Is Double-Dipping Fair?

A common complaint from ex-spouses who are obliged to pay spousal support is that all too often, the supported spouse gets a double-dip, and I don’t mean an ice cream cone.

Double-dipping occurs when a payor spouse pays support based on his employment income, but also pays support on his investment, rental or capital gains income arising from assets that were divided between the spouses, or for which the supported spouse received compensation through the receipt of cash or the retention of the family home.

Let me give you an example. If a husband retains a rental property valued at $100,000 and an investment portfolio worth $200,000 and in return the wife receives the former matrimonial home with a basement suite, valued at $300,000, it seems unfair for her husband to include these additional income sources as income for the purpose of paying spousal support. Yes, he may earn income on his share of the family property, but the wife also has that option.

As well, consider that the wife’s home has a basement suite she declines to rent and therefore eliminates an additional source of income for herself.

On top of all that, keep in mind that for Canadians, the matrimonial home is a tax-free asset, while the husband’s rental property will attract capital gains tax as will the investment portfolio.

Another common example of this practice is where a business is valued by capitalizing the business’ income stream and the wife is compensated for her interest, while the husband is ordered to pay support on that same income stream.

Do our courts care? Nope. But lawmakers in California thought it was an important issue when Bill SB 481 was tabled in the Senate with the goal of passing legislation that would give judges the discretion to consider the sources of income utilized for a support calculation to prevent unfair, blatant double-dipping.

Regrettably, this attempt to address double-dipping faltered,dying in the Senate in January 2012, with no pending legislation.

The treatment of this issue by North American courts is divergent to say the least. In Mississippi the courts have declared double-dipping a “glaring inequity” while in other jurisdictions there is passive tolerance with no apparent will to resolve the unfairness that can occur.

Of course, cynics will say that because double-dipping most frequently prejudices husbands, not wives, it will be a long time until our courts get around to fixing the problem.

California was on the right track with their double-dipping bill, a proposal that would at least encourage judges to consider whether paying spousal support on income derived from divided family assets is equitable. Certainly, the draft legislation only opened the door for an inquiry, nothing more.

Perhaps it will resurface in California and then catch on in other jurisdictions. Let’s hope so. Fair means fair for everyone.

Lawdiva aka Georgialee Lang