;
- Terms of any existing financial agreements binding upon the parties; and
- Any other circumstances that need to be taken into account (Section 76, Family Law Act).
What Time Limits Apply?
When it comes to spousal maintenance consent orders, a time limit of 12 months from the date of divorce applies and de facto couples have 24 months from the date of separation. However, it’s important to note that you are not entitled to maintenance if you marry another person unless the Court otherwise orders.
And there you have it – everything you need to know about your rights and entitlements pertaining to divorce. The information provided in this article should not a substitute for legal advice, so we strongly suggest you get in touch with an experienced family lawyer should you need assistance in any of the matters we have touched on today.
In conclusion, do you have questions about income inequality in marriage? 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.