Determining Spousal Support for High-Net-Worth Individuals
Spousal Support Objectives and Considerations
Spousal support is meant to recognize economic advantages or disadvantages arising from the marriage.
When a couple separates, the higher income partner or spouse is generally obligated to support the lower income partner or spouse. This is known as spousal support (sometimes also called alimony) and is intended to balance the financial impact of the separation and ensure a fair outcome for both parties.
Under s. 15.2 of the Divorce Act, the objectives of spousal support orders are listed as:
- Recognizing any economic advantages or disadvantages to the spouses arising from the marriage or its breakdown;
- Apportioning any financial consequences arising from the care of any child of the marriage over and above any obligation for the support of any child of the marriage;
- Relieving any economic hardship of the spouses arising from the breakdown of the marriage; and
- Promoting the economic self-sufficiency of each spouse within a reasonable period of time.
The same provision of the Divorce Actsets out the factors a court will consider in determining whether a spouse is entitled to spousal support, which include:
- The financial means and needs of each spouse;
- The length of the relationship (marriage or common-law relationship);
- The role each spouse took during the relationship;
- The effect of a spouse’s role in the relationship on that spouses’ financial position;
- The effect of the breakdown of the relationship on a spouse’s financial position;
- The care of children (if any); and
- Any agreements, arrangements, or orders previously made about spousal support.
Spousal Support in High-Net-Worth Cases
Spousal support is also designed to relieve economic hardship. However, what constitutes “hardship” in the context of high-net-worth individuals?
Spousal support decisions are generally made using the Spousal Support Advisory Guidelines (“SSAG”), although these guidelines are not mandatory. In addition, where the income of the spouse paying spousal support is above $350,000, different spousal support considerations apply.
Last year, an Ontario court was faced with such a case, which involved the high-profile divorce between Canadian television personality Robert Herjavec (from reality shows such as Shark Tankand Dragon’s Den) and his wife of 24 years, Diane Plese.
For support purposes, the court determined Ms. Plese’s annual income to be $679,725 and Mr. Herjavec’s income for 2018 to be $5.9 million.
The court had to determine whether Ms. Plese was entitled to spousal support and, if so, what was “reasonable” having regard to the condition, means and other circumstances of the spouses.
The court first considered the length of the marriage, which spanned almost three decades. It then considered the fact that Ms. Plese had contributed to her husband’s success and the fact that she was unable to work full time after their children were born. Additionally, Mr. Herjavec had told her not to bother working, since she was bringing home less than what he paid their gardener. The court found that Ms. Plese has therefore been unable to contribute to her own support since 2003 and that, at the age of 56, she was unlikely to be able to return to her previous profession.
The court also noted that, aside from income determination, Mr. Herjavec retained capital assets worth at least $32 million, while Ms. Plese retained close to $13.5 million, after equalization.
The court looked at the specific facts of the spouses’ lifestyle and stated:
“Spousal support is also designed to relieve economic hardship. What is “hardship” in the context of this family? I need to look at the pre-separation lifestyle of the family to understand this context.”
The court noted the various aspects of the couple’s lifestyle, which included living in a 22,000 square foot home with an indoor pool, ballroom, tennis court, tea house and ten-car garage housing numerous luxury vehicles, which was located on more than two acres in one of the most exclusive areas of Toronto. The couple also owned a ski chalet in Caledon, a luxurious vacation property in Florida, boats and other water craft and a Muskoka cottage. Additionally, the couple took family holidays in Europe, often travelling by private jet. Ms. Plese owned a considerable amount of expensive jewellery from Cartier, valued at over $428,000. Mr. Herjavec owned and operated numerous luxury cars.
After reviewing these facts, the court concluded:
“Ms. Plese testified that her lifestyle has suffered since the breakdown of the marriage. For example, instead of travelling by private jet, she flies with commercial airlines. Instead of staying in a suite of rooms at luxurious hotels, she now stays in a single hotel room. I have no evidence that Mr. Herjavec has experienced any similar reduction in his lifestyle.
I conclude that without spousal support, Ms. Plese will have suffered economic hardship as a result of the end of the marriage.”
In determining the amount and duration of spousal support, the court noted that:
“The SSAGs do not automatically apply in circumstances where the payor spouse earns more than $350,000 per year. Courts have dealt with these high income earners in various ways. In some circumstances, the court will look at the SSAGs result in terms of the net disposable income (NDI) available to each of the parties under various scenarios. In the case of lengthy marriages, courts will often fashion a spousal support order that results in each party have roughly the same NDI.
In other cases, the court will conduct the analysis on a “means and needs” basis; that is, what does the recipient spouse reasonably need to meet his or her reasonable expenses, having regard to the standard of living the parties enjoyed while they were living together.”
After reviewing all the facts, the court determined that Mr. Herjavec had to pay Ms. Plese $125,000 per month in spousal support, with no termination date. In addition, the court ordered that spousal support would bind Mr. Herjavec’s estate and must continue to be paid after his death, as a first charge upon his estate.
At Feigenbaum Law, our goal is to help you move forward following the breakdown of a relationship while retaining as much financial stability as possible and ensuring your children are provided for. Mark Feigenbaumis able to counsel his clients on all potential risks that may result from a family law dispute, not just those related strictly to the breakdown of a marriage.
If you own a business or have a high-net-worth, and are going through a separation or divorce, it is imperative to consult with a family lawyer who understands the specific legal and financial risks that you may face. Contact Mark online or call him at (905) 695-1269 or toll-free at (877) 275-4792 to book a consultation.