Is Double-Dipping Fair?

GEO_edited-1A 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

World’s Most Expensive Divorces

Every once in a while a new client will make an appointment with the sole purpose of determining whether he/she can afford to get divorced or whether the financial consequences will be so devastating that he/she is better to stick it out.

The fact is that divorce often means relinquishing half of your property and paying generous, perhaps lifetime, spousal support. For a middle class Canadian it can be a significant financial setback.

However, it is no less crushing for spouses with great wealth. Consider the expenses of maintaining multiple homes in various locations around the world; travel expenses including the upkeep of executive jets or helicopters; lavish vacations; hundreds of thousands of dollars for the most exclusive private schools for their children and shopping sprees at Hermes, Vuitton and Cartier’s.

Do you think it was easy for the following group of millionaires/billionaires to write settlement cheques to their wives?

1. RUPERT MURDOCH, media tycoon, paid $1.7 billion in 1998 to his wife ANNA MURDOCH MANN, to whom he was married for 31 years. Ms. Mann recently broke her silence and gave her first interview to an Australian magazine. She referred to her ex as “ruthless” and predicted an ugly succession battle when Mr. Murdoch gives up the reins to his media conglomerate or dies. She is hoping that her children do not get overlooked in favour of Mr. Murdoch’s second family with his wife Wendy Deng.

2. Saudi arms dealer ADNAN KHASHOGGI left his wife SORAYA after 13 years of marriage. His extra marital affairs were no secret , but when he took up with one of his wife’s closest friends their union was over. She sued him for $2.5 billion but accepted an out of court settlement for $874 million. Mr. Kashoggi retained his yacht, Nabila, which at the time was the most expensive ship in the world and was featured in the James Bond movie “Never Say Never”. It is reported that Mr. Khashoggi suffered some serious business setbacks and now lives more modestly in Monaco.

3. Russian billionaire businessman ROMAN ABRAMOVICH divorced his second wife Irina after 16 years of marriage and five children. Forbes magazine named him the tenth richest man in Russia, fiftieth in world rankings with a net worth of $11.2 billion. His payout to IRINA was a mere $300 million. Roman retained the Chelsea Football Club and a collection of businesses, homes, yachts, airplanes and cars, including a Ferrari, a Maserati, a Bugati, several Porches, and a Mercedes Benz.

Zsa Zsa Gabor’s lament is likely shared by Ms. Murdoch, Ms. Khashoggi and Ms. Abramovich, when she said: “I want a man that’s kind and understanding, is that too much to ask of a millionaire?”

Lawdiva aka Georgialee Lang