How “Double Dipping” Can Affect Your Massachusetts Divorce Settlement

An issue that can arise in high-net-worth Massachusetts divorce cases is a practice commonly referred to as “double dipping.” As the Appeals Court of Massachusetts explained in a recent decision, double dipping is a phrase sometimes used by legal commentators to “describe the seeming injustice that occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations.”

Here is what this means in practical terms. Let’s say Tom and Nancy are getting divorced. Tom owns his own business, which is considered a marital asset. Under the terms of their divorce settlement, Tom agrees to essentially “buy out” Nancy’s share of the business by giving her assets of roughly equal value. But Nancy then insists that Tom’s income from his business be included when calculating his alimony obligations. From Tom’s perspective, this is “double dipping” since that business income comes from the business he already “paid” Nancy for.

Separating Business Valuation from Spousal Income

Strictly speaking, Massachusetts law does not forbid double dipping. But courts can consider the potential for double dipping when making an equitable distribution of marital assets. Part of the problem, however, is that it can be difficult to define double dipping in the first place.

That Appeals Court decision referenced above, Negahban v. Negahban, is a good example. In this divorce case, the husband owned an ophthalmology practice, which was considered marital property. The trial court awarded the business to the husband but also considered it a source of income for support purposes. The Appeals Court upheld this decision.

As the Appeals Court explained, the trial judge “valued the practice using the capitalization of earnings method and deducted a reasonable salary expense for the husband.” In other words, the court drew a clear line between the value of the business for purposes of making an equitable distribution and the husband’s expected income from that business. Even if this resulted in double dipping, the Appeals Court reasoned, it would not be to the husband’s “detriment,” since he earned more than the wife.

The Appeals Court likewise rejected the husband’s challenge of the trial court’s valuation of his practice. Valuation disputes often involve each side submitting an expert opinion. Here, the Appeals Court noted that the trial judge actually adopted a lower valuation than what was proposed by the wife’s expert. As such, the final valuation was actually favorable to his interests.

Contact a Peabody High-Net-Worth Divorce Lawyer Today

The presence of a family business, professional practice, or other complex assets can significantly complicate the division of property in your divorce, even when you and your spouse are eager to negotiate a settlement. That is why it is important to work with a qualified Peabody high-net-worth divorce lawyer who can guide you through the process and work to protect your financial interests. Contact Reade Law Firm, PC, today at 978-767-8383 to schedule a consultation.

Source:

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