Severance Pay in Determining Income for Child Support
When one obtains severance pay from his/her employer, it is considered income for the purposes of determining child support. Most payors seem to believe that it is an asset rather than income. This is incorrect. Severance pay is income replacement. As such, it is considered in evaluating child support obligations.
The best approach is to treat the severance pay as being paid for over time for the employer calculated the amount and adjust the amount of child support.
Legal Framework for Child Support and Severance Pay
Under the Family Law Act in Ontario, child support calculations are based on the income of the payor. The Child Support Guidelines explicitly include severance pay in the definition of income. This ensures that all forms of income replacement, such as severance, are factored into the support calculations, reflecting the true economic capacity of the payor during the period they receive such payments.
How Severance Pay Affects Child Support Calculations
Severance pay should be reported as part of the payor’s annual income on their income tax return. For child support purposes, the full amount of the severance received will be considered in determining the annual income from which monthly support payments are calculated.
The ideal approach is to amortize the severance pay over the period it is intended to cover. For instance, if a severance package equals six months’ salary, the child support calculation could distribute this amount as income over the six-month period following the payor’s job loss.
Related: Ontario Child Support Calculator
Legal Advice for Fair Child Support
Going through a divorce? Trying to determine child support? Consulting with a skilled family law attorney can provide guidance tailored to individual circumstances, especially when dealing with substantial severance packages. Legal advice can help ensure that child support payments remain fair and in compliance with Ontario’s guidelines.
We have the compassionate and skilled divorce lawyers in Toronto to get you results. We welcome any inquiries you may have.