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This is Not About Ice Cream – “Double-Dipping” in Family Law

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This is Not About Ice Cream – “Double-Dipping” in Family Law

Although pensions are not a particularly “sexy” topic in family law, they can nonetheless be an important and high-value part of the property-settlement process between divorcing couples, and often represent the largest family asset aside from the matrimonial home.

But the treatment of pensions can be complicated: On the one hand, they are considered “property” for the purposes of splitting up matrimonial assets under the Ontario Family Law Act, and their division is governed by the usual formula which takes into account the increase in each spouse’s net worth between the marriage and separation dates. However, since pensions are usually not accessible until a spouse retires, valuation and equalization may become difficult, and often the non-pension-holding party will trade an interest in the future pension payout in exchange for current assets such as a share in the matrimonial home.

But this resolution can have its setbacks, too: matters can become contentious when the pension-holder is later determined to be obliged to pay spousal support to his or her spouse. Specifically, in such scenarios the question arises whether it is fair for that spouse to have to pay spousal support from any pension income that he or she receives after retirement.

“Double-dipping” is a term used in the family law context to address this kind of situation. It occurs where a pension has already been included in the equalization payment, and where the non-pension-holding spouse later goes on to claim for spousal support at a time when the paying spouses main or only source of income is the pension.

In Canada, there is a general rule against double-dipping, derived from a Supreme Court of Canada decision called Boston v. Boston. In that case the court held that – in most cases – it is unfair for a pension-holder to have to pay spousal support from that portion of their pension that has already been subject to the property equalization process. Otherwise, the recipient spouse would be allowed to reap the benefits of her ex-spouse’s pension twice: once as an asset that is subject to equalization, and then again as a source of income for spousal support purposes.

Instead, according to the Supreme Court, to avoid such double-dipping the spousal support calculation should where possible involve consideration of what portion of the pension was earned after the spouses’ separation date (i.e. the portion that was not already subject to the equalization calculation process).

As might be expected, there are exceptions to the rule against double-dipping: For example, an Ontario Court of Appeal decision called Mieklejohn v. Meiklejohn suggests that spousal support might be paid from the proceeds of an already-equalized pension in cases where the recipient spouse is in dire need, has most of his or her assets tied up in a home, and has little ability to earn an income and become self-sufficient. There are other limited exceptions as well.

If you have questions about pension division and avoiding a scenario involving double-dipping, we can help.

For the full text of the decisions, see:

Boston v. Boston, [2001] 2 S.C.R. 413  http://canlii.ca/t/5205

Mieklejohn v. Mieklejohn, 2001 CanLII 21220 (Ont. C.A.)  http://canlii.ca/t/1f8w7

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.