Beyond The Numbers – California Spousal Support

What Goes Into Calculating Spousal Support? How Can You Ensure The Amount Is Fair?

The thorniest issues to resolve in a divorce involve finances. The details matter in answering questions regarding income, and it is often more complicated than reviewing the numbers on a tax form. How much does your business owner spouse actually earn? What sort of lifestyle did you enjoy while married? What is your spouse capable of earning? Can you force a spouse to go out and get a job? The answers to these questions matter and determine whether and how much spousal support you pay.

When there is some disparity in how much you and your spouse earn, spousal support equalizes your income. This financial assistance ensures that one spouse is not left destitute and in need of public assistance. Often a supported spouse is a custodial parent who may have given up opportunities for a more flexible schedule to be available for children. Spousal support compensates for the additional work and loss of free time that comes with being a primary caretaker.

Spousal support allows the supported spouse to live a lifestyle similar to what the parties enjoyed during their marriage. Your lifestyle will change following divorce, because there are no longer the economies of scale, and that is where the word similar is important. Both spouses, however, are required to support themselves and their children at the highest possible level.

How Long And How Much?

Two important issues exist when determining spousal support: How long will a spouse need support? How much monthly support is just and equitable?

The answers to these questions are complex, but California's lawmakers have described the duration as "a reasonable period of time." This in itself does not answer the first question.

If a marriage was of a long duration - 10 years or more from date of marriage to date of separation - a judge has indefinite jurisdiction.[1] This means the judge does not set a termination date. When a former spouse becomes self-supporting, spousal support ends. Terminating or reducing spousal support typically will require you to go back in front of a judge. Not working by choice is also a basis to argue for terminating support even if a former spouse is not fully self-supporting.

If a marriage was shorter than 10 years, the duration of spousal support is generally half the length of the marriage.[2] The judge has discretion, however, to order support for more or less time based on the circumstances.

Calculating the length of spousal support is the more straightforward of the two issues. How much becomes more complicated.

Numbers Are Only A Starting Point

You may already be familiar with DissoMaster reports that calculate child support and spousal support. Odds are that when there is any indication that your marriage is on the rocks, you have run a DissoMaster to get an idea of how much you might owe or receive. California judges use the DissoMaster as a guide for child support and temporary maintenance.

What numbers go into the calculation? Wages and salary, tax filing status, number of children, the amount of time-share, health insurance premiums and child care costs are some of the factors. The program uses tax brackets to calculate state, federal, FICA and Medicare. It then divides the net available income between the parties.

It is important to note, however, that California judges cannot use the program to calculate permanent spousal support.

This is because the calculation on its own has limitations when determining spousal support. First, the program relies on accurate numbers - presuming that W-2 or tax return income data is correct. Second, the program lacks the sophistication to account for what a spouse could earn and noneconomic factors, such as the lifestyle enjoyed by the parties, the duration of the marriage or the number of years devoted to raising children.

Because many factors cannot be quantified and plugged into a formula, a permanent award of spousal support requires a judge to perform a nuanced case-by-case analysis.

Relying On Numbers Alone Can Result In Unfair Spousal Support

Let's discuss a scenario that illustrates the limits of DissoMaster's algorithm. In this example, Jack Smith and Lisa Smith were married in the summer of 2002 and separated in early 2013. Their marriage lasted more than 10 years, and spousal support has become an issue.

He earns $120,000 a year as an engineer; she earns $48,000 running a pastry business she started a couple years ago after tiring of her pharmaceutical sales career. The couple has two children, ages 4 and 2. They agreed Jack would have a 43 percent time-share (this child custody term describes the amount of time Jack will spend with his children). Jack would also pay $1,100 a month for health insurance and $1,200 a month in child care costs.

After crunching the numbers, the DissoMaster report finds that Jack will need to pay Lisa $482 per month in support. This amount includes $181 in child support and $301 in spousal support. When there are children, a direct connection exists between child support and spousal support.

The yearly spousal support is $3,612, but adds up over 20 years to $72,240. While spousal support is deductible to the spouse who pays it, this is a sizable financial obligation. It is critical to get permanent spousal support right at the time of the divorce. Any later modification is complicated, and judges rarely grant motions to modify permanent spousal support after a finalized divorce.

Jack will argue for a lower spousal support award because Lisa's change in employment did not affect their marital standard of living. Before discussing Jack's argument, it helps to have a better understanding of how California judges determine permanent spousal support.

What Factors Determine Permanent Spousal Support?

Family law professionals refer to these 14 factors as the § 4320 factors.[3] A California judge must consider each factor before setting a permanent award of spousal support. The factors are:

  • The earning capacity of each party
  • Contributions to the attainment of education, training or a career position
  • Ability of the supporting party to pay spousal support
  • The needs of each party based on the standard of living established during the marriage
  • The obligations and assets of each party
  • Duration of the marriage
  • Ability of the supported party to work without interfering with the interests of dependent children
  • Age and health of the parties
  • Any history of domestic violence
  • Tax consequences to each party
  • Balance of the hardships
  • The goal that the supported party shall be self-supporting within a reasonable amount of time
  • A criminal conviction of an abusive spouse
  • Any other factors that the court determines are just and equitable

California judges have wide latitude to use their own expertise in carefully analyzing these factors to reach a fair and just spousal support award. For instance, in the case of domestic violence, a woman may lack confidence to hold down a job after years of abuse. A number can never represent the impact on a victim. Based on the circumstances, a judge might find that more spousal support or a longer award is justified. This approach requires more than simply plugging numbers into a formula.

A vocational examination is one tool that may show a spouse has the potential to earn more and lead the court to impute income. The lifestyle that the family enjoyed can also affect the amount of spousal support.

When Is A Vocational Examination Necessary?

The court may order an exam by a vocational training counselor in a dissolution of marriage or legal separation proceeding. A vocational examination is an important discovery tool whenever a spouse is not working and will need support. If a spouse quit a lucrative job around the time of separation to pursue a hobby, it is also prudent to explore this avenue.

The assessment looks at age, health, education, marketable skills and the availability of employment opportunities in the area to determine whether a spouse could maintain him or herself at the marital standard of living.[4]

A vocational training counselor creates a résumé when one does not exist that includes skills and past earnings. Then the counselor completes an employment survey and offers available positions with high, medium and low pay. Often two plans exist: Plan A based on historical skills and Plan B related to what the individual wants to do - a dream job. A vocational exam provides a tool to limit spousal support based on marketable skills and available opportunities.

Could A Vocational Exam Lower Jack's Spousal Support Obligation?

A vocational exam could provide Jack with support for an altered spousal support determination. Lisa had been successful in the pharmaceutical industry, earning roughly the same salary as Jack for seven years. With commissions and bonuses, she earned more than Jack did some years. While her pastry business is profitable, she spends more hours on it and earns much less.

Based on her historical skills and available employment opportunities, additional income could be imputed to Lisa. This fictional income figure would reflect what she could earn based on her skills and could reduce or zero out the amount of spousal support Jack owes.

How Can You Capture The Marital Standard Of Living At Separation?

The income reported on a tax return does not always truly represent the marital lifestyle that a couple enjoyed. Vacations and travel, investments in real estate, large savings accounts, private school tuition and dining at expensive restaurants provide the court with a snapshot of the marital standard of living.

Typically, one spouse handles the money management during a marriage; it is rare that both spouses have equal knowledge of the family balance sheet. A money manager spouse has an unfair advantage in divorce proceedings and may use it to his or her benefit. In the time leading up to a divorce, one spouse may use tactics designed to understate income to reduce child support or spousal support. In some cases - especially when there are complex investment portfolios - a spouse may funnel assets into a hidden account.

If reported income could never have paid all the expenses and the debt burden was low, it may be time to hire a forensic accountant. A business owner spouse may have buried expenses. Going through the records to separate legitimate deductions from the questionable ones often requires a background in forensic accounting. Accepting cash payments, deferring compensation or bonuses, and transferring cash to another individual or entity are other accounting methods used to reduce apparent available income.

What Was The Marital Standard Of Living When Jack And Lisa Separated?

Did Lisa's change of profession disrupt the marital standard of living? The following facts show that the standard of living did not change and Lisa might not have a credible argument for spousal support.

After Lisa opened the pastry business, the family was still able to take vacations, eat out at new neighborhood restaurants and cover the costs of quality child care. Lisa traded in her sporty BMW for a Mercedes Benz SUV with a company logo that she used for business, but also as her main vehicle. Several vacations tied in with wine and food expos. She catered some upscale parties and two weddings for friends, who may have paid in cash. Lisa paid many restaurant bills with cash.

These facts raise the suspicion that Lisa may have paid some personal expenses with company funds. She could possibly have received cash payments that were unreported. Because the lifestyle expenses do not match up with reported income, a forensic accountant could explain the discrepancy by looking into the business receipts and deductions.

This evidence along with a forensic accountant report could show that Lisa does not need $301 in spousal support based on the marital standard of living and her business income. A judge may order a lower permanent spousal support award after considering these factors.

Look Beyond Just The Numbers

The DissoMaster calculations provide a useful starting point when considering how much you might be required to pay or might receive from a former spouse following a divorce. The tool is not the final word, however, when it comes to spousal support. A court must consider all of the § 4320 factors, which can significantly affect the amount of spousal support ordered.

A vocational examination is a tool to motivate your spouse to find a job. Looking closely at your standard of living can raise suspicions about hidden accounts or business accounting maneuvers designed to lower income figures. As these factors highlight, spousal support award determinations are complex. Various factors can influence the final determination and greatly influence how much you will owe over the duration of the award.

Resolving financial issues in a divorce can be thorny. When a divorce is on the horizon, a spouse may take steps designed to increase or reduce spousal support. By looking closely at the details - beyond just the numbers - you can ensure that the spousal support award is fair and reasonable.