The word discretion is often used by family law attorneys and judges and imputing income to a parent in an child support case is one area where the family court has wide discretion. That discretion however must bear a resemblance to reality and must be based on real evidence and facts and express findings.
Imputation of income on child support cases often comes up when one parent claims the other parent refuses to work and earn an income or is under employed. However, the issue of imputation of income is not limited to earned income from employment. The court also has the discretion to impute passive income on investments, such as imputation of an interest rate to a liquid fund.
Whether or not the imputation of income is to earned or unearned, this area of family law causes confusion and the Family Court’s decision can vary so much from judge to judge. In this article, our child support attorneys will walk you through how and when the court will impute income in child support cases. In a future article, we will specifically address the issue of imputation of income in spousal support situations.
In California child support cases, the court can consider earning capacity in lieu of (which means “instead of”) income.
In other words, if a parent is unemployed or underemployed, the court has the discretion to assign an income to that parent that the parent would otherwise earn consistent with their earning capacity, ability and income earning opportunities. The family court can only exercise this discretion so long as a parent’s earning capacity is consistent with the child’s best interests.
The Family Law Court must make affirmative findings on current ability and opportunity to earn income. It cannot weave an income number (and therefore a chid support number) out of thin air simply because it believes a parent could or should be employed. The family court does not need to find a parent’s refusal to work or inability to work to be in bad faith. Simply being unemployed or underemployed when the parent has the current ability and opportunity to earn income is sufficient to impute income.
Commonly, family law judges imputed minimum wage income to an unemployed parent who refused to work. While that was very common while the economy was good, it becomes less so when the economy suffers and unemployment increases.
Imputed income for a California child support case is not limited to employment.
The family court can also look at income producing assets and compute a reasonable rate of return to historically non-income producing investment assets. How this is applied in family court once again varies from judge to judge. If a particular investment, such as a stock portfolio, is returning a rate of return on the investment, most family judges will not second-guess or question whether or not that rate could be higher. That is because family law judges are not qualified to make investment decisions and generally cannot rule on such issues without expert testimony.
However, if money that could be placed in the bank or in an investment account is not and does not earn any interest whatsoever, the family law judge does have the discretion to assign a reasonable rate of return on that investment.
Can the court impute income in a California child support matter and add that income to what a parent earns from employment?
The short answer is not normally. The imputation of income should be instead of the actual income. To add an imputed income on top of what a parent earns from employment would not create a guideline child support number and would give the other parent a windfall. On the other hand, the family law court has the discretion to add to the earned income that of unearned income, such as a rate of return from investments. That is because the imputation of unearned income has nothing to do with a parent’s efforts to become employed or actual earnings from employment.
Finally, the court must tax the income that it includes and cannot abuse its discretion in deciding gross income as nontaxable for child support cases. That is because to do so would be inconsistent with California guideline support which automatically taxes gross income before computing a child-support number.
The issue of imputation of income in child support cases needs an experienced and top orange county child support attorney.
Self represented parents, almost without exception, cannot handle such issues in court because they will not know how to present the law and the facts on the imputation issues.
If you have a case where you believe the other parent should be imputed income due to unemployment, underemployment and/or a return on investment or you face an argument by the other parent’s lawyer that income should be imputed to you, you owe it to yourself to contact our top child support attorneys for help. We are available for a consultation and offer reasonable fees and smart and affordable representation.