Dividing assets on divorce is never a fun experience. In some situations it becomes even more of a challenge. Upon the breakdown of a relationship, particularly those which are long-term or where the parties are near retirement, specific issues arise. Frequently, concerns surrounding the division of property and ongoing spousal support payments and how to avoid what we refer to as the ‘spousal support double dipping’ issue. Another name for this situation is “double recovery”. If after reading this, you have questions, our Calgary spousal support lawyers, and our Edmonton spousal support lawyers help! Call us today
What Is Spousal Support Double Dipping?
Double dipping, also referred to as double recovery, typically occurs when the following two circumstances combined:
- Pension is divided as property: Spouse A’s pension is taken into account when the property is being equalized with Spouse B receiving half of the value of the pension through either receiving part of the actual pension or the other spouse retains another asset or is paid an equivalent amount of money in lieu of the value of half of the pension; and
- Support being paid: When Spouse A retires, Spouse B is seeking spousal support from Spouse A and seeks to use the income that is paid from the pension as part of the formula for determining how much support should be paid.
In the above circumstance, the spouse is receiving double benefit of the same funds. Payment for the property and then again as payment for spouse income.
Does Double Dipping Only Occur When Dividing Pensions?
While double dipping most commonly occurs with pensions, it also occurs in other situations. for example, it occurs with certain income streams derived from other assets such as shares or stock options or businesses.
Does Double Dipping Only Occur With Spousal Support Payments?
No, it occurs in other situations. For example, it also occurs in situations where child support is a relevant factor. Although, this is less likely as many retirees or parties collecting pensions do not have children who are under the age of 18 or still dependent and requiring financial support.
General Family Law Rules For Spousal Support Double Dipping
The courts will not permit spousal support double dipping on the same asset unless you fall into a class of exceptions. The leading Supreme Court of Canada case on double dipping is the 2001 decision of Boston vs. Boston. In this case the Supreme Court held that the issue of that double dipping is “generally unfair” and courts should avoid it.
In the Boston case, the parties divorced after 36 years of marriage. The husband received approximately $385,000 in assets, mainly comprised of the value of his pension. Conversely, the wife received approximately $370,000. Further, the court ordered the husband to pay the wife spousal support. The husband was ultimately entitled to reduce his spousal support payments due to the fact that the pension he was currently receiving having been already considered when the matrimonial property was divided. The court then ruled that the income from the source formed an exempt status from the calculation for determining spousal support.
The Boston fact scenario is the classic example of double dipping and when such payments will not be awarded by the courts. The case stands for the principle that it is unfair to permit double dipping in spousal support awards. The payee spouse had an obligation to to use the assets that they received on the equalization to create a “pension to provide for her future support”. In other words, the courts imposed a positive obligation on her to make a reasonable attempt to generate income from the assets that she received, rather than trying to receive support from the payor’s pension income.
Exceptions To Spousal Support Double Dipping Rules
Case law gives us a clearer understanding of the spousal support double dipping rules. Specifically, the Boston Decision set out the following exceptions to the “Double Dip” or “Double Recovery” rules. For example, the rules include the following:
- The payor spouse has the ability to pay additional spousal support;
- The spouse receiving support has made a reasonable effort to generate income from the equalized asset to become economically self-sufficient); and lastly
- Despite the above, an economic hardship or need from the marriage or its breakdown persists.
In other words, the Supreme Court of Canada recognized there are two preconditions which may permit double recovery: 1) need alone or 2) a reasonable effort to avoid the need by using his or her share of the matrimonial assets in an income-producing way, but still a need persists.
Level Of Need Required For A Double Dip To Occur?
The court looks at the spousal support double recovery rules from time to time. The recent 2020 Alberta Court of Appeal decision of Bone v. Bone dealt with the ‘need’ exception as set out above.
The parties in the case divorced after 28 years of marriage. Each party received $948,000 in non-taxable assets, RRSPs of $95,856 and an equalization of Mr. Bone’s pension and supplemental pension. At time of retirement, Ms. Bone’s financial need was found to be obvious: she could not work, she was in considerable debt, she earned approximately $5,400 per year and she had no significant assets. The court directed that Mr. Bone pay a reduced spousal support which was a slight Double Dip on his pension income given the dire financial situation of Ms. Bone.
How Kahane Law Office Helps
The family law lawyers at Kahane Law Office understand this complex area of the law. Their experience includes dealing with spousal support and property division issues that arise after the breakdown of a relationship. Specifically, they help clients avoid, or access the spousal support double dipping rules, as they apply in their situation. Schedule an appointment with one of our family law lawyers to learn your rights by contacting our office today. For the fastest response please email us with some brief details on your situation. We then let you know the help we offer. Email us directly here. Alternatively, please call or Calgary, Alberta office at 403-225-8810, or if you live in Edmonton at 780-571-8463.