Child Support Problems For The Super Rich

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Joseph and Maryanne divorced in 2000.  Joseph agreed to pay $8,500 per month for chile support for their 3 children and $12,000 per month nonmodifiable spousal support to Maryanne for 10 years.  At the time Joseph’s income was $800,000 per year from the  company he founded.

In 2007, Maryanne filed a motion seeking increased child support for remaining minor child because Joseph had sold his company, netting $100,000,000.00.  Maryanne had no debt, and she had$14,000,000.00 in assets, of which half were liquid. She had remarried. She declared her living expenses to be $43,000.00 per month.  Joseph asserted he had $11,000.00 per month in salary, $225,000.00 per month in investment income, and $427,000.00 in losses primarily from start-up businesses in which he had invested.  Joseph had liquid assets of $64,000,000.00.

If Joseph’s business losses were excluded, Joseph had income of $229,000.00 per month.  If they were included, his income was negative $236,000.00 .  The trial judge concluded that like the husband in In re Marriage of Berger (2009) 170 Cal.App.4th 1070, Joseph was trying to shield a portion of income from support.  Joseph maintained an affluent lifestyle despite business losses. The trial judge declined to consider Joseph’s business losses and calculated child support based solely on Joseph’s positive income.  Child support was increased from $4,000 (for the one remaining minor child) to $18,000 per month.  Joseph appealed, arguing the trial court never made a guideline calculation pursuant to Fam. Code §4058. The Court of Appeal affirmed.  When business losses are high, court may use “earning capacity” rather than actual earnings in calculating child support pursuant to Fam. Code §4058(b).

Joseph argued that by excluding his losses when calculating child support, the court deviated from guideline without making the findings required by Fam. Code §4057.  The Court of Appeal disagreed, holding that the trial court was permitted by Fam. Code §4058 (b) to utilize Joseph’s “earning capacity of a parent in lieu of the parent’s income.”

“Although section 4058, subdivision (a)(2) provides that gross receipts from a business are to be reduced by expenditures required for the operation of the business in calculating income under subdivision (a) of that section, subdivision (b) of section 4058 provides a trial court with discretion to determine a parent’s annual gross income on a basis different from that parent’s actual income. Pursuant to subdivision (b), the court ‘may, in its discretion, consider the earning capacity of a parent in lieu of the parent’s income, consistent with the best interests of the children.’ Thus, although subdivision (a) of section 4058 instructs the trial court to deduct the operating expenditures of a parent’s business in determining that parent’s actual income, the court is not required to utilize a parent’s actual income in setting child support if it determines that the parent’s actual income does not reflect that parent’s earning capacity. The trial court thus was not required to use [husband’s] actual income in the guideline support formula…. Rather, it was within the court’s discretion to consider [husband’s] earning capacity in lieu of his actual income.”

Trial courts have great latitude when calculating child support orders to ensure that award is in child’s best interests:

“‘To ensure that child support orders are made in the best interests of the children, section 4053, which provides for implementation of the statewide uniform guidelines for child support, “gives a court great latitude in applying its principles to individual cases. In outlining relevant considerations, the Legislature did not limit the guidelines simply to parental income from salary, return on investment, or from any other particular source. Rather, it adopted the broader concepts of station in life, ability to pay, and standards of living.” [Citation.] Consequently, “our Supreme Court has refused to read any limitation into a trial court’s discretion to impute income when in the child’s best interests.”‘”

Please click here to read the original Sorge opinion.

Please visit Hardinglaw.com for more information on California child support.

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