Lump Sum Spousal Support in British Columbia: When Courts Order One

A single payment can look attractive when you are separating. A payor may want a clean break, and a recipient may want certainty instead of relying on monthly cheques for years.

This article explains how lump sum spousal support fits into BC law, when it tends to come up, the risks on both sides, and the tax questions to ask first. It is general information only.

This article covers the law of British Columbia.

What lump sum support is

BC government guidance lists the possible outcomes of a spousal support decision as no support, a lump sum, or regular payments for a set period. A Family Law Act order may require periodic or lump-sum payments.

A lump sum is not a separate kind of entitlement. Whether you are entitled to support, and the amount and duration, are still worked out by looking at each spouse's condition, means, needs and other circumstances. The lump sum is simply one way of delivering the result.

When a lump sum tends to come up

The Spousal Support Advisory Guidelines note that short marriages without children usually produce very limited awards, sometimes none, even with a large income gap, and that small amounts are often converted to a lump sum or a very short transitional award. The guidelines are advisory only, though, and do not decide entitlement.

People also consider a lump sum to avoid depending on future payments. Regular support can raise questions about arrears if the payor stops paying or about what happens if the payor dies, since continuing support after death requires findings such as ongoing significant need and sufficient estate assets. Whether a lump sum suits your case depends on the facts.

Risks for payors and recipients

• Release: a spouse may release the other from support liability in an agreement, so a lump sum paired with a release can end the claim.
• Set-aside: a witnessed written support agreement can be set aside only on specified grounds, such as nondisclosure of income, property or debts, taking advantage of vulnerability, or lack of understanding, or if it is significantly unfair.
• Changes later: a court can change, suspend or end an order or agreement if circumstances have changed or new substantial evidence or nondisclosure is found. How that interacts with a lump sum depends on the wording, so have it reviewed.
• Fixed terms: where a fixed-term order has expired, support can resume only if the applicant shows economic hardship arising from changed circumstances that would likely have led to a different order.
• Time limits: a spousal support proceeding under the Family Law Act generally must be started within 2 years after the divorce judgment for married spouses, or within 2 years after separation for spouses in a marriage-like relationship.

For a recipient, the main risk is spending or losing the money and later facing hardship with no clear way back. For a payor, the risk is paying and then discovering the agreement does not clearly end the obligation.

Tax questions to ask first

The Income Tax Act defines a support amount as an allowance on a periodic basis for the recipient's maintenance, which the recipient has discretion to use, payable under a court order or written agreement. Because of the word periodic, a one-time payment may be treated differently from monthly support, so get tax advice before agreeing.

There is one specific rule for catch-up payments: a payer who makes a lump-sum payment of $3,000 or more to bring support up to date, and who can deduct it, must give the recipient Form T1198 when it is reportable income to the recipient. Without a court order or written agreement, the tax rules do not apply at all. Legal and accounting fees to set or contest support are not deductible on lines 22000, 22100 or 23200.

What to do next

• Get full financial disclosure from the other side, and provide your own.
• Ask a lawyer for the guideline range so you can compare the lump sum with it.
• Ask an accountant how the payment will be treated for tax for both of you.
• Make sure the agreement is in writing, witnessed, and says clearly whether it ends all support claims.
• Ask whether the agreement should be filed in court so it can be enforced as an order.

Frequently asked questions