Imputing Income to a Party for Spousal Support Purposes
Spousal support is one of the most complex issues in a divorce case. A party’s right to receive spousal support depends on how much money each party has. The party responsible for paying spousal support has an interest showing the court that they aren’t very wealthy. The party requesting spousal support has an interest in maximizing the calculation of the other party’s income. In some circumstances, an analysis of the parties’ respective financial conditions and wealth will justify the court in imputing certain assets to a party’s income for the purpose of determining spousal support.
Rules for Determining Spousal Support
Under California Family Code § 4320, courts are required to consider several factors when determining the terms of a spousal support obligation. In general, the spousal support factors relate to whether the spouse requesting support has a need for spousal support payments, while the spouse to pay support has an ability to pay spousal support.
One of the basic factors for determining spousal support awards involves consideration of the parties’ respective assets and liabilities. In California, the parties typically include an “income & expense declaration” with their filings. Form FL-150 is the judicially approved form for listing the party’s properties, assets, debts, and obligations. However, courts do not solely rely on what a party includes on their FL-150 (Income & Expense Declaration).
One of the spousal support factors requires courts to evaluate “the ability of the supporting party to pay spousal support, taking into account the supporting party’s earning capacity, earned and earned income, assets, and standard of living.” As a result, courts may consider a party’earning capacity, based on things such as a party’s training, education, knowledge, and professional licenses.
Imputing Income for Determining Spousal Support
The imputation of income is an act where courts essentially include a certain asset to a party’s income. For example, under Family Code § 4058(b), courts are allowed to can consider a party’s earning capacity in place of income when determining child support, to the extent that doing so would affect the best interests of the parties’ children. The provision is important because courts specifically rely on a party’s adjusted gross income to calculate child support obligations. For example, a party might intentionally change jobs to minimize the amount of their adjusted gross income. However, if a party minimized their financial resources for purposes of minimizing their spousal support obligation, the court can calculate their adjusted gross income based on the party’s earning capacity.
When it comes to spousal support, courts are also required to consider each party’s earning capacity. Unlike child support, courts evaluating spousal support are not specifically authorized to make quantitative adjustments to a party’s adjusted gross income based on their earning capacity. As a result, courts generally will not count amounts associated with a party’s retirement accounts as income for spousal support purposes. This allows individuals to shelter assets from spousal support obligations by placing them in a different account. However, if a party sold property to reduce their own interests and assets in order to minimize or avoid paying spousal support, courts have imputed the party’s earning capacity to their income for spousal support purposes. If a party is working at their full earning capacity, courts will not impute it to a party’s adjusted gross income.
Determining whether a party’s income capacity should be imputed to their income can be a complex financial matter necessitating the use of financial experts, such as forensic accountants and Certified Public Accountants. As a result, it is highly recommended that people retain a professional legal representative for professional counsel and advice on issues concerning spousal support.
Contact the Law & Mediation Firm of Klueck & Hoppes, APC Today
Does your divorce or family law case involve a complicated financial issue, such as the imputation of income for spousal support purposes? If so, you should consult an experienced attorney from the Law & Mediation Firm of Klueck & Hoppes, APC. Our team of attorneys is here to guide you through family law proceedings to help ensure you understand the merits and disadvantages of a particular course of action.
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