California: first state to try to legislate against the ‘double dip’

BVWireIssue #110-3
November 16, 2011

Last February, California Senator Roderick Wright (D-Inglewood) sponsored a bill, SB 481, regarding the determination of spousal support in marital dissolution actions. “Existing law requires the court to consider various factors for determining spousal support, including, among other things, the ability of the supporting party to pay spousal support, and the obligations and assets of each party,” states the committee notes. “This bill would require the court to also consider the extent [to] which income for support was already capitalized and paid to the other spouse in the division of community property, in order to avoid double counting the income when the result would be inequitable.”

Although currently tabled in the Senate, the California bill represents “an interesting attempt to legislate this issue,” according to Stacy Collins (Financial Research Associates). The bill wouldn’t necessarily eliminate the double dip so much as extend the discretion that trial courts already enjoy in determining spousal support to include, on a case-by-case basis, the possible impact of the double counting of income, first in capitalizing a business asset for distribution and then again in using the owner’s earnings to award support.

The legislation, if passed, might set a precedent for other state jurisdictions, which currently seem to straddle a range between an outright prohibition—in Mississippi, for instance, courts says the double dip presents a “glaring inequity”—to an ad hoc fairness review, to a passive tolerance. For currency and clarity on this complicated issue, tune in to: Asset or Income? Double Dipping in Divorce, featuring Collins and Don DeGrazia (Gold Gocial Gernstein) this Thursday, Nov. 17. In this 100-minute webinar, Collins and DeGrazia will discuss how to recognize the possible double-counting of income and assets, and how different jurisdictions have tried to resolve the continuing quandary.

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