Avoiding “Double Dipping” (and even “Triple Dipping”) in Divorce Cases

In Trethewey v. Trethewey, the Appeals Court vacated a Probate and Family Court judge’s double counting of an asset as both a divisible asset (and liability) of the marital estate and a stream of income. This decision provides guidance to both family law practitioners and judges in identifying double dipping, which may arise when a financial or compensation structure that can be both an asset and source of future income for support purposes is at play. Often, after an asset is divided by a divorce judgment, the portion remaining with the supporting spouse can still be a source of income for support purposes. Double dipping, on the contrary, occurs when all of the income from said asset has already been considered in a payor’s income for support purposes.

In Trethewey, the husband received a $5 million “transitional bonus,” which was an advance payment of his anticipated income paid in monthly installments over the course of nine years. Under this arrangement, the husband had immediate access to the $5 million that he would earn over the next nine years of employment. As collateral for the bonus, the husband executed a $5 million promissory note, which was incrementally forgiven by the amount of the monthly installments as he met certain business benchmarks. If husband’s employment ended before the note was satisfied, he would be responsible for the outstanding balance on the note, which would immediately be due.

After a nineteen-day trial, the Probate and Family Court issued a Judgment of Divorce Nisi which attributed the monthly loan forgiveness installments to husband as income for alimony purposes, as if he were receiving that money on a monthly basis, while also dividing the remainder of the $5 million advance payment (which was approximately $3.2 million at the close of trial and held in husband’s brokerage checking account) between the parties. Additionally, the judge assigned the entire liability under the promissory note to the husband despite the fact that the wife had received a portion of the advance, which the Appeals Court concluded had been, arguably, triple counting.

The Appeals Court found the Probate and Family Court’s treatment of the transitional bonus to be both inequitable and inconsistent with the judge’s stated rationale, which was to provide the wife with a “slightly larger” portion of the marital estate than the husband. The Appeals Court acknowledged that double dipping may be difficult to identify and define. It concluded that it would have been appropriate to treat the monthly increments of the transitional bonus as income for alimony purposes, but it was double dipping and an error of law for the judge to also treat the remainder of the advance held in the husband’s brokerage account as an asset of the marital estate free from liability to be divided between the parties. The Court also noted that the assignment of the entire liability under the promissory note to the husband had been, arguably, triple counting.


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