Posted on April 14, 2009 by Eric S. Solotoff

ANOTHER INTERESTING DECISION REGARDING CHILD SUPPORT IN HIGH INCOME SITUATIONS

On April 13, 2009, the Appellate Division issued a decision in the case of Cadavid v. Nieto which dealt in large part with the issue of child support in high income cases. To view the full text of the case, click here. 

We have previously blogged on this topic.  To view links to those prior posts, click here , here, and here.

In the Cadivad matter, the father appealed an Order requiring him to pay almost $9000 per month in child support.  Both parties were  immigrants from Colombia. The father is the successful founder and president of eight schools that teach English as a second language located in New Jersey, New York, Florida, and Canada. He also owns interests in several commercial properties in New Jersey and Florida as well as 4 homes.  In a June 2007 loan application, the father valued his various business interests at $8 million and the fair market value of his real estate holdings at $5.2 million. The trial judge calculated the father's annual income for purposes of child support at approximately $2 million annually.

On the other hand, the mother was a full time homemaker but had an associates degree from Bergen County Community College.

The parties had 3 children under age 10 at the time of the proceedings.

The parties' divorce in 2000.  In the divorce agreement, the father agreed to pay $100,000 in support per year which included $20,000 in limited duration alimony, as well as other expenses related to the marital home where the mother continued to reside, etc.  In 2003, after the parties' third son was born, the parties amended their agreement to increase child support by $300 per month.

In 2007, prior to the expiration of her alimony, the mother filed a motion to modify support and expressed her intention to move with the children from Bergen County to Warren, New Jersey.

After a several day trial, the trial court awarded the mother $8,839 per month in child support for the three children. The court also required the father to pay for the boys' summer camp costs and counseling expenses, but rejected the mother's request that he also pay for their other extracurricular expenses. The trail court further ordered the father to obtain a $2 million life insurance policy for the benefit of the children, and fixed arrears in the amount of $7,716. Finally, the court  awarded the mother $40,000 in counsel fees.  The father filed this appeal.

The father argued that the trial court unreasonably declined to impute income to the mother and instead was obligated to allocate to the mother a defined portion of the children's financial needs.
The Appellate Division affirmed, agreeing with the trial court that imputation was not necessary given that the limited income that could be earned by the mother would be insignificant compared to the child care expenses she would have.  Specifically, the Court held:

Given the mother's limited potential earning capacity and lack of prior work experience, as well as the benefits of the mother personally attending to the boys' transportation and other after-school needs, there are reasonable grounds for the
judge's decision not to impute net positive earnings to the mother. The judge essentially determined that the child-care and other expenses that the mother would incur if she were employed would substantially eviscerate her potential income.
The judge observed that the mother drives the children "wherever they have to be when they have to be there on all of the extracurricular activities," and that her efforts in that regard "lessens the financial burden on [the father]." As the judge noted, the mother is "putting in the time, the energy, and many other things in order to take care of these children, [services] that otherwise someone else would have to be paid to do." The judge's reasoning is neither arbitrary nor an abuse of discretion, although we note that the father remains free to seek prospective relief on the imputation issue if circumstances materially change.

The fatter also objected to the shelter expenses on the mother's CIS because she lived in the new home with her fiance and his own son.   Endeavoring to remove the incidental benefit to the fiancé and his son for these shelter expenses, the mother generally applied a two-thirds (or four-sixths) fraction to the household costs for utilities, snow removal, cable access, and other
shelter items.  The mother also acknowledged, both on her CIS form and in her testimony, that the two-thirds fractional share for these items should be further reduced by applying a multiplier of three-fourths, so as to segregate out the children's portion from her own portion. The trial court and Appellate Division found this to be reasonable.

Similar analysis was given regarding mortgage expenses and real estate expenses.

The law is clear that in this case, if the other parent gets an incidental benefit of the child support, the Court is not offended.  What can be taken from this case is that the CIS was crucial in setting forth the children's expenses.  Moreover, by applying reasoned proportions to shared expenses, they will be sustained.

 
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Posted on January 2, 2009 by Eric S. Solotoff

APPELLATE DIVISION AFFIRMS LIMITATION ON ADDITIONAL CHILD SUPPORT IN AN OVER GUIDELINES CASE

On December 31, 2008, the Appellate Division released the opinion in the case of Cardell v. Kirby.  In this case, child support over the guidelines was limited to a nominal amount by the trial court and the Appellate Division affirmed.  To see the full opinion, click here.

In this case, the defendant-father lived in NY with his wife and two children.  As some point, he became estranged from his wife and had a relationship with the plaintiff-mother  that resulted in a child born in November 2006.  Subsequent to that time, he resumed living with his wife.  The defendant seemingly earned or had the ability to earn more than $500,000 per year.  In fact, in 2006, he earned  just under $700,000 and the plaintiff earned just under $87,000

The plaintiff filed a complaint and motion seeking, among other things, $4,000 per week. The defendant began paying support of $2,600 per month and filed a cross motion seeking to limit his support to that amount.

The judge determined that the top child support due from the defendant to the plaintiff, inclusive of his share of child care, was $632.00 per week.  Noting that he had to add some amount over that, he added $17.50 per week to pay a portion of plaintiff's loan that was required to renovate her
apartment to accommodate the parties' daughter.  The plaintiff appealed.

The Appellate Division noted the established principle that the needs of an infant are less than those of teenagers.  The Court also noted that "a balance must be struck between reasonable
needs, which reflect lifestyle opportunities, while at the same time precluding an inappropriate windfall to the child or to the custodial parent."  The Court disagreed with plaintiff's contention that the court erred by not considering the lifestyle that her daughter is entitled to, based on defendant's significant earnings.

The Court also rejected plaintiff's assertion that the court erred by failing to recognize that the amount of expenses declared in her December 2006 Case Information Statement only represented what she could then afford, "at a time when defendant was not paying support."  The Court noted that the trial judge correctly determined the child support based upon the information that it had before it at the time.

Read together, it seems as though plaintiff may have made a mistake by failing to include a CIS with not only her actual budget, but one that included a proposal of what her expenses would be if she was receiving the support that she sought.  Specifically, the quote from the reported Walton v. Visgil case, restated in the Isaacson case, probably should have been heeded.  The quote is as follows:

where as here, the children are entitled to share in a parent's good fortune, the custodial parent's budget should be broken down into two parts: the reality-based component dictated by his or her income and the added projections which will, in fact, allow the children to share in the other parent's financial gain. This could include, by way of example, private school tuition, private tutoring, summer camps, music or art lessons, sports clinics, vacations, study abroad, and the provision of transportation for a child who drives, to mention only a few possibilities. It could also include help to make the family home more presentable, assistance with the cost of a family car, or a larger amount of money for a teenager's clothing and incidentals. As we have said, these are only examples. What is important is that sufficient thought, effort and information is put into the two-part budget to give the trial judge a basis on which to act under Dunne and Zazzo.

Of course, in a case of a 9 months old, it is probably hard to come up with these types of extras.

 

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Posted on March 31, 2008 by Eric S. Solotoff

No Maximum When Determining Child Support in High Income Cases

      In high-income cases, determining the appropriate level of child support is a difficult - and critical task for the courts.  Part science, part art, most judges rely on both detailed financial disclosures adn a qualitative assessment of what is truly in the child's best interests. In the vast majority of low- and middle-income cases, judges follow the advice of the New Jersey Child Support Guidelines, which define child support based on the family’s net income. In 2006, the Guidelines were revised include more high-income situations. Many feel this formulaic approach was more hindrance than help because discretionary spending patterns can vary widely. 

       The New Jersey Supreme Court’s revised the Child Support Guidelines effective September 1, 2007 – specify only a minimum support level (with no guidance on an upper limit) for families with net incomes exceeding $187,000. Previously, the Guidelines defined both the support level for families with net incomes exceeding $229,840. When the new Guidelines are in effect, a large number of cases will no longer be subject to guidelines on the maximum level of support, which should result in awards that are more in keeping with the parties’ lifestyles.            

        Approximately 10 years ago, the New Jersey Child Support Guidelines were overhauled to include more families. Prior to those changes, only cases in which the combined net income (i.e., the net after-tax income of both parents) was under $52,000 per year fell within the Guidelines. The changes significantly raised the upper limit of the Guidelines to include families whose combined net income was as much as $150,800 per year ($2,900 per week). The Guidelines were not changed again until 2006, when the upper limit was raised to cover families up to $229,840 ($4,420 per week). The goal was to make the Guidelines more inclusive.

            However, the changes had unintended consequences. While there were some modest increases in child support awards at lower-income levels, support actually decreased at the upper levels – which prompted an immediate outcry from the Family Law Section of the New Jersey Bar Association. Others argued that strict Guideline calculations did not make sense in higher-income situations where discretionary spending patterns would not necessarily be captured in the economic data on which the Guidelines were based. 

          The Supreme Court took note and accepted the recommendation of its Family Practice Committee to set the top of the guidelines at $187,000 per year ($3,600 per week) in combined net income. The Court expects that the new limits will cover 90 percent of the state's child-support cases.

Parameters in Determining Child Support Where Income Exceeds the Guidelines

The Guidelines may not be extrapolated for cases that exceed the upper limits; instead the upper limits of the Guidelines are intended as a presumptive minimum of child support and an additional amount must be added to that amount.  In determining the specific level of support, the court must consider the following:

  • the needs of each child
  • the standard of living and economic circumstances of each parent
  • all sources of income and assets of each parent
  • the earning ability of each parent, including educational background, training, employment skills, work experience and custodial responsibility for each child (including the cost of child care), as well as the length of time and cost required for each parent to obtain training or experience for appropriate employment
  • the need and capacity of the child for education, including higher education
  • the age and health of the child and each parent
  • the income, assets and earning ability of the child
  • the parents’ responsibility for the court-ordered support of others
  • reasonable debts and liabilities of the child and each parent
  • any other factors the court may deem relevant.

            New Jersey Appellate Court rulings show that support awards in high-income situations must, at the simplest level, meet a child’s reasonable needs and reflect the family’s lifestyle. However, the rulings also make clear that awards should not constitute an inappropriate windfall to the child or infringe on the legitimate right of either parent to determine the appropriate lifestyle of his or her own child. 

Advice for High-Income Situations

            In high-income situations where the Guidelines do not define an upper level of support, the custodial parent should carefully assess the child’s needs and any accompanying costs. Specifically, the parent should supplement the Case Information Statement (the key disclosure document required by the State of New Jersey) with a detailed budget that outlines these costs. The budget should include specifics regarding the child’s needs as well as lifestyle enhancements, which may reflect either the status quo and/or what circumstances would allow. This budget can assist the court in determining an award in excess of the Guidelines’ minimum. 

            In addition to the normal expenses for food, clothing and shelter, the budget should consider the following (as applicable): private school tuition, private tutoring, summer camps, music/art lessons, sports clinics, vacations, study abroad, transportation for a child who drives, money to make the family home more presentable (particularly appropriate where the non-custodial parent’s ability to pay has greatly increased post-judgment), a family car, and a teenager's clothing and incidentals.

            The non-custodial parent can and should have a say, both as it relates to the values imparted upon the child(ren) by such luxuries and to the actual cost. If the non-custodial parent handled the finances within the marriage, then he or she may be better qualified to address the actual costs and would be well advised to create his or her own budget. 

      The custodial parent should not use the child support process as an opportunity to create an unreasonable “wish-list” for a child that neither suits the child’s well-being nor reflects the family’s lifestyle. The courts have been instructed to “be vigilant in providing for ‘needs’ consistent with lifestyle without overindulgence.” Some courts have dubbed this the “Three Pony Rule,” which states that “no child, no matter how wealthy the parents, needs to be provided more than three ponies.” [1], [2]

            Family law issues involve complex choices and decisions, and child support is no exception.

[1] The only exception is in the event that a non-custodial parent’s income and/or financial circumstance improve greatly post-judgment. In such cases, the children are entitled to share in the increased good fortune of a parent. The custodial parent should prepare a detailed budget that includes items, such as those mentioned above, that the children could enjoy if the child support were enhanced.

[2] Isaacson v. Isaacson, 348 N.J. Super 560 (App. Div. 2002)
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