Financial Disclosure and Child Support
| October 1, 2019 | by Kimberley Ketsa
After separation, one of the first steps in sorting things out is to exchange financial documents, which is called “financial disclosure”. Tax returns, paystubs and business financial statements can tell us what a person’s income is, which then informs us what child support should be. This blawg explains more about Financial Disclosure and Child Support.
Married parents are governed by the Federal Child Support Guidelines. Unmarried parents in Alberta are governed by the Alberta Child Support Guidelines. They essentially cover the same rules.
The objectives of the child support guidelines are to:
- Establish a fair standard of support for children that ensures they benefit from the financial means of both parents;
- Reduce conflict and tension between parents by employing an objective calculation for child support;
- Improve efficiency of the legal process by giving courts and parents guidance in setting levels of child support and encouraging settlement; and
- Ensure consistent treatment of parents and children who are in similar circumstances.
With income information and the Child Support Guidelines, it can be relatively simple to figure out child support.
Generally, calculating child support is a three-step process:
1) What are the parents’ annual incomes?
2) Based on the incomes, what does the table tell us monthly child support should be?
3) Based on the incomes, what is each person’s share of special or extraordinary expenses?
The Guideline tables take into consideration taxes, tax benefits, inflation and basic cost of living. They are designed to support the child, while allowing the payer of child support to still meet their own needs. That is why it’s so important to have financial information, to be able to find the correct amount of child support. Without information, someone could be paying too much or too little child support.
“Disclosure” is simply that exchange of financial documents. “To disclose” means to show or share.
Disclosure of financial information is mandatory and is the law for both parents. Section 21 of the Guidelines say that first, the person asking for child support must disclose all relevant financial information. Then, the person who is asked to pay must also disclose the same documents.
At any point, one parent can serve the other with a Request for Financial Information (Provincial Court) or Notice to Disclose (Court of Queen’s Bench). The form simply depends in which court they are applying for child support. The parent served has 30 days to provide the documents. These are part of the Rules of Court. You can find all family court forms, including the ones for financial disclosure, on the Alberta Courts website or at Resolution Services.
As we’ve said, the obligation to disclose is mandatory. After 30 days, a court can make an order requiring one person to provide any missing documents by a deadline. The Court can order costs or fines for not providing the documents. After a judge has made an order, if a person does not comply and repeatedly refuses to provide the documents, they can even face time in jail for contempt.
In recent years, the Alberta Court of Appeal has considered the obligation to disclose financials in child support cases. The Court takes the need for financial information very seriously. The Court has made clear that the onus to provide is on the person in control of the documents.
If someone does not fully disclose their financial information, the court can “draw an adverse inference” and impute income. This means, refusing to disclose can suggest that you have something to hide, and so a judge might order child support based on a higher estimated income instead.
The payer of child support needs to provide a detailed breakdown of all their sources of income. Generally, child support can be determined by simply looking at total income on your tax returns. However, sometimes business owners and shareholders receive other benefits that translate into income for child support purposes. In that case, we need additional business financials to be provided.
Business expenses can be added to income for child support. For example, a cell phone bill paid by the business but used for personal matters, or a vehicle owned and paid for by the business, but driven for everyday personal use benefits that person the same as income. It is the job of the business owner or shareholder to explain how much is of personal benefit and that the expenses are reasonable.
Financial documents can be difficult to read without experience. It is always best to get advice from a financial specialist and a lawyer before making any major decisions.
Refusals to disclose cause distrust, increase conflict and increase costs in a separation. If it is later discovered that financial information was hidden and child support was underpaid, it can result in a large bill of back-pay for the payor. Disclosing financial information fully and promptly will help resolve child support quickly and without the cost to fight in court.
There are many applications and websites that offer child support calculations, including the Government of Canada website: https://www.justice.gc.ca/eng/fl-df/child-enfant/2017/look-rech.asp. The important thing is to have the financial disclosure first to get accurate results.
While many child support calculations can be simple, some circumstances take us outside of the usual Guideline table amounts. Annual income over $150,000, business ownership, large travel costs, the types of special expenses and shared parenting schedules can all complicate child support calculations. You can get advice on these things from a lawyer.
Being organized and on time with your disclosure will save you in legal costs. It will also help a mediator, lawyer or judge understand your finances to help reach the right amount of child support. The court has a useful guide to organizing and filing disclosure here: https://cfr.forms.gov.ab.ca/Form/RCA11252.pdf. We also encourage you to organize your disclosure in a binder with tabs for easy reference. Remember to keep a copy for yourself too.
Once there is a court order for support, the parents can enroll in the Child Support Recalculation Program. This allows parents to automatically adjust support based on their tax returns year to year, without having to go back to Court. For more information on the Child Support Recalculation Program, see the Service Alberta page here: https://www.alberta.ca/child-support-recalculation.aspx.
The obligation to share income information continues so long as the children are under 18 or remain dependent. All child support orders have a clause requiring parents to exchange their financial information every year. Under Section 22 of the Guidelines, you can file a request for financial information with the Court once a year.
Financial disclosure is also a very important part of determining spousal or partner support and matrimonial property divisions. It is advised to never sign off on a settlement agreement without financial disclosure from both spouses. Always review the financial information and any settlement proposal with a lawyer.
Confused about financial documents? Served with a Notice to Disclose or Request for Financial Information? Unsure how to get child support? Our lawyers at Kinetic Law are experienced with disclosure applications and child support matters and are available to help.
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