Stephenson v. Stephenson: pension double-dipping concerns
The equalization of net family property is one of the most contentious issues involved in matrimonial disputes. One of the factors that contribute to such contention is determining when and how to value certain assets.
Pensions are a good example of an asset that can be difficult to deal with when determining equalization. Often, when pensions are valuated, the owner of the pension has not yet begun to receive the pension benefits. It is important to note that regardless of whether the pension has been ‘realized’, its value is included in equalization upon separation.
The fact that pensions are valuated upon separation, not realization, gives rise to the concern of ‘double-dipping’, due to the fact that pension holders can eventually pay support based upon pension income. The question then becomes: should the pension holder be required to pay support only based upon the portion of the pension that was not previously subject to equalization? In other words, in determining income for spousal support purposes, should the court look at the entire pension income, or only the value of the portion earned post separation/equalization?
In Stephenson v. Stephenson, the court addressed the issue of double-dipping. In Stephenson, the parties separated in 1996 after 25 years of marriage. Upon separation, the parties valued and equalized their assets and entered into a Separation Agreement. As part of the Separation Agreement, the husband’s spousal support obligation was $1,500.00 per month, and indexed to inflation. Further as per the Agreement, said spousal support obligation could also be reviewed upon a material change in circumstance.
In 2010, the husband retired and brought a motion to reduce his spousal support obligation, which was heard in August of 2011. The husband’s pension income was $2,410 per month. Of his pension income, approximately $899.00 per month (or one third) had already been equalized upon the parties’ separation. Therefore that left $1,570.00 per month as the portion of the pension that had been unequalized.
On the motion the husband was seeking to have his support obligation reduced to $471.00 per month, which reflects the unequalized portion of his pension income. The motions judge, however, ordered that the husband pay spousal support in an amount that exceeded what the Spousal Support Guidelines required, based on his unequalized pension income. In making this determination, the motions judge considered the possibility that the pension had been undervalued at the time of separation, and the fact that the pension was small at the time of valuation.
The husband appealed the motions court’s judgment.
In determining how to assess the husband’s pension income for support purposes, the Divisional court looked to the matter of Boston v. Boston, where the Supreme court determined that it is inequitable to allow a wife to twice reap the benefits of her husband’s pension. In Boston, the court established that in order to avoid double recovery, the court should focus on the portion of the pension income that was not part of the equalization.
The Divisional Court acknowledged that there are exceptions to avoiding double recovery, for example the need for spousal support, however, established that such an exception was not apparent in the current matter.
The Divisional Court further established that the motions court’s consideration that the husband’s pension was small at the time it was valued and may have been valued incorrectly, were irrelevant and incorrect considerations.
Based on the above findings, the Divisional Court established that the husband’s support obligation as of March 2011, were to be $491.00 per month, based upon his unequalized pension income of $1,570.00.
This case is important to establish the dynamic, where income is derived from assets that have previously been subject to equalization. In family law, the courts seek to maintain an equitable balance between that which a recipient is reasonably entitled to, and that which a payor can reasonably be expected to pay.
Stephenson is also important because it reinforces a critical element that courts will consider when determining double-dipping issues. The courts will analyze what the recipient did with the funds received on equalization. Where a recipient of equalization receives a cash payout, they have a corresponding duty to demonstrate the reasonable efforts that were made to produce further income in order to support themselves.