Income Determination and Divorce – Collaborative Divorce Law Can Be Used to Negotiate Financial Disclosure in Divorce

How do separating spouses know the appropriate amount of spousal and child support?

As your family law lawyer will tell you, both spouses need to produce financial information about their income and expenses so that the amount of spousal and child support can be determined.  Below we will explore financial disclosure in divorce as the first step to income determination.

Financial disclosure represents all the information that helps to determine your and your spouse’s income.  Complete financial disclosure in divorce is required, whether you are in collaborative divorce law, in mediation, in arbitration or in court. If you are negotiating outside of the Court process, lack of financial disclosure will undoubtedly prompt the other person to terminate the negotiation and bring the matter to court. In court, judges will likely believe you are hiding something and make orders that may adversely affect you.

If you are employed by a third party, (corporation or government for example), your income is at line 150 of your income tax return.  This includes income from all sources such as income shown on your T4 slip and income from investments. Your Toronto family law lawyer will be able to inform you of what to provide to complete your financial disclosure in divorce, but it is generally your income tax returns of the last 3 years and a few recent pay stubs.

Income determination for self-employed people requires more investigation. Income determination is usually required when someone’s income is not based on a salary that is recorded in a T4 slip. This would be the case for entrepreneurs who have their
own businesses.

For income determination in these instances, we need more comprehensive financial disclosure. If the financial structures of the business are complicated, an accountant may be hired to review the financial disclosure provided and then render an opinion to your family law lawyer or to the court as to the true income for support purposes.
This is because the allowable deductions for business owners under the Income Tax Act are not all allowable deductions for child and spousal support. – this does not mean that the entrepreneur has incorrectly reported their income under the Income Tax Act.

When you separate and look for a Toronto family law lawyer, make sure that he or she informs you of how to get appropriate financial disclosure in divorce. Some family law lawyers do not inform their clients of the possibility of separating using collaborative
divorce law, rather, they suggest starting a court action as the first step. However, going to court should be the means of last resort for most separating couples, as this generally does not give spouses the results they had hoped for.

One of the important features of collaborative divorce law is that a collaborative family law lawyer is obligated to collect and share with the other spouse and other collaborative family law lawyer all relevant financial disclosure, in a non-adversarial manner. In collaborative divorce law, both spouses commit to full disclosure. A
collaborative family law lawyer will have to withdraw from the case if he or she believes that his or her client is not providing full disclosure. This renders the collaborative process safe and less expensive than the courts.

By contrast, in court, even with the help of a Toronto family law lawyer, people may have to wait a long time to get complete financial disclosure and the disclosure process happens in a more adversarial and costly manner.

A competent family law lawyer, (including a collaborative family law lawyer), will be able to guide you towards the best process. Collaborative law or mediation will not be appropriate when a spouse is wilfully hiding information. Discuss these issues with your Toronto family law lawyer to be guided in the legal process that would be the best for you. For more information please contact Nathalie Boutet at 416-860-1942.

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