One of the most challenging concepts for many family law attorneys (and even some business valuation experts) is the “double dip.” The double dip issue arises in many divorces involving farms or small businesses and can have a substantial impact on the bottom line if not correctly accounted for and addressed.
Double dipping in the divorce context deals with how to account for money or other property. The goal is to ensure that everything gets counted once—and only once. Many times, when child support or spousal maintenance is paid or contemplated, grain, livestock, or other income-taxed assets are being used (i.e., sold to generate income) and attributed as income. When that happens, the same assets should not show up on the balance sheet as a divisible asset in the property division. To do so would be to “double dip” or double count the same asset twice. In general, a return on an asset is income and is available for child support and spousal maintenance purposes. But if the court also counts as available a return of the asset, there is a problem since such a return is more appropriately accounted for on the balance sheet—and only on the balance sheet.
Further complicating matters is that depending on how parties decide (or a judge decides for them) on how to divide marital property, an inequitable result can occur when the parties intend to provide an asset to one spouse as an equitable property division but then see that asset (such as a stream of future payments) show up as income calculation for child support or maintenance purposes. That can substantially skew the finances between the parties unfairly.
At a minimum, it is important to understand that this concept exists even though it is not always applied appropriately. Credibly arguing for or against the double dip can arm judges with the correct information to ensure everything is accounted for and accounted for only one time.
Andrew M. Tatge is Gislason & Hunter’s Managing Partner and chair of the firm’s Family Law and Divorce Practice Group. He regularly represents farmers, business owners, professionals, and other high income and high net worth individuals (or their spouses) in divorce and related actions. He also writes and speaks regularly on divorce issues related to business owners and family farms. Andrew can be reached at firstname.lastname@example.org or (507) 387-1115. This information is general in nature and should not be construed for tax or legal advice.