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NJ Family Legal Blog Pertinent Information As It Relates To New Jersey Family Laws

A SAVINGS COMPONENT IN CHILD SUPPORT?

Posted in Child Support

I have previously blogged about the permanent alimony , imputation and lifestyle aspects of the Gnall case decided by the Appellate Division last week.  The last interesting aspect of Gnall was the treatment of child support in an over guidelines case, specifically, college savings.

College Savings Stock Photo*Image courtesy of FreeDigitalPhotos.net

Remember from the prior posts that in this case, the husband was earning well over $1 million dollars and $65,000 was imputed to the wife, plus alimony. The trial court calculated a basic support award, using the Child Support Guidelines of $997 per week. The judge further ordered a supplemental award of $19,200 per child per year, from which the maximum allowable federal gift tax exclusion was to be deposited into each of the children’s existing UGMA for higher education, and the balance remitted to the wife in equal monthly installments.  Both parties appealled with the wife arguing that it was too low and the husband arguing that it was too high.  The Appellate Division remanded because it found the fact finding to be lacking.

Of note, the wife objected to the portion of the support that was supposed to go toward college savings, instead arguing that she should have and control all of the money.  In response to that argument, the Appellate Division held:

Even though a supplemental support amount in addition to the guideline’s base amount is authorized because of the parties’ high level of income, the judge must identify the nature of the children’s supplemental needs to be satisfied by the supplemental support awarded. See Caplan, supra, 182 N.J. at 272 (noting that the trial court may take any reasonable approach in arriving at an appropriate award); Strahan, supra, 402 N.J. Super. at 309-10 (same). We reject claims that the judge improperly considered the parties’ past practice of funding the children’s anticipated higher education costs through annual deposits into the UGMA accounts. See Strahan, supra, 402 N.J. Super. at 311 (criticizing an above-guidelines child support award absent evidence of some “marital standard” regarding “the way the parties treated the children”). We merely require the court to express those needs, in addition to the annual past practice of saving for the children’s education, to be satisfied by the supplemental support award. (Emphasis added).

While court’s are vested with the authority to set up trusts for children’s future needs in the rare case, given the income and assets, it is curious that it was done here.  It is also curious that an UGMA account would be used, since at 18, arguably the money is the children’s and it cannot be compelled to be used for college (though people use UGMA and UTMA accounts for this all of the time).  It also ignore the perhaps more beneficial college savings vehicle that is a 529 account. Moreover, depending on the perspective, it is potentially requiring the children to pay for their own college when there is no apparent need for that given the parents’ incomes and assets; is requiring the wife to pay for college out of her child support and/or in lieu of receiving child support; or is requiring the husband to prematurely fund the college obligation before the issue of college is ripe.  If his circumstances later substantially change for the worse, he has perhaps funded more than his proportionate share.

On the other hand, it appears that the court was met with the dilemna of knowing that it had to supplement the basic child support award and wanting to do so because of the husband’s seven figure income, but being unable to justify a greater award because the wife (or her lifestyle expert) did not show enough additional “need” for the support over the guidelines.  Is the issue what the lifestyle was, or what the wife would do with the extra money if she had it (and remeber, the income went up substantially, both during the last few years of the marriage and again post-complaint)?  If the law says that the children are entitled to share in the increased good fortune of their parents, how was that considered in this case, especially if the analysis was of marital lifestyle.

All in all, Gnall provided a lot of interesting points for lawyers and litigants to chew on, both in terms of how issues were decided and possible contradictions with other cases.  It will be interesting to see whether this goes up to the Supreme Court, or provides fodder for alimony reform.

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Roseland and Morristown, New Jersey offices though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or esolotoff@foxrothschild.com.