Vancouver Guideline Support Imputed Income lawyers warn that it’s imperative that the correct guideline income is used for the paying spouse’s income to ensure a fair spousal or child support award. Personal tax returns rarely provide an accurate income picture for a paying spouse that owns a company, runs their own professional practice, or who has large amounts of capital including real estate investments and the like. While investing in the long term may make sense, not using assets to properly generate income can mean the present needs of separated spouses and children are not properly met. It is unfair when a spouse with significant assets chooses to invest in a venture that only pays off years down the road and “in spades” unless a Court attributes a fair return on monies that could be utilized during the time when support is payable.
What happens when wealthy ex-spouse does not use their wealth to properly earn income? Should children have a lower standard of living? What happens if a recipient spouse refuses to invest millions after settlement to help themselves meet the goal of self-sufficiency? These are tough questions that our top-rated Vancouver Guideline Support Imputed Income handle every day.
Vancouver Guideline Support Imputed Income Lawyers 1 877 602 9900
In today’s blog, our senior family lawyer at our Vancouver office discusses the issue of Vancouver Guideline Support Imputed Income on capital that is not being used appropriately to generate income. This area of child support and spousal support law is ever more significant given the huge gain on land and stocks over the past few years in Vancouver, BC, and Calgary.
Income-based Support Obligations: Imputing Income On Capital
The amount of support payable in family law matters is influenced by a number of factors. In an effort to promote certainty and avoid unnecessary litigation, the federal government implemented guidelines for both child and spousal support. The income of the parties is a key factor in determining how much support is payable. The Divorce Act directs the court to consider such factors as the condition, means, needs, and other circumstances of each spouse in determining a person’s financial ability to pay support.
Our founder, Lorne MacLean, QC set the law for Canada “Means” has been interpreted by the Supreme Court of Canada to include all capital and other sources of income: pecuniary resources, capital assets, income from employment or earning capacity, and any other source from which gains or benefits are received, together with, in certain circumstances, money that a person does not have in possession but that is available to such person: Leskun v. Leskun, 2006 SCC 25, at paragraph 29
Where a spouse is seeking to avoid paying their fair share of support by being underemployed [earning less than they are capable of] or unemployed altogether, the court may apply a reasonableness test to ascertain what their income “should be” for the purpose of support obligations. However, another approach often seen in high net worth matters is imputing investment income from capital assets even if no investment income is currently being generated. Where a party has significant capital assets, the Court may seek to impute income based on what a reasonable rate of return would be on those assets and add that into the income calculation for support purposes.
Vancouver Guideline Support Imputed Income – The Child Support Guidelines Rules
Section 19(1) of the Child Support Guidelines ( which applies to spousal support as well as child support disputes) provides a wide discretion to impute such amount of income to a spouse as
it considers appropriate in the circumstances:
19 (1) The court may impute such amount of income to a spouse as it considers appropriate
in the circumstances, which circumstances include the following:
(e) the spouse’s property is not reasonably utilized to generate income;
What Percentage Return On Capital Makes Sense?
In the past few years, the Courts have defaulted to a 3% deemed rate of return when determining how much guideline support income should be imputed from capital assets. However, it is important to understand this rate of return is not set by any regulation or otherwise prescribed by law; rather, it is a default position the court may use in the absence of persuasive expert evidence regarding a likely rate of return.
In Kim v. Hong, 2013 BCSC 587, the Court noted that neither side called financial expert evidence on the proper rate of return on investment, and accordingly, accepted that the Bank of Canada Prime Business Rate, which had remained at 3% since September 2010, was a reasonable figure to use. This 3 percent rate of return is still being by used by the Courts despite the fact the Prime Rate has been 3.95% since October 2018. See our record win in Devathasan of $116,000 a month combined child and spousal support where we successfully argued a 3% return on capital was appropriate.
It is important for clients and their counsel to understand the legal rationale behind the 3% rate of return for imputing investment income. Every case has its own unique facts, and it is important to consider whether a 3% deemed rate of return is aligned to your own particular circumstances. In some cases, it may be worth challenging the underlying rationale and arguing for a higher [or possibly lower] rate of return due to changes in the Bank of Canada’s Prime Business Rate or other market conditions.
If you have a question on Vancouver Guideline Support Imputed Income, call us now toll-free across BC and in Calgary Alberta at 1 877 602 9900