The Difference between “Retroactive” and “Arrears”
Decisions about child support or spousal support (alimony) are usually forward looking. However, a court may also be asked to look backwards to deal with support or alimony that should have been paid.
There are two scenarios that may apply to your situation: (1) arrears of support, and (2) retroactive support. Arrears and retroactivity apply to child support and spousal support.
Arrears
Arrears of support are those amounts that a person failed to pay but was required to do so by a contract (e.g., separation agreement) or court order. Determining the precise amount of arrears is not always straightforward. The amount depends on how long the arrears were accumulating, the amount of each payment and the frequency.
Arrears: A Real-life Example
In one case, a father agreed in a separation agreement signed in 2008 that he would pay child support of $10,000 per year for his two children. Except for a $5,000 lump sum, however, he did not honour his promise. In the same separation agreement, he also promised to pay spousal support to the mother of the children.
The mother of the children did not pursue recovery of the child support and spousal support that was owing until 2014 (a 7-year gap). The mother filed the separation agreement with a court and asked for its help to enforce the contract using the Family Responsibility Office. By this time, the father owed more than $124,000 in arrears.
In considering how to resolve the arrears issues, the court factored in the following:
1. Changes to the father’s employment during the period if any;
2. Changes in the children’s living arrangements and degree of need during the period if any; and
3. Mother’s failure to pursue arrears for approximately 7 years.
In the end, the court decided to award the mother $32,000 for arrears of child support and $45,000 for arrears of spousal support.
On the one hand, the court did not want to condone a disregard of a contractual obligation, but, on the other hand, the mother did lose her entitlement to the full amount because she waited some 7 years before pursuing recovery.
This point may be challenging to accept because there are good reasons why a person may not want to pursue a lawsuit, such as not having the money to pay for legal fees or making attempts at negotiating a compromise prior to starting a court case.
Why It Matters: The Family Responsibility Office (FRO)
Because there is an order or contract, arrears can be enforced by the FRO. FRO is an Ontario government agency that is like the support police and has extensive power to suspend the payor's driver's license, revoke a passport, garnish pay, or take an income tax refund.
Tax Breaks
In some circumstances, Canada Revenue Agency (CRA) will allow a person trying to recover arrears of support to deduct their legal bills at the end of the year. On the other side, if a person is defending against a claim for a change in support, CRA may also allow this person to deduct their legal bills from their income. To know whether your legal bills qualify for a tax break, consult with a family law lawyer.
Takeaway
This story shows that arrears can be collected. But the longer you wait, generally the less you will recover. This is why consulting with a family law lawyer at the early stages of a dispute can be of great help to you in planning your use of limited resources and strategizing an effective course of action.
Retroactive Support
In contrast to arrears, a “retroactive” amount in family law refers to money that should have been paid or agreed to in the past, but for some reason was not (or has not yet been). This means there’s no court order nor contract in existence yet.
For this reason, you would encounter retroactive support issues early on in your dispute, usually when you are negotiating your separation agreement through lawyers. If you can't agree out of court, the retroactive amount can be a claim you make in a court application.
In one case, the Supreme Court of Canada considered what impact a recipient’s delay should have on the amount of retroactive support recoverable. The court decided there must be a balance between the payor’s interests in certainty for his or her financial affairs compared to the rights of the child to the monetary support where the recipient delays in pursuing it, or, alternatively, compared to the right of the recipient spouse to spousal support.
The Court set a general rule that retroactive support could be collected going back up to 3 years before the date of notice given to the payor.
An extenuating factor that allows a court to go back more than 3 years would include wrong conduct that is quite serious on the part of the payor.
A court will also look at,
whether the recipient parent delayed unreasonably in advancing the claim;
evidence the children suffered hardship because of the non-payment, and
the extent to which, if at all, the payor would suffer hardship if ordered to pay now.
When it comes to the notice given to the payor, the court will also require that the claim be advanced promptly thereafter. This means starting a court application. Otherwise, the payor’s legitimate interest in financial certainty would again become an obstacle to collection.
Takeaway
Courts prefer that support issues be addressed in a timely fashion. The issue of establishing or defending against retroactive support is complex and depends on the facts of your situation. To avoid losing your right to recover retroactive child support, it’s important to give notice within 3 years and start a court application promptly thereafter.
Retroactive amounts can't be enforced by the Family Responsibility Office (FRO) because there isn't an order or contract that FRO can rely on.
If you are a high-income earner, the issue of support is especially impactful. Speak with the family lawyer early on and understand how the law applies to your situation.