Some prospective clients have the mistaken notion that calculating child support is an easy process. While it is true that the Statewide Uniform Guideline provides an algebraic formula for calculating child support, and software such as Dissomaster is used to perform the calculation, some sources of income that can greatly affect the final calculation are discretionary. In complicated child support cases where discretionary income is an issue, the advocacy of an experienced family law attorney can make a significant difference in the calculation.
Net disposable income is the key financial factor in calculating child support. However, in order to arrive at net disposable income, we have to determine the gross income of the parent. The sources of income in computing gross income fall into two categories: mandatory and discretionary income. The mandatory income are the sources of income that the court must include in computing gross income. The discretionary income are those which the court may or may not include.
Sources of Discretionary Income
Employee benefits or self-employment benefits may be included in the computation of gross income, depending on the discretion of the court. Such benefits may include, but are not limited to, the following:
- Car allowance or company car.
- Expense accounts, such as for meals and entertainment.
- Employee rent-free housing.
- Uniform allowance.
- Company credit cards.
- Unused vacation.
- Unused sick leave.
- Health and fitness or country club memberships.
- Medical reimbursement plan.
- Personal expenses paid.
- Stock options or ESOPs.
There are certain California cases that have held that trial courts have the discretion to treat any benefits as income to the extent that they reduce the recipient party’s living expenses. However, this approach is discouraged, since a blanket approach of such would go beyond what is contemplated by law. Most judges also avoid taking a blanket approach that includes anything that reduces living expenses as income.
The annual net disposable income figure is normally divided by 12 to determine the parent’s monthly net disposable income. However, if the calculation inaccurately reflects the actual or prospective earnings at the time of the support determination, the court may make appropriate adjustments to the disposable income figure.
Adjustment may be necessary when the parent has seasonal or fluctuating income, and the parent’s most immediate past monthly earnings do not reflect the inherent “ups and downs” in the earning cycle. In making an adjustment, the court must determine a representative time sample from which to calculate an average monthly income that is a reasonable predictor of the parent’s likely income for the immediate future.
The parent who is dependent on markedly fluctuating income, such as royalties, may ask the court to allow for a time sample longer than the usual 12 months. For example, a 2- or 3-year average might be better suited in this case, considering that royalties are likely to be the highest with a book’s initial release.
The allowance of the court for a longer time sample depends on the parent’s occupation. For instance, a 2 or 3-year average might be unrealistic for a commissioned salesperson because the resulting income figure may only reflect the past overall economy and not serve as an indicator of the salesperson’s immediate future income.
Care should also be taken to ensure that the time period isn’t too short. Consideration of too short a period may distort the income calculation, such as when a one-time commission or sale was paid during the short period.
Income of Parent’s New Spouse or Nonmarital Partner
The income of either the parent’s new spouse or non-marital partner is not included in determining or modifying child support. An exception to this is when there exists an extraordinary case in which excluding that income would lead to extreme and severe hardship to the child subject to the child support award.
There is an “extraordinary case” when any of the following instances occur:
- Voluntarily or intentionally quitting his or her work or reducing his or her income.
- Intentionally remaining unemployed or underemployed while relying on the income of the new spouse or non-marital partner.
If there is an extraordinary case that falls under the above-mentioned instances, the court should consider the income of the new spouse or non-marital partner in determining or modifying child support. The court must also consider whether including this income would lead to extreme and severe hardship to any child supported by the parent or by the parent’s new spouse or non-marital partner.