Trethewey v. Trethewey, 2024
Overview.
The judge awarded $1.7 million to Rosalia from the Wells Fargo account because the money transferred to her should not have been considered as a marital asset free from its liability. (Editor’s note: It was an account holding funds of a transition bonus when Michael changed jobs to Wells Fargo Advisors. The funds were released to Michael over a 112-month period at $51,550 per month.) “The actual structure of the $5 million was not a bonus, however; rather, it reflected the advance payment of a portion of the husband’s anticipated income from Wells Fargo.” Michael simultaneously executed a $5 million promissory note that would incrementally be forgiven at $51,550 per month.
Opinion.
The double dipping arose from the trial court’s transitional bonus ($5 million). The trial court treated the monthly forgiveness of debt as income to Michael. On the other hand, the trial court counted the amount remaining of the advance payment, approximately $3.2 million, as a marital asset and awarded 53% to Rosalia. The trial court judge also allocated the full, over-$4-million amount remaining in the promissory note to Michael. “On the record before us, it was error for the judge to treat the $5 million advance in this fashion—double dipping or arguably even triple dipping—thereby disadvantaging the husband with respect to the Transitional Bonus threefold. Because the resulting award was neither consistent with the judge’s stated rationale—which did not address the double dip—nor equitable, we amend the divorce judgment to eliminate the double dipping problem.”
The trial court judge found that $600,000 of Michael’s determined $1,282,684 annual income was from counting the debt forgiveness as income. As a result, the decree provided Rosalia with alimony of $425,988 annually, which was approximately 33% of Michael’s gross income, including the transitional bonus. “In summary, the judge treated the Transitional Bonus both as a divisible asset and as income for purposes of calculating alimony. The judge also allocated the liability associated with the promissory note to the husband in its entirety, even though this liability arose from the $5 million advance, and even though the wife received a portion of that advance (fifty-three percent of the $3.2 million) through the asset division.”
Discussion.
Double dipping. In reviewing a property division, the appellate court applied a two-step analysis. (Hassey v. Hassey) Here, the appellate court was concerned with the second analysis because the judge’s rationale did not discuss the double dip.
Double dip described “the seeming injustice that occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations.” (Sampson v. Sampson) What constituted double dipping was not easily defined.
In this case, the judge considered the portion of the $5 million transitional bonus earned each month as income for alimony purposes. But the judge erred in also treating what remained of the unearned portion of the $5 million as an asset of the marital estate that was then divided with Rosalia. Rosalia received approximately $1.7 million of the remaining amount in the Wells Fargo account. However, Michael had not yet earned that money. As a result, it was also a liability of the marital estate, which the judge allocated entirely to Michael. The judge’s award of the $1.7 million to the wife from the Wells Fargo account amounts to an error of law.
As noted, the judge’s detailed findings did not “demonstrate that [s]he considered whether double dipping had occurred, and whether h[er] orders were consistent with the principles enunciated in [Dalessio].” (Sampson). “The decision to include the $3.2 million in the marital estate was error, and the award of fifty-three percent of that amount to the wife ($1.7 million) is accordingly reversed.”