Tips and Techniques to Consider When Modifying Child Support

Most, if not all jurisdictions, follow the rule of law that “[a] party seeking to modify a child support obligation must demonstrate a material change in circumstances warranting the modification.”  Specifically, “there must be a substantial change in either parents’ income and financial status of the needs of the child.” Whether or not there has been a substantial change in circumstances must be scrutinized from the entry of the previous award.  After hearing both parties and the evidence, the court may modify and revise the previous judgment.  The court may consider reliable evidence of income, such as tax returns for prior years, check stubs, or other information for determining current ability to pay child support or ability to pay child support in prior years.  Most jurisdictions will have the burden of proof falling on the petitioning party.  In contrast, the non-custodial parent, or the paying parent (hereinafter “NCP”), will counter claim that the change in circumstances is only temporary or that the change is not a substantial one and is offset by additional issues impacting support. 

In the case of Funaro v. Kudrick, Mother petitioned for an upward modification of father’s monthly child support obligation.  Father appealed the trial court’s decision which granted that branch of the mother’s petition which was for an upward modification of the father’s monthly child support obligation.  The Court found the evidence Mother presented at the hearing established a change in circumstances due to the increased needs of the children, a decrease in her income, and a substantial improvement in the father’s condition.  As such, the Court held that income was properly imputed to the father given that his testimony concerning his income and expenses lacked credibility and also evidence that his finances were mingled with those of friends or family.  Similarly in Knight v. Knight, the Court found that evidence supported an increase in father’s child support obligation from $225 per month to $690.50 per month because Mother presented evidence  which included Father’s banking records which showed large deposits and expenditures for father’s business which also demonstrated father’s personal expenditures.  Mother’s evidence also showed that Father paid average of $9,700 a month in personal expenses in six months before final hearing, Father, in operating his business, intermingled business finances and personal finances, father did not present evidence, either for business finances or for personal finances, to counter mother’s evidence pertaining to his income and expenditures, and father did not make any effort to explain complicated evidence pertaining to his finances.

These are normally the “typical” modification of child support cases.  However, what if the custodial parent has also had an increase in their salary as well? How do you navigate this issue? No need to worry as this article is here to provide tips and techniques on navigating modification of child support when circumstances have uniquely changed for both parties.

TIPS AND TECHNIQUES TO AID IN YOUR CASE

1.       “Material” is the operative word here.

Several jurisdictions have followed the reasoning that “a small increase in the obligor’s income does not constitute a substantial change in circumstances.”  In re Marriage of Armstrong, Former Husband, Petitioner, filed a petition to modify child support payments to his former Wife, Respondent.  The trial court denied former Husband’s petition, ruling that “no substantial change in circumstances had been demonstrated justifying a modification of [P]etitioner’s child support from May of 2000 to May 2003.” The Appellate Court affirmed the trial court’s ruling. 

In summary, the court ordered Petitioner to pay child support in the amount of $1,250 per month based on the parties’ marital settlement agreement in July 1997.  The information provided on appeal revealed that Petitioner’s gross income was approximately $90,000 per year.  In February 1999, after the parties’ divorce, the Respondent filed a modification to modify the judgment.  Respondent asked the trial court to increase the amount of child support.   Following this petition, the court entered an order increasing support to $1,603 per month based on the parties’ agreement.

In April 2000, a year later after Respondent’s petition, Petitioner filed his own petition to modify arguing that his income had decreased from $90,000 to $60,000.  The court denied Petitioner’s petition reasoning that he had not changed jobs in good faith.  Notably, Petitioner did not appeal the court’s May 2000 order denying the modification and such May 2000 order was upheld.  In September 2002, Mr. Armstrong filed another petition to modify the judgment.  Petitioner testified that he was involuntarily terminated and that his gross salary was $66,661.56 per year.  At the same hearing, Respondent testified that she grossed $13,000 per year working for a high school.  This was a significant increase from her income of $3,400 per year in 2000.  Respondent also testified that the children’s expenses were greater than they had been three years earlier.  The trial court reasoned that there had been no substantial change in circumstances justifying a modification of Petitioner’s child support from May of 2000 to date.  The court reasoned that the increased income of the Petitioner substantially offset the increased income of the Respondent particularly when combined with the greater expenses presently for the parties’ three minor children.  The court further found both current spouses had the ability to earn substantial income and consequently, the motion to modify filed by the Petitioner was denied.  The Appellate Court affirmed the trial court’s decision reasoning that while Petitioner’s salary increased from $60,000 to $66, 661.56 which was a change in circumstances as was the increase in salary of the Respondent, the Court could not find that the court’s determination that a substantial change in circumstances had not occurred was against the manifest weight of the evidence.

Following the analysis in In re Marriage of Armstrong, it is not sufficient for obligor to argue that there has been a change in circumstances and as such, there is a need for modification of child support.  This is because there needs to be a substantial change in the circumstances since the court’s previous order.  Had the Petitioner in In re Armstrong filed his petition for modification on the premise of the original judgment where he was making $90,000 per year and was now making $60,000 that would probably have sufficed as a substantial change.  However, there were several agreements/court orders in between which cut against his argument that there was a significant change in his circumstances.  It is an important practice tip to remember that a Petitioner can only appeal the current order and not a prior order if arguing a change of circumstances.

Likewise, if the obligee or custodial parent files a petition for modification on the premise that the obligor is now making $66,661.56 and no longer $60,000, the obligor can make a good argument that this is not a material change of circumstances even that this is only a small increase in salary. “[A] small increase in the obligor's income does not constitute a substantial change in circumstances.” 

2.      Don’t forget to impute!

Another useful tip to consider is whether the increase in income was based on events that were known to both parties before the judgment of the trial court.  In Re Marriage of Salvatore, the Respondent Daniel Salvatore, appealed the denial of his petition to modify his child support obligation.  He argued the McHenry County circuit court's ruling was erroneous because there had been a substantial change in circumstances since the dissolution of his marriage to Petitioner, Brenda Salvatore.  Namely, Daniel argued that his child support obligation should be decreased based on Brenda's income from her recent employment. The Court of Appeals affirmed the lower court’s decision.

Respondent first argued that, because Brenda was unemployed and earning zero income at the time of the judgment of dissolution, any income she earns from her new job is indeed relevant to establishing a substantial change in circumstances.  As aforementioned, a party's increased income does not constitute a substantial change in circumstances when the increase was based on events that were contemplated and expected by the trial court when the judgment of dissolution was entered.

Using this reasoning, if it is that the potential material change in circumstances was known or at least contemplated before the judgment of the trial court was entered then a party cannot later “rely on the occurrence of an event that [they] contemplated when [they] negotiated these other contractual obligations to establish a substantial change in circumstances that would trigger a downward modification of [their] child support obligation.”  In re Marriage of Salvatore, the Court found that Daniel knew that Brenda worked at two dental offices in the years prior to the judgment of dissolution.  In addition, the pleadings also reflected that Brenda worked during the marriage as a registered nurse.  As such, Daniel should have contemplated Brenda’s increase in income being that she was “fully capable of gainful employment as she [was] a licensed registered nurse who worked throughout the parties’ marriage.”

The case of In re Marriage of Salvatore, without expressly stating such, highlights the importance of imputation of income especially in cases where the custodial parent’s employment history is known by the NCP as well as knowledge of any certifications or licenses that will allow the custodial parent to seek gainful employment.  However, it is important to note that even if such events are known and contemplated, the court will still consider the “financial resources and needs of the custodial parent.”

The earning capacity standard may even be applied in situations where a payor has left a high-paying position in good faith. In In Marriage of Ilas, a California case, the supporting spouse quit his job as a pharmacist to enroll in medical school. The Court held that although the payor did not quit his job in bad faith, he was nonetheless held to the earning capacity standard and the Court considered his earning capacity when calculating support. One case where the payor was able to take a lower paying position was Marriage of Meegan, in which the Court held that where the payee was capable of supporting herself, the Trial Court properly terminated the payor’s obligation when he voluntarily resigned a high-paying job to enter the monastery.  The Meegan case states that there are no clear rules for these cases and each situation must be analyzed on an individual basis. It has been suggested that the courts, in what seems to be an act of self-preservation where the Payor experienced extreme depression, would expand the holding of Meegan to allow a highly paid attorney to accept a position on the bench and reduce support accordingly. Payors who are not considering entering the monastery or taking a position as a judicial officer, should seriously consider consulting their attorney before making career changes because even though their income may be significantly reduced, their support obligations could remain the same.

3.      More Money, More Problems

Another tip to consider when a non-custodial parent has had an increase in income are their expenses and/or any additional circumstances.  This is particularly true for self-employed spouses. A court can deduct depreciation, tax credits, or any other business expenses when calculating self-employment income. But it is important to remember that deductions from income when calculating net resources are different from deductions from adjusted gross income when calculating federal income tax. However, some of the “business expenses” may actually be benefits received by the spouse that could be added back in to an income determination – vehicles, cell phones, rents paid for home office. You will also want to determine if any “business” expenses, i.e. credit card payments, food, clothing, cleaning bills, etc., are actually personal expenses of the spouse merely being paid by the entity and written off as expenses.

While athletes may earn a tremendous amount of income, the paying parent should also examine the lifespan of his or her career. In cases involving parents who are in high income professions that have limited lifespans, such as professional athletes, there is a growing amount of nationwide precedent as courts have recognized the particular concerns associated with allowing for the vast differences in projected future income when compared to present income of professional athletes.  Athletic careers are unlike many other careers because of the kind of preparation needed to play at a high level and the limited duration of these careers. In one case, the court found “compelling in the instant matter is appellant’s very high but transitory income as an NFL player.”  In another, the Court of Appeals of Ohio, Second Appellate District found that a monthly award from the trial court of almost $15,000 “is appropriate due to the limited life-span of the Defendant’s earnings.” Later, the same court suggested that the trial court did not abuse its discretion in its award, noting that “Douglas’ ability to command a multi-million dollar salary likely will be limited to the relatively short duration of a career playing professional football.” Elsewhere, a court recognized the “obvious instability” of employment as a professional athlete, saying that a career as a professional athlete is “extremely speculative and could be cut short at any time.”  Because of the known transitory nature of income of professional athletes, courts have begun to set aside money in various ways in order to allow for a projected future drop in income. The same could be argued for any high net income profession with limited life expectancy. In Douglas, the court required that 30% of the award, just over $4300, be paid to the custodial parent, with the other 70% to be placed in a jointly administered trust for the future needs of the child.  Other courts have provided for 40% of a child support award to be paid to the custodial parent, with the other 60% overseen by a legal guardian of the child’s property.  This award to trust to be held for the child’s benefit presents a practical opportunity to provide for the child long-term.

Conclusion

There are a variety of factors to consider when looking to modify support. The biggest commonality is determining if there has been a material and substantial change of circumstances, but beyond that, looking to the individual factors in your case and being creative will aid both you and your client.