Avoid the Divorce Pitfall of Double Dipping

Many of us have heard of the party foul called double dipping — using the same chip or cracker for multiple scoops into the serving dish or crockpot of delicious dip. In divorce litigation, double dip has a much more complicated meaning.

In divorce terminology, a double dip occurs when the same income or cash flow is used twice — once as an asset to fashion an equitable distribution of marital property and again in the calculation of spousal support. Most commonly, double dip issues arise with business interests and retirement assets. They occur in cases involving investment accounts and oil, gas and mineral rights.

Each party to a divorce must evaluate whether he or she will receive the greatest economic benefit if the funds are classified as marital property or as income.  Despite the fact that this issue is common in complex divorce cases, there is actually very little precedent in Pennsylvania relating to the double dip.

The landmark case involving double dip in Pennsylvania is Rohrer v. Rohrer, 715 A.2d 463 (Pa.Super. 1998). In this case, the wife requested that post-separation earnings should be included in determining her husband’s net monthly income for support. Both parties in the divorce and the court debated whether retained earnings prior to the separation should be included in the support calculations or considered business assets to be equitably distributed.

On appeal, the Superior Court of Pennsylvania ruled that the earnings retained by the husband’s companies prior to separation were required to be included in the value of the business interests for equitable distribution.

Years later, in Berry v. Berry, 898 A.2d 1100 (Pa.Super. 2006), the Superior Court upheld the proposition from Rohrer that the same funds could not be considered both income and marital property.

In Berry, as is often the case, the dependent-spouse wanted a severance payment and lump sum payment of her husband’s partnership accrual account, to be considered as property for equitable distribution so that she could derive the greater economic benefit of a larger share of the payments with no income tax consequence.  The Superior Court held that the capital account payment was an asset subject to equitable distribution because it was accrued during the marriage. By contrast, the severance payment, which had a purpose of compensating the husband for future services that he would render post-separation, was characterized as income by the Court.

Pennsylvania’s appellate courts have not rendered a definitive test regarding the multiple scenarios of double dip, though the principles elucidated in Rohrer and Berry continue to provide guidance.  To ensure that you are appropriately handling the distribution of assets and avoiding the double dip hazard, speak to the experienced legal team at Pollock Begg Komar Glasser & Vertz LLC. Call today at (412) 471-9000 to speak to one of our lawyers or use our online contact form.

About the Author

Joseph R. Williams, partner at Pollock Begg, maintains a comprehensive family law practice including all types of economic cases, custody and visitation, protection from abuse and support. A dynamic member of the legal community, Joe has been recognized with numerous awards for his achievements and leadership. He frequently authors for legal publications as well as mainstream media and lectures and moderates at continuing legal education seminars.