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Address effect of retirement on support payments in separation agreements

Working spouses must consider the impact of retirement on spousal support in their separation agreements, Toronto family lawyer Herschel Fogelman tells

Fogelman, founder and principal of Fogelman Law, says many payors assume they will be able to reduce or eliminate their support obligations upon retirement, considering their reduced earning potential once they stop working. However, it’s often not that simple, he adds.

“You need to have the conversation in advance,” Fogelman says. "Ideally the separation agremeement would contain a specifiic provision that retirement is a material change in circumstances allowing for a variation of support."

According to a landmark 1994 judgment by the Supreme Court of Canada, in order to establish a material change in circumstances, the change must not have been foreseen or foreseeable at the time the deal was struck, and Fogelman says Ontario judges have, in some circumstances, ruled that retirement does not clear that bar.

“If you reach an agreement on support at age 55 and you’re working for an employer with a policy of mandatory retirement at 65, then your retirement date is not much of a mystery,” he says. “You could hit a roadblock in meeting the material change test because the change was arguably foreseeable at the time the separation agreement was executed.”

In other situations, says Fogelman, payors who brought applications to vary support in advance of their retirement found themselves caught in a procedural vicious circle.

“There are cases where courts have said that the application is premature because the change in circumstances hasn’t happened yet, and they should return once they have actually retired,” he says.

“It’s a significant problem," says Fogelman. "Support payors may be forced to stay in the workforce longer than they wanted, or they may be left in a situation where they’re unable to fund their own retirement due to the ongoing support obligations.

"If a party cannot move to vary in advance of a known and involutnary retirement, it may create sgnificant inequity.”

At the very least, he says family lawyers must warn clients about the “material change” test and the risk that it may not be satisfied if it was foreseeable when the agreement was made.

“The best route is to have the issue addressed at a moment in time prior to the retirement, but with it on the horizon. If you can negotiate a review of support at the age of 62 or 63, it allows you to come back and say: ‘Here’s my situation and I need to make a change to support,’” says Fogelman.

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