Double Dipping. There is no ice cream in Divorce.

“Double Dipping” is a term you may hear when contemplating a divorce action. Unfortunately, you don’t get ice cream. Rather, “double dipping” in a Connecticut divorce action, is something to be avoided; as it relates to the improper characterization of income and marital assets for equitable distribution.

The problem of “double dipping” occurs when one financial item is considered in the calculation of alimony and marital distribution twice. The item is marked once, as property, making it an “asset” subject to equitable distribution between the parties. But, what about the “stream of income” generated by an “asset”? How would it be properly characterized during the dissolution of a marriage?

Does each party get a share of the asset and a share of the income it generates? Is the asset considered only as an asset or only as income; or do the income and asset values combine into the incoming producing asset? Should the income stream from the asset also be counted as income; and thus subject to distribution as alimony? If the income is counted once as regular income and again as income from an asset there is a problem because the receiving spouse gets the double benefit of owning a share of the asset and receiving alimony based on the same income received from the asset. This “double dip effect” is one which must be explored by reference to Court rulings.

While generally “double dipping is not allowed”, there appear to be exceptions to that rule. According to the Connecticut Courts, it is possible to award an asset, as well as, use the income from that same asset to pay for an award of alimony to one party; without being guilty of “double dipping”. To determine if prohibited “double dipping” has occurred; each case must be analyzed on its’ individual merits.

In order to be guilty of “double dipping”: 1) the asset must be the sole income stream of the alimony payor and 2) that said income stream would be under the control or ownership of the party to receive the alimony. The purpose of the rule is to prevent the receiving party from having too much control over the amount of alimony the payor must pay them. This may result in the receiving spouse increasing the stream of income to the payor spouse, so as to obtain a larger alimony payment.

In addition it appears that the nature of the business asset itself must be “personal”. By “personal” the Court seems to be referring to an asset such as a service industry; where the buyer is paying for the personal services of an individual, i.e. like painting.

If one spouse receives a share of the other spouse’s business as an asset, during equitable distribution, and that distribution gives the newly receiving spouse the power to influence the stream of income from a personal service business, and that same business is the only source of income for the other spouse, it would be inequitable to also order the spouse, who has already had his business divided, to now pay alimony out of the stream of income of the divided asset.

So remember to tell your attorney, if you are paid by your own company, so that your income, a.k.a. your salary, can be properly characterized for your benefit.