Early Retirement And The Implications For Spousal Support

May 6, 2016
Leisha Murphy

This blog post addresses the issue of voluntary early retirement and how this may affect spousal support orders. Voluntary early retirement is defined as someone who could continue to work, but chooses, for his own reasons, to retire, and as a result seeks to reduce or terminate a spousal support order.

The Case Law in BC

If a payor ex-spouse (i.e. the ex-spouse paying spousal support) retires early voluntarily, can he or she simultaneously stop paying spousal support? According to our BC Court of Appeal in Cramer v. Cramer, yes, so long as:

1 The payee ex-spouse (i.e. the ex-spouse receiving support) was aware of the payor ex-spouse’s desire to retire early; and

2 There is a medical reason why the payor ex-spouse is no longer able to earn income.

The husband in Cramer v. Cramer was paying spousal support to his ex-wife. He was diagnosed with diabetes and encouraged to retire by his doctor. The ex-wife was aware of her ex-husband’s desire to retire early and was found by the Court to have pursued an unrealistic career and therefore did not make realistic attempts to become self-sufficient. The court  Mr. Cramer no longer had to pay spousal support upon his retirement at age 60.

Faced with a different set of facts, the BC Supreme Court in Szczerbaniwicz v. Szczerbaniwicz came to the opposite conclusion. In this case, the payor ex-husband did not have any medical conditions and the parties had not previously discussed his voluntary early retirement. As a result, he was not permitted to stop paying spousal support when he retired at age 52. Even though his income during retirement was half of what he earned while working, the court ruled that the ex-husband was capable of continuing his employment and and earning his previous salary of $90,000 per year.

The Court explained:

If retirement is not voluntary because of economic circumstances, medical reasons, or an employer’s actions and the payor is unable to work, the court will tend to reduce the maintenance payable; otherwise, if the payor is still capable of earning an income, his application to terminate or vary spousal support will likely fail.

The Court in Szczerbaniwicz v. Szczerbaniwicz used the income figure of $90,000 to calculate monthly spousal support payments.

Often the payee being aware the payor may retire early is not enough for the court to permit spousal support to be varied or terminated.

In a 2008 BC Supreme Court decision, the wife was aware that the husband wished to retire early; however, the court found the husband had no reason for retiring early and therefore could continue to earn income. The Court ruled that the husband had the ability to earn half of his previous income in addition to his pension income.

Takeaways

Some things to consider if you are considering early retirement:

1. When would you like to retire, and will you still be paying spousal support at that time? If the answer is yes, you may want to include a clause in your separation agreement that  you will give the payee 6 months notice if you intend to retire voluntarily and further provide circumstances when you may choose to retire. Then, both parties should decide what will happen when you retire: will spousal support terminate at that point or simply be reduced to recognize your diminished ability to pay?

2. What other concessions can you make to the payee if you decide to retire early so that the early retirement will not be perceived as you shirking your responsibilities?

3. It is best to address retirement in a written agreement.  You can reduce the chances that a court will interfere with the agreement if it is fair to both parties, and both of you obtained independent legal advice.

Every situation is different. If a payor ex-spouse is considering voluntary early retirement, both parties should contemplate what this will look like for the person receiving support and the person paying support.

Leisha Murphy
Leisha Murphy
Partner (Vancouver)
Connect Family Law

Leisha has practised exclusively in the area of family law since being called to the British Columbia Bar in 2010. Before opening Connect Family Law in 2015, she practiced in the family law group of a leading British Columbia law firm.