In the context of divorce, double dipping involves one spouse getting paid or receiving payment twice for one asset. For example, this could occur when the marital asset in question was erroneously counted twice—the first time during property division and the second time during calculations for alimony or spousal support.
Double dipping usually involves non-tangible assets such as pension plans and retirement benefits. Due to the unfairness of double dipping, laws are in place to protect business assets, especially business goodwill, which is the ability of a business to continue making profits in the future.
Avoiding Double Dipping into Goodwill
The court could employ several actions to avoid the possibility of double dipping during a divorce, explains a divorce attorney in Colorado Springs, CO. These include the following:
- Listing the business’ goodwill as alimony or spousal support;
- Excluding the goodwill when establishing shared marital property, particularly if the non-paying spouse would be awarded alimony;
- Paying the goodwill over time; and
- Considering the business dissolved so that each of the spouses would receive equal shares of the assets.
However, these solutions for double dipping could also backfire. For instance, if the divorcing couple decides to use the goodwill as spousal support, they would have to make a formal arrangement stating their proposed agreement. The thing is that not all courts are agreeable to order that goodwill be used for spousal support.
Considerations for Goodwill Calculations
Even without the potential issue of double dipping, calculating goodwill is simply very difficult, so when courts try to calculate goodwill, they consider the following factors:
- How long the divorcing couple was married;
- When the couple acquired or established the business;
- The contribution of each spouse to the business;
- Spousal support or alimony;
- Tax considerations;
- How much control each spouse exercised over their business; and
- Whether the policies of the business address business and personal goodwill.
Generally speaking, courts favor a case-by-case and flexible approach to business goodwill calculations, which means that rulings could significantly differ from one divorce case to another. Also, the services of a professional appraiser would be needed for calculating business figures. Bearing this in mind, if you want to make sure that you avoid double dipping during your divorce, seek help from an experienced attorney to help you out in determining state laws that specifically impact assets and property distribution.