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Alimony & Pensions:  No Double Dipping

Continued from Alimony & Pensions:  No Double Dipping

In my view, this is also a correct decision. After separation, Mr Boston was only left with his pension -- an asset that would decline in value over time. On the other hand, Mrs Boston had over $300,000 in assets, which could be invested, and in fact, did increase in value. She should be required to use up these funds for her own support, just as the husband had to use up his pension for his own support.

Of course, the law is never so simple as this. The Supreme Court left open a big exception to the rule against double dipping – it is allowed in cases where it cannot be “fairly avoided.” For instance, double dipping may be permitted in cases where the husband can afford to pay additional spousal support, and the wife still needs the money even though she has made a reasonable effort to produce income from her assets.

In subsequent decisions, the exceptions to the rule in the Boston case have become so numerous that they have almost become larger than the rule itself. There has been a string of decisions after Boston, at both the trial and appellate level, where double recovery has been allowed, for one reason or another.

The exceptions to the Boston case can make it difficult to settle the financial issues in a separation where there is a pension with a large value. The pension holder, normally the husband, is naturally reluctant to divide things equally if it means that when he retires, he will have to pay spousal support based on his pension income.

One solution is what is known as an “if and when” pension division. This means that the pension is not divided along with the other marital assets. Instead, if and when the husband receives his pension, he pays a certain percentage of it to his former wife. This is risky from the wife’s perspective, as if the husband passes away prior to receiving his pension, she could be left with nothing.

If an “if and when” pension division is not feasible, then dividing property on separation must be handled very carefully. It should be made clear in the separation agreement exactly what the pension is worth, and how this figure was arrived at. Preferably, this value should be backed up with an actuarial valuation of the pension.

Another consideration is that income-generating assets should be transferred to the spouse without a pension, if possible. This way, the spouse without a pension can invest those assets to create a stream of income equivalent to a pension. Then her need for spousal support when her former husband retires will be reduced.

Ultimately, however, none of these solutions is entirely satisfactory. The pension holder, normally the husband, is always at risk that his former wife will get a double recovery from him. And the spouse without a pension, normally the wife, faces the risk that her income will fall drastically simply because her former husband decides to retire.

The solution to the problem of double dipping really must be a statutory one. There should be a way such that a couple who separates can divide pension credits on an equitable basis. This would ensure that both the husband and the wife receive a retirement income based on the value of the pension acquired during marriage.

Already, for some types of pensions this is possible. For instance, under the Pension Benefits Division Act, federal government pensions are divisible at source. However, for most pensions, this is not available. Until this happens, a fair division of marital property that includes a valuable pension will be difficult.
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