As spouses separate, the issue of child and spousal support often becomes an issue, and it may be necessary to measure one or both spouse’s income available for support purposes (or “Guideline income”). Given the far reaching economic and financial impacts of the pandemic on many taxpayers, historical income may not be indicative of income for the foreseeable future. It may become more important to assess monthly income (rather than just annual income) in this rapidly evolving situation. During COVID-19 British Columbia is currently (January 2021) in Stage 3 of our Restart Plan, with a number of province-wide restrictions currently in place, which impacts many businesses including nightclubs, restaurants, vacation accommodation including hotels and resorts and all other businesses who enjoy spin off economic benefits from tourism, aviation and the performing arts, to name a few. Those individuals going through separation and divorce who have their own businesses in these sectors and many others, are likely financially impacted by COVID-19. In our view, as activities adjust to the “new normal”, monthly data will become more important in establishing current and prospective income during COVID-19. While not strictly a component of Guideline income, parties may want to consider the impacts of potential cash injections into businesses to keep them operational. Potential approaches to take to estimating income during the pandemic
Use monthly information to estimate available income during COVID-19.
Consider modeling scenarios in order to understand the practical implications of lower income. While income may not ultimately be determined based on these scenarios, they will help in planning for the family’s needs.
Use financial planning experts/tools to assist in making sure the family’s needs are met during the period of lower income.
Treat the during COVID-19 period separately from ‘available income after COVID-19’.
Maintain flexibility to revisit available income in the future.
When businesses are involved, take a holistic approach to the business to consider the impacts on the business in terms of cash injections required, structural changes (lower staffing levels), and other changes.
After COVID-19
With the country slowing starting its vaccination program, individuals may want to revisit available income after COVID-19 is no longer as prevalent or active (Stage 4 of BC’s Restart Plan). While this may be an option for some, we note that obtaining reliable data of available income for an operating period after COVID-19 will result in a significant delay.
Available income will be impacted by trends caused or accelerated by COVID-19 and structural changes in the business. As an example, will staff that were laid off be able to be replaced. If not, how will that impact the capacity of the business?
The extent to which demand will rebound is unknown at this point. While we are confident that the economy will recover, what is unclear is the shape of the recovery.
If you need assistance from professionals to determine the appropriate income amount to use for child and spousal support purposes, financial specialists with an accounting designation (CPA) and Chartered Business Valuators (CBVs) frequently assist clients and lawyers analyze annual and where necessary, monthly incomes. If you are looking for help in Vancouver or the Lower Mainland in BC, Collaborative divorce professionals, including financial specialists and lawyers who assist with this work, are listed on the CDV webpage.
Commentaires