What is Imputed Income in Child Support?
Some parents may try to deliberately reduce their income to avoid the full responsibility of paying child support, or to increase the amount of child support that the child’s other parent is court-ordered to pay. Under California law, both parents are held equally responsible for providing financial support to their children. Accordingly, the court will consider each parent’s income when calculating the fair amount of child support that each parent will need to pay. Income is defined very broadly in the Family Code.
Child Support is Not a Bartering Chip. It is Calculated Using a Sophisticated Formula
The formula for setting support obligations has been carefully built in order to serve the child’s best interests and represents what California law has set as a necessary baseline for what a child needs. It is not a bartering chip. It is not unheard of for a parent to want to use child support as such. For example, one parent may say to the other, “I will release you from all child support responsibility if you sign over full custody to me.” It is unlikely any California court would order this. This arrangement harms the child’s best interest in financial terms.
Imputed Income Defined
Income is very broadly defined in the Family Code and can include income that is not actually realized. For instance, the court can “impute” income to one or both parents, which, in effect, it is saying that the parent COULD be earning X amount of money. The court then awards child support based on X, not what the parent claims to be earning.
For example, let’s say that a parent is making $20 an hour as a bakery worker and then chooses to quit that job and live with their parents when their spouse files for divorce. When reporting income to the court for child support purposes, the parent states that they have no income, since they have quit their job and not secured a new one. This parent should expect that the court will likely impute income to them, as the person will likely be seen as voluntarily unemployed/underemployed.
The same analysis applies if a parent ends up choosing a lower paying job than a higher paying one for which s/he would qualify for. For example, let’s say that a parent has years of experience as a software engineer but chooses to quit that job and work as a bakery worker making $20 an hour. This parent should expect that the court will likely impute higher income to them given their work experience and background as a software engineer.
Courts can also impute income “underutilized” or “non-performing” assets. This is to prevent parents from tying up their money in assets that produce no income to reduce their child support obligation. In this situation, courts will typically impute a reasonable rate of return on the assets. For example, if a parent has a large stock portfolio that is underutilized, meaning the historical rate of return is below a reasonable rate of return, the court may impute a reasonable rate of return of like 4% on the $100,000. This can also apply to large real estate portfolios.
When Courts Impute Income
If the court finds that a parent with a child support obligation deliberately quit or lowered their income, the court could base their child support award off the person’s old salary information, or even non-performing or underutilized assets.
California courts assess three main factors when determining if income should be imputed:
- The parent’s ability to earn income
- The parent’s opportunity to earn income.
- The parent’s willingness to earn income.
Clearly, if a parent is struggling with ability or opportunity to work, the court will weigh that differently than a parent who is simply demonstrating an outright unwillingness to work.
Imputed Income Amount
Courts assess a parent’s “earning capacity” when deciding how much income to impute. This will likely include employment history, and could factor in a vocational expert report. If an appropriate amount cannot be determined, the court may impute minimum wage.
Contact Cardwell Steigerwald Young, LLP
If you are seeking more information about imputing income in your own family law matter, contact the experienced San Francisco child support attorneys at Cardwell Steigerwald Young, LLP.
Sources:
leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=4065.&lawCode=FAM
courts.ca.gov/documents/ab1058-2016-income.pdf
