«CHILD AND SPOUSAL SUPPORT [REVISED 2012] ABOUT CJER The California Center for Judicial Education and Research (CJER), as the Education Division of ...»
It is against public policy to impute income to a parent on the CalWorks program (often described as “welfare-to-work”) that provides benefits to families with minor children when the parents are unable to provide their support and that requires the recipient to either seek employment or to prepare for employment through, for example, educational programming in lieu of full-time work. Mendoza v Ramos, supra, 182 CA4th at 685. The goal of CalWorks is for the recipient parent to achieve the ability to provide support for his or her children. Thus, recipients are, in effect, in the process of seeking employment. 182 CA4th at 686.
d. [§201.22] Incarcerated Parent A court cannot impute earning capacity to a parent who is incarcerated, absent evidence that the parent has both the ability and the opportunity to work in prison, or that the parent has other assets that could be used to pay child support. Marriage of Smith (2001) 90 CA4th 74, 82– 83, 85, 108 CR2d 537. A court may, however, impose a suspended child support obligation and potential future insurance obligation on an incarcerated parent if those obligations are imposed in the
only, with no determination or imposition of any monthly obligation as long as the parent remains incarcerated and has no opportunity to work. El Dorado County Dep’t of Child Support Servs. v Nutt (2008) 167 CA4th 990, 993, 84 CR3d 523. A court may also base an incarcerated parent’s support obligation on interest imputed to assets he or she liquidated to pay for a defense after his or her arrest. Brothers v Kern (2007) 154 CA4th 126, 136, 64 CR3d 239.
The determination of earning capacity must be based on the parent’s current circumstances, and not on the fact that the parent was employed before incarceration or is likely to become employed on release. Marriage of Smith, supra, 90 CA4th at 83; State of Oregon v Vargas (1999) 70 CA4th 1123, 1127, 83 CR2d 229. The reason the parent is incarcerated, however, is not relevant to the determination of earning capacity.
Marriage of Smith, supra, 90 CA4th at 85.
3. [§201.23] Objectively Reasonable Work Regimen Earning capacity should normally be based on an objectively reasonable work regimen, not on an extraordinary work regimen. The fact that the parent may have worked overtime or followed an “onerous” work schedule before becoming unemployed or allegedly underemployed does not mean that his or her earning capacity should be based on this schedule.
201–23 Child Support and Spousal Support §201.24 Marriage of Simpson (1992) 4 C4th 225, 233–235, 14 CR2d 411;
Marriage of Serna (2000) 85 CA4th 482, 486, 102 CR2d 188 (parent is not required to work extraordinary hours so as to approximate marital standard of living). The only exception is when the parent is in an occupation in which a normal work week necessarily requires overtime work; in such a case, overtime may be considered to be part of the parent’s “reasonable” work regimen and thus part of his or her earning capacity.
Marriage of Simpson, supra, 4 C4th at 236.
4. [§201.24] Considering Children’s Best Interests The statutory guidelines governing child support do not limit the circumstances under which a court may consider a parent’s earning capacity, with the exception that reliance on earning capacity must be “consistent with the best interests of the children.” Marriage of Simpson (1992) 4 C4th 225, 233, 14 CR2d 411; Marriage of Smith (2001) 90 CA4th 74, 81, 108 CR2d 537. Stated differently, a court may not impute earning capacity to a parent unless doing so is in the children’s best interest. Marriage of Cheriton (2001) 92 CA4th 269, 301, 111 CR2d 755;
Marriage of Mosley (2008) 165 CA4th 1375, 1386–1387, 82 CR3d 497 (earning capacity was imputed to parent who had attorney position at large law firm but quit to raise her children, when her returning to work was in the best interests of children); Marriage of Berger (2009) 170 CA4th 1070, 1082, 88 CR3d 766 (earning capacity was imputed to parent who elected to defer his salary as investment in company but continued to live extravagantly off of his sizeable assets, precluding his children from sharing benefits of his current standard of living); see also Marriage of Sorge (2012) 202 CA4th 626, 134 CR3d 751.
Generally, the “best interests” issue arises when there are young children, and one parent stops working to stay home with the children. In determining whether to impute earning capacity to the stay-at-home parent, the court must balance the state policy that both parents are obligated to support their children and that without imputing income the employed parent carries the entire burden against the interest of the children in having a stay-at-home parent. See Marriage of LaBass & Munsee (1997) 56 CA4th 1331, 1339, 66 CR2d 393. In cases of very young children, the issue may become moot when the cost of day care is considered, e.g., to impute earnings of $2,000/month to the stay-at-home parent who, if working, would incur $1,000/month in day-care expenses may not be in the child’s best interest. A different result might be warranted, however, when the parent decides to stop working after marriage to a new spouse with significant income, in order to stay home with the children. See Marriage of Paulin (1996) 46 CA4th 1378, 1384 n5, 54 CR2d 314. The courts have declined, however, to adopt a rule prohibiting the imputation of income in all cases in which parents refrain §201.25 California Judges Benchguide 201–24 from employment in order to care for young children. Marriage of LaBass & Munsee, supra, 56 CA4th at 1340; Marriage of Hinman (1997) 55 CA4th 988, 999, 64 CR2d 383.
The “best interests” the court must consider are those of the children for whom support is being ordered, not the interests of children from a parent’s subsequent marriage or relationship. 55 CA4th at 1001.
5. [§201.25] Imputing Income From Assets A court’s discretion to impute earning capacity to a parent is not limited to income from work. A court may also consider a parent’s ability to receive income from assets. Marriage of Dacumos (1999) 76 CA4th 150, 154–155, 90 CR2d 159. Just as a parent cannot shirk his or her parental obligations by reducing his or her earning capacity through unemployment or underemployment, a parent cannot also shirk the obligation to support his or her children by underutilizing incomeproducing assets. 76 CA4th at 155. See Mejia v Reed (2003) 31 C4th 657, 671, 3 CR3d 390 (court may take earnings from invested assets into account when computing child support).
In addition, a court has the discretion to impute income to a parent’s non-income-producing assets. Marriage of Destein (2001) 91 CA4th 1385, 1388, 1393–1397, 111 CR2d 487 (rate of return imputed to non-incomeproducing real estate assets that were parent’s separate property). A court’s discretion to charge a reasonable rate of return to an investment asset does not depend on an income-producing history for the asset. 91 CA4th at 1394. This rate of return must, of course, be established, generally by expert testimony. See 91 CA4th at 1397–1398.
A court may consider a parent’s “substantial” wealth under the principles that a parent must support his or her children according to his or her circumstances and station in life and according to his or her ability, and that children should share in their parents’ standard of living. Fam C §4053(a), (d), (f); Marriage of Cheriton (2001) 92 CA4th 269, 292, 111 CR2d 755; Marriage of Berger (2009) 170 CA4th 1070, 1084–1085, 88 CR3d 766.
[§201.26] Exclusions From Income “Gross income” does not include the following:
• Child support payments, including any child support received for children from another relationship. Fam C §4058(c).
• Public assistance, when eligibility is based on need. Fam C §§4058(c), 17516. See Elsenheimer v Elsenheimer (2004) 124 CA4th 1532, 22 CR3d 447 (Supplemental Security Income (SSI) benefits constitute income derived from a need-based public assistance program).
201–25 Child Support and Spousal Support §201.26 JUDICIAL TIP: Although SSI is need based, basic social security retirement benefits are not, and thus are included in gross income.
• Social security disability insurance benefits, under the explicit language of Fam C §17450(c)(2). Marriage of Hopkins (2009) 173 CA4th 281, 290, 92 CR3d 570.
• Student loan proceeds. Marriage of Rocha (1998) 68 CA4th 514, 516–517, 80 CR2d 376 (proceeds are not income because of expectation of repayment).
• Life insurance proceeds. Marriage of Scheppers (2001) 86 CA4th 646, 649–651, 103 CR2d 529.
JUDICIAL TIP: Interest income from life insurance proceeds, calculated at a reasonable rate of return, may be included in gross income.
• Gifts. Marriage of Schulze (1997) 60 CA4th 519, 529, 70 CR2d
488. However, the court has discretion to consider recurring gifts of money as income. Marriage of Alter (2009) 171 CA4th 718, 735, 89 CR3d 849.
• Entirety of undifferentiated personal injury awards. Marriage of Heiner (2006) 136 CA4th 1514, 1522, 39 CR3d 730 (the entirety of an undifferentiated lump sum personal injury award is not income for purposes of calculating child support, but the determination as to whether some portion of the award should be allocated as parental income is left to the discretion of the trial court).
• Payments from personal injury settlement annuities when the settlement states that all sums paid constitute “damages on account of personal injuries or sickness.” Marriage of Rothrock (2008) 159 CA4th 223, 232–233, 70 CR3d 881. However, a settlement agreement may spell out expressly or impliedly the different components of future payments by, for example, labeling a portion as reimbursement for lost past or future wages. Also, events leading up to the settlement, including litigation proceedings, may demonstrate that parts of a settlement were allocated to various components. The party challenging what appears to be an undifferentiated settlement bears the burden of proving it otherwise. 159 CA4th at 235.
• Inheritances. County of Kern v Castle (1999) 75 CA4th 1442, 1445, 1451, 89 CR2d 874 (parent’s inheritance is not income for purposes of calculating his or her annual gross income under Fam C §4058(a)(1), but may be considered under Fam C §4058(a)(3) to extent it has reduced parent’s living expenses).
§201.27 California Judges Benchguide 201–26 JUDICIAL TIP: As with life insurance proceeds, the court may calculate a reasonable rate of return for interest income on the principle of a gift or inheritance and may include that in gross income. See §201.12.
• Spousal support received from a party to the child support proceeding. Marriage of Corman (1997) 59 CA4th 1492, 1499– 1500, 69 CR2d 880.
• Noncustodial parent’s share of increased equity value of his or her family home. Marriage of Henry (2005) 126 CA4th 111, 116–119, 23 CR3d 707; Marriage of Williams (2007) 150 CA4th 1221, 1244–1246, 58 CR3d 877. However, a showing of special circumstances may justify a departure from guideline child support under Fam C §4057(b). 150 CA4th at 1245–1246.
• Noncustodial parent’s unliquidated stock received in connection with the sale of business in which he or she was majority stockholder. Marriage of Pearlstein (2006) 137 CA4th 1361, 1375, 40 CR3d 910.
H. [§201.27] Deductions From Income The court must compute each parent’s annual net disposable income by deducting from the parent’s annual gross income the actual amounts
attributable to the following:
• Federal and state income taxes. Fam C §4059(a).
— Amounts deducted must be taxes “actually payable” after considering appropriate filing status, and all available exclusions, deductions, and credits. That number may differ significantly from the taxes withheld on a party’s pay stub because people often underwithhold or overwithhold taxes.
Taxes must bear “an accurate relationship to the tax status of the parties (that is, single, married, married filing separately, or head of household) and number of dependents.” JUDICIAL TIP: The certified child support software packages are programmed to calculate a party’s actual withholding responsibility.