Double-Dipping and Goodwill in Divorce
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What Does "Double-Dipping" Mean in a Divorce Setting?
In a divorce setting, “Double-Dipping” refers to a situation in which a former spouse gets paid twice for a single asset. This can happen when a marital asset is counted twice, once during the division of property, and again when calculating amounts for spousal support. Double dipping is generally considered unfair for the paying party, and some jurisdictions enforce measures to prevent it from happening.
Double dipping commonly occurs with non-tangible assets, most especially retirement benefits and pension plans. Anti-double dipping measures are also enforced for assets related to businesses, specifically business goodwill.
What Is “Goodwill” in a Divorce Setting?
Goodwill refers to a business’ ability to continue to make profits in the future. Business goodwill is an intangible asset that is calculated when dividing up property and assets during divorce. In a divorce setting, goodwill may be calculated differently than in a traditional business setting, where it is often calculated based on past earnings rather than future potential.
How Can Double-Dipping for Goodwill be Avoided in a Divorce?
There are several ways that a court can avoid double-dipping for goodwill in a divorce proceeding. These may include:
- Excluding the business’ goodwill when determining the shared marital estate (especially where the non-paying spouse will be receiving spousal support)
- Specifically listing the goodwill as spousal support
- Treating the business as if it were dissolved, with each spouse receiving one half of the business assets
- Amortizing goodwill over time
While these are common solutions to double dipping, they can have their drawbacks. For example, if the business goodwill is treated as spousal support, the parties would likely have to form their own agreement regarding that arrangement. Courts are sometimes reluctant to issue an order include goodwill as spousal support.
Calculating Business Goodwill for Divorce: Factors to Consider
Calculating goodwill in the first place is also very challenging, even when disregarding double-dipping. A court may analyze the following factors to determine goodwill:
- Length of the marriage
- When the business was created or acquired
- What each party contributed to the business during the marriage
- Tax considerations
- Spousal support
- Whether the business’ policies address personal and business good will
- The amount of control each spouse had over the business
In general, courts prefer a flexible, case-by-case approach when calculating business goodwill during divorce hearings. Thus, court rulings can vary widely with each individual case of divorce.
Do I Need a Lawyer for Help With Double-Dipping and Goodwill in Divorce?
Issues with double-dipping and goodwill can be exceptionally complicated. In many cases, an expert appraiser will be needed to calculate business figures. Also, the expert advice of a lawyer can help determine how state laws affect the distribution of properties and assets. In order to avoid double-dipping, you may wish to hire an experienced family lawyer to help you during the divorce proceedings.
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Last Modified: 04-08-2016 11:39 AM PDT
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