CHILD SUPPORT & THE 40% RULE by Jeremy D. Loeb
Most parents who have occasional access rights to their children eventually hear about the existence of a section of the child support legislation that allows a court to reduce their child support payments if they have their children with them forty percent of the time or more.
Often these access parents then try to increase their access time so that they can fit into this percentage and secure a reduction in support. What exactly is this rule? How does it work? How is the percentage calculated? Is it a hard and fast rule or does the court have some discretion?
Proceedings involving custody, access, and child support overlap in a fundamental way. Understanding how these issues intermingle legally is very important for parents entering a court proceeding or a negotiation with respect to their children. Discussed below is one specific aspect of child support which is not readily known by most family law litigants and separating couples with children known as the “40 percent rule”.
In Canada parents have an obligation to support their dependent children. This obligation can extend to persons who have no biological or adoptive relationships to the child(ren) but who have acted as a parent to the child(ren). The starting point when dealing with the child support obligations of parents is the Child Support Guidelines. The objectives of the Child Support Guidelines are:
(a) to establish a fair standard of support for children that ensures that they continue to benefit from the financial means of both spouses after separation;
(b) to reduce conflict and tension between spouses by making the calculation of child support orders more objective;
(c) to improve the efficiency of the legal process by giving courts and spouses guidance in setting the levels of child support orders and encouraging settlement; and
(d) to ensure consistent treatment of spouses and children who are in similar circumstances.
The amount of child support payable by a parent is set out in the Child Support Guidelines and is based on his or her annual income and the number of children. While the Child Support Guidelines have been useful in narrowing the focus of child support issues by the courts and for separating parents, there still remain a few areas of discretion that are troublesome for courts, litigants and negotiating parents. One of these discretionary areas is the “40 percent rule.”
Section 9 of the Guidelines permits a reduction in the amount of child support payable where a parent “has a right of access to or has physical custody of a child” for 40 per cent of the time over the course of a year. The rule needs to be contemplated by litigants to understand its impact on their strategic decisions in negotiation, litigation and in child support determinations. It should also be kept in mind that access parents are often accused by the other parent of trying to increase access for the sole purpose of getting a reduction in their child support payments and not because they actually want to spend more time with their children.
Child support depends on which parent has primary residence of a child and, through the application of section 9 of the Child Support Guidelines, how much time the child spends with the non-residential parent.
The Guidelines give the court discretion to set the amount of child support. Through Section 9 a court may take account of the increased costs of shared custody arrangements if the support payor exercises access or physical custody for at least 40% of the time.
This has led to legal arguments over how “time” is calculated and also created arguments in the courts for how time is determined when a child is in school or at camp, etc.
Section 9 discretion requires a court to first calculate the time spent with the child for each parent to determine whether they meet the 40% threshold. If the threshold has been met, the court then considers the amount of support payable having regard to the Guidelines and the increased costs of shared custody arrangements and the “conditions, needs and other circumstances” of the child and each spouse or parent.
Most courts stick to a strict mathematical calculation of time based on the number of days in the year that a child spends with the parent. Some cases have also looked at the quality and nature of the time spent with the children. In one case where the father had put a nanny in place while he was at work for most of the day, the court still found that it was appropriate to apply that time spent with the nanny as the father’s time for the purposes of calculating the 40% threshold.
Litigants need to remember that the 40% threshold is just the first step in a section 9 analysis. Ultimately, the court will be looking at how much child support is required in 40 per cent rule cases. The court will consider the following:
(1) Look at the Guideline amounts of child support for both parents and determine a straight set-off amount.
(2) Review child expense budgets. Here the court will look at the parent’s actual spending and must examine ALL of the expenses of BOTH parents, not just the increased expenses due to the increased access. The court must look at the overall increased total costs for a child by each parent, including duplicated costs and any disproportionate spending by one parent. Once this is done the expenses should be apportioned between the parents based on their respective incomes to either verify the set off amount or determine if adjustments to the set off amount is required.
(3) Next, the court needs to consider the ability of each parent to bear the increased costs of shared custody and the court must consider the standard of living of the child(ren) in each household. This is the heart of the section 9(c) analysis – here a court will look at income disparity, assets, liabilities, new partners, all with the understanding that a child should not experience a significant variation in the standard of living between households.
(4) Finally, the court should distinguish between initial orders, agreements and variations since a recipient (of child support) parent may have validly incurred expenses based on legitimate expectations of what the child support would be. This is likely a factor that applies especially to fixed costs. For example, if one parent made renovations to their child’s room based on a presumption of child support from a prior agreement, this fact may mitigate against lowering the amount of child support payable to them.
Therefore, meeting the 40 per cent threshold allows a court to oust the standard determination of child support and do a full-fledged review of factual circumstances.
The analysis must be focused on the particular facts of each case (a contextual analysis). The court should require adequate financial information by means of financial statements and budgets to be able to analyze the resources and needs of the parents and children. It is important to keep in mind the objective of a fair standard of support for the children and a fair contribution from both parents. The court will be especially concerned with the standard of living of the children in each household and the ability of each parent to absorb the costs required to maintain the appropriate standard of living. Given the broad discretion conferred by s. 9(c), a claim under s. 7 for extraordinary expenses can be examined as part of the s. 9(c) analysis with consideration of all of the other factors because [s.] 9(c) is broader than s. 7.
In other words, a much more expansive analysis takes place for child support determinations when section 9, or the “40%” threshold, has been activated! Thus directing the courts to analyze resources, standards of living, and costs – something usually not considered in simpler child support cases. As one can see the complexity involved in a fulsome analysis of child support under a section 9 claim – the 40% rule – is burdensome for litigants and the court. It poses a challenge when this analysis is fact-specific and requires income evidence from both parents. Litigants need to be aware of the 40% rule, and consider it when negotiating for custody and access time. Moreover, when the threshold is met a payor must ask – is it worth going to court over? At the end of the day these cases are generally about limiting the amount of child support a legitimate payor owes his or her children. In theory, at least, this means making arguments that children should get less money.
As is often suggested one should approach their family law dispute as a business deal, in order to make rational decisions about separating assets, financial responsibilities, etc. Obviously, when the financial questions overlap with questions of custody and access parents need to remember that the court will conduct an analysis under the best interest of the child principles. Parents should never attempt to leverage their children’s time with them or their former partner to gain or save a few dollars in child support.
The 40 percent rule debate is highly connected to the advantages and disadvantages of shared parenting. The challenges for parents, lawyers, courts and policy makers in doing child support analysis under section 9 is one of many examples where the law becomes trickier as more discretion is available. The tensions between the objectives of the Child Support Guidelines are on full display when the 40 percent rule is activated – as one can imagine the difficulty in reducing conflict and applying consistent and fair standards when section 9 analysis is engaged or used in a strategic way.
JEREMY D. LOEB is a student-at-law at BOOKMANLAW PROFESSIONAL CORPORATION, a boutique family and estate law firm located in Toronto, Canada. Jeremy can be reached at 416-488-2243, ext 26 or at [email protected]. Visit the BOOKMAN LAW web site at www.bookmanlaw.com