Here’s the objection every business owner’s lawyer eventually makes. The court valued the business by capitalizing its earnings and awarded the other spouse half that value. Then the court ordered maintenance, paid out of the same earnings. Hasn’t the owner now paid for the same dollars twice?
Lawyers and appraisers call this the double dip. The valuation counts the spouse’s future earnings for the property division, and support then draws on the same earning capacity. Washington’s answer is a replacement salary test. If the valuation carved a market rate salary out of the earnings before capitalizing them, there is no double dip. Maintenance paid from that salary does not duplicate the property award. In re Marriage of Valente, 179 Wn. App. 817, 320 P.3d 115 (2014).
The honest starting point is that Washington law on double dipping is thin. Washington’s Family Law Deskbook devotes three sentences to it. The leading treatise concedes the concept “is not well defined in current Washington law.” But the problem itself is well mapped, and Washington business owners have more at stake in it than owners in most states. Here’s the full picture.
Where the concept comes from
Washington courts have recognized that maintenance based on proceeds of property already awarded can be duplicative. In re Marriage of Barnett, 63 Wn. App. 385, 818 P.2d 1382 (1991), and In re Marriage of Mathews, 70 Wn. App. 116, 853 P.2d 462 (1993), are the usual citations. At the same time, property and maintenance are intrinsically related here. The court must consider the property division when setting maintenance and the intended maintenance when dividing property. In re Marriage of Crosetto, 82 Wn. App. 545, 918 P.2d 954 (1996). Courts award income producing property to one spouse and consider its income in setting support all the time. So the double dip cannot simply mean “the same dollars appear twice in the case.” It has to mean something narrower.
The valuation literature supplies the narrow version. Pratt’s handbook defines double dipping as “computing a value based, at least in part, on the spouse’s future earnings for property division and then also using the future earnings capacity as a basis for determining spousal support,” and identifies exactly when it arises. When an income approach, excess earnings method, or market approach assumes the owner keeps working at a normalized salary, the value of that future work gets impounded in the asset. Support ordered out of total earnings rather than the owner’s reasonable compensation then counts the excess twice.
The handbook adds a sentence that should get every Washington practitioner’s attention. The problem “is exacerbated in those jurisdictions that consider personal goodwill a marital asset.” Personal goodwill is itself a function of the owner’s future earning power. Washington is one of those jurisdictions. The double dip risk here is structurally higher than in the 30-plus states that carve personal goodwill out.
Valente: the replacement salary test
The leading Washington business case is In re Marriage of Valente, 179 Wn. App. 817, 320 P.3d 115 (2014). The husband kept the company and the wife was compensated for her share of its value. The husband argued the maintenance award double dipped into the business he’d just paid for.
Division One disagreed, and the reason is the whole ballgame. The valuation had carved a reasonable replacement salary out of the income stream before capitalizing anything. The value the wife was compensated for was built on earnings above that salary. So her property award never included the husband’s own compensation, and maintenance paid from that compensation didn’t duplicate the property division.
Washington’s test, then, splits the owner’s economics in two. One stream is a market rate salary for the owner’s labor. The other is the return above that salary, which belongs to the business. The value of the business is capitalized from the second stream. Maintenance is paid from the first. No overlap, no double dip.
Other states have reached messier conclusions on the same question. New York’s high court bars recounting an income stream once it’s been converted to an asset. In its words, “Once a court converts a specific stream of income into an asset, that income may no longer be calculated into the maintenance formula and payout.” New Jersey’s high court went the other way. It blessed a normalized salary for valuation and the owner’s higher actual salary for alimony in the same case. Pratt’s handbook catalogs the split and notes some courts now treat a business as both an asset and an income source. Washington’s replacement salary framing avoids most of that mess, if the valuation is built right.
What this means when you read the report
The entire question comes down to the normalization table of the valuation report. Find the replacement compensation line and ask three things.
Was a replacement salary deducted at all?
If the appraiser capitalized the company’s earnings without deducting market rate compensation for the owner, the resulting value includes the owner’s future labor. A maintenance award against that owner’s earnings now has a genuine duplication problem, and Valente‘s logic cuts against the valuation rather than the maintenance. This isn’t a rare error. The valuation literature lists failing to allow for reasonable owner’s compensation among the most common excess earnings mistakes. Revenue Ruling 68-609 itself requires the deduction.
Is the number realistic?
The compensation assumption is the only input that moves both halves of the case, in opposite directions. As Pratt’s reasonable compensation chapter puts it, compensation above market diminishes enterprise value, and compensation below market overstates it. Set the replacement salary too low and you inflate the business value while understating the income available for support. Set it too high and you do the reverse. The appraiser should name the salary survey, the industry, the revenue band, and the date of the data. They should also have examined compensation over roughly five years rather than one.
Is everyone using the same earnings consistently?
The clean structure keeps the streams separate all the way through: excess earnings in the valuation, owner compensation in the support analysis. Trouble starts when a party capitalizes the whole income stream for value and then also claims the whole income stream for maintenance purposes, or resists both. The appraiser-side literature states the discipline flatly. If excess income is added back in the valuation, it has been converted to an asset. It should no longer be considered for support.
There’s a useful mirror image in the goodwill cases. When reasonable replacement compensation absorbs the company’s entire earnings, there are no excess earnings and there may be no goodwill at all. In re Marriage of Luckey, 73 Wn. App. 201, 868 P.2d 189 (1994). Excess earnings and replacement compensation are two halves of one whole; whichever side of a case you’re on, you can’t argue both halves in opposite directions.
One more distinction courts rely on
Washington separates goodwill from earning capacity. Future earning capacity is income; it bears on maintenance and child support. Goodwill is an intangible asset valued from past results; it gets divided. The concepts are related but distinct, and courts have said so expressly. That distinction is the doctrinal answer to the owner who says “you already divided my earning power.” The court didn’t divide earning power; earning power isn’t property. Whether the line holds cleanly in every capitalization of earnings valuation is a fair question. The deskbook itself calls the line “so fine as to be rendered invisible in certain cases.” But it is the line Washington draws.
A related wrinkle sits on the child support side. Division One holds that contemporaneously ordered maintenance must be included when computing income for child support, while Division Two has held the opposite, and the split remains unresolved. In re Marriage of Condie, 15 Wn. App. 2d 449, 475 P.3d 993 (2020); In re Marriage of Wilson, 165 Wn. App. 333, 267 P.3d 485 (2011).
A divisional split has real consequences in Washington. One division of the Court of Appeals gives respectful consideration to another’s decisions but is not bound by them. Conflicts get resolved only when the Supreme Court grants review. In re Personal Restraint of Arnold, 190 Wn.2d 136, 410 P.3d 1133 (2018). Until that happens, which rule applies in your county is an argument to make, not a rule to look up. In a business owner case where maintenance is large, the answer can change the support number materially. The sequencing (set maintenance first, then support) is itself part of the argument.
The takeaway for referral sources
If you’re a CPA or appraiser working a Washington divorce, document the replacement compensation assumption more carefully than anything else. It’s doing double duty. It sets the value of the business, and it defines the earnings available for maintenance without duplication. Note the source data, the comparability of duties, and the multi-year window. If you’re reviewing the other side’s report, start at the same line. In our experience the double dip question gets resolved there, not in closing argument.
Common questions
Is double dipping illegal in Washington? There’s no statute on it. Valente treats it as an abuse of discretion argument that fails when the valuation properly carved out replacement compensation.
Does the double dip argument apply to child support too? The same economics apply, but the child support statute’s own income rules control, including the unresolved divisional split over counting contemporaneously ordered maintenance.
Can a settlement avoid the problem entirely? Yes. Agreements can fix the replacement salary, define which earnings fund maintenance, and recite that the valuation excluded the owner’s compensation. Building that record is cheap insurance against a later modification dispute.
This post is part of our series on divorce involving a family business. Read the main guide, Divorce Involving a Family Business in Washington, or the judgment calls hiding inside a business valuation.
Last updated August 2026.
Law Offices of Daniel Ehrlich, Everett. Family law in Snohomish, Island, King, and Skagit Counties. (425) 954-5578.
This article is general information, not legal advice. Every case is different. If you’re facing a divorce involving a business, talk to an attorney.
