One important issue for consideration upon the breakdown of a marriage, is what happens to the pension. Pensions are often one of the largest assets accumulated by the parties during marriage. They can be as, if not more valuable than matrimonial homes. When parties separate, their assets accumulated during the marriage are divided equitably through Equalization. Pensions are treated as property under Canadian Law, and form part of the Equalization calculation. Whether the pension is divided, or the parties come to alternative creative arrangements to meet the Equalization payment due (such as the husband keeps his pension and the wife keeps the matrimonial home), the value of the pension has still been taken into consideration in the division of the property, upon the breakdown of the marriage.
When spousal support is payable and the pension holder later retires, the same pension that was equalized upon separation, is sometimes considered as income from which support payments should be made.
This “Double Dipping” issue has been considered extensively by the Courts over the years. The leading authority in relation to the issue of double dipping is Boston v Boston[1]. The Supreme Court of Canada has stated that it is desirable to avoid double recovery from a pension when it is both an asset and an income source. To avoid double dipping when claiming support payments after equalization the Court stated that where practicable, the focus should be on the part of the payor’s income and assets that have not been part of the division of matrimonial assets. However, the Court also stated that it certain circumstances double dipping cannot be avoided. In fact it may be required in circumstances where the payor has the ability to pay, the recipient has made a reasonable effort to generate an income from the equalized assets, and despite this, an economic hardship from the breakdown of the marriage persists. It may also be permitted in spousal support orders based mainly on need.
In the years since the Boston case the courts have not hesitated to resort to double dipping if the facts of a case have warranted it. The Courts have permitted double dipping in the following circumstances:
– where a portion of the pension was earned after separation;
– where the recipient was a full time home-maker who raised the children and is without significant employment skills or training, causing limited or no ability to earn an income;
– where the recipient only received a modest sum from equalization and it can only be used to generate a modest amount of income;
– where the recipient’s share of assets were tied up in reasonable housing from which an income could not be generated;
– where the payor’s income has not decreased significantly following retirement;
– where the payor’s standard of living is higher than the recipient’s;
– where an income from work or investments can be imputed to the payor.
– The list goes on…
In the case of DeWinter v DeWinter[2] Justice Quinn stated “[H]aving found that the applicant has satisfied subsection 58(1), my orders are designed to make adequate provision for her proper support; and whether that results in double dipping or triple dipping is immaterial.”
In the 2014 case of Hickey v Princ[3]Justice Abrams stated:
It is generally unfair to allow the payee spouse to reap the benefit of the pension both as an asset and then again as a source of income. This is particularly true where the payee spouse receives capital assets which she then retains to grow her estate.
To avoid double recovery, the court should, where practicable, focus on that portion of the payor’s income and assets that have not been part of the equalization or division of matrimonial assets when the payee spouse’s continuing need for support is shown. That would include the portion of the pension that was earned following the date of separation and not included in the equalization of net family property.
The spousal support payments in this case were reduced on retirement from $2,468.37 per month, to $1,050, to prevent double dipping after consideration was given to the fact that part of the husband’s income from his pension had already been equalized.
The issue of pensions and what happens to them after the breakdown of a marriage is an important issue, which should be carefully considered by the parties and their lawyers when resolving the issue of Equalization and future support.
[1] Boston v Boston (2001) 2 SCR 413 (Supreme Court of Canada);
[2] DeWinter v DeWinter Estate (2001), 41 ETR (2d) 190 (Ont. S.C.J)
[3] Hickey v Princ, 50 R.F.L. (7th) 138 (Ont S.C.J.); http://www.canlii.org/en/on/onsc/doc/2014/2014onsc5272/2014onsc5272.html
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