Court remands high income child support case
High Income Child Support cases in New Jersey, can be quite complicated. With no child support guidelines, it is like the wild west. Anything can happen. If things go wrong, you could wind up paying a large percentage of your income to the other parent who could use the money as alimony. Thus, the tough job will turn to your lawyer who must use creative and aggressive arguments to make sure that your high income does not turn your child support into alimony. If you have a high income child support case in any court in NJ, call our team of tough, smart attorneys to discuss your case today.
SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-3009-07T13009-07T1
Submitted February 24, 2009 – Decided
Before Judges Grall and Ashrafi.
On appeal from Superior Court of New Jersey,
Chancery Division, Family Part, Morris County,
Docket No. FM-14-439-99.
Forster & Arbore, attorneys for appellant
(Lawrence D. Forster, on the brief).
Cutler, Simeone, Townsend, Tomaio & Newmark,
attorneys for respondent (Salvatore A. Simeone,
of counsel; Emily R. Carstensen, Laura A.
Steinberg and Mr. Simeone, on the brief).
Rick and Cheryl Bennett were married for sixteen years and have two children. By agreement, an arbitrator’s award on financial matters was incorporated into their judgment of divorce. Since their divorce, they have returned to the court several times disputing financial issues. Now, more than eight years after the divorce, we must again remand to the trial court to recalculate the amount of child support that Rick should have been paying to Cheryl since 2004.
In 2003, Cheryl filed a motion to increase alimony and child support, and otherwise amend financial terms of the divorce judgment. She argued that circumstances had changed since the divorce, in particular, the precipitous decline in value of stock options for Lucent Technologies awarded to her as part of equitable distribution and a dramatic increase in Rick’s income from new employment. The trial court held an evidentiary hearing over five days in 2004 and made rulings on Cheryl’s motion. Cheryl appealed.
In a detailed unpublished opinion, this court affirmed the conclusion of the trial court that changed circumstances entitled Cheryl to adjustment of support payments, but it reversed the amounts of child support and alimony awarded and remanded to the trial court for further findings and analysis in accordance with the discussion contained in the opinion. Bennett v. Bennett, No. A-0939-04T1 (App. Div. June 14, 2006).
On remand, a different trial judge reviewed the lengthy record of the 2004 plenary hearing, the documentary evidence, and the parties’ proposed findings of fact and conclusions of law based on the existing record. The judge issued a comprehensive, written opinion addressing the several issues presented on remand. The accompanying order of the court (1) vacated Cheryl’s obligation to pay a credit of $104,000 to Rick on equitable distribution; (2) increased Rick’s alimony obligation from $55,000 to $100,000 per year; (3) determined that Rick would not pay any additional rehabilitative alimony; (4) imputed to Cheryl annual income of $39,561; (5) required Rick to pay guidelines-based child support of $606 per week; and (6) required Rick to pay additional child support above the guidelines of $283 per week, for a total of $889 per week in child support. On this appeal, Rick challenges only the increases in his child support and alimony obligations.
Generally, trial courts are permitted to exercise discretion in awarding financial support in a matrimonial action. Pascale v. Pascale, 140 N.J. 583, 594, (1995). “If consistent with the law, such an award ‘will not be disturbed unless it is manifestly unreasonable, arbitrary, or clearly contrary to reason or to other evidence, or the result of whim or caprice.'” Foust v. Glaser, 340 N.J. Super. 312, 315-16 (App. Div. 2001) (quoting Raynor v. Raynor, 319 N.J. Super. 591, 605 (App. Div. 1999)). “‘[F]indings by the trial court are binding on appeal when supported by adequate, substantial, credible evidence . . . ‘ in the record.” Id. at 316 (quoting Cesare v. Cesare, 154 N.J. 394, 411-12 (1998)). Thus, the standard of review from the trial court’s support rulings is deferential on factual determinations but plenary on application of the law.
Here, the trial court’s opinion shows careful attention to relevant facts and to the statutory factors listed in N.J.S.A.that must be considered in determining orders of support. But the opinion uses a legally incorrect method to determine the amount of child support that Rick must pay. It does not follow the instructions for making a child support calculation for high income earners contained in the Rules Governing the Courts of the State of New Jersey (“Court Rules”). Also, it double-counts Rick’s responsibility for certain specified expenses of the children. 2A:34-23
The trial court found that Rick’s annual income in 2004 was $374,600. It imputed income of $39,561 to Cheryl based on her education, health, prior work experience, recent job training, and ability to find employment after time away from the job market. These findings are supported by substantial credible evidence.
The combined parental income of more than $400,000 is greater than the income limits contained in the child support guidelines. Where the combined parental net income exceeds $187,200 annually, or $3,600 per week, the Court Rules provide that:
the court shall apply the guidelines up to $187,200 and supplement the guidelines-based award with a discretionary amount based on the remaining family income (i.e., income in excess of $187,200) and the factors specified in N.J.S.A.Thus, the maximum guidelines award in Appendix IX-F represents the minimum award for families with net incomes of more than $187,200 per year. 2A:34-23.
[Child Support Guidelines, Pressler,
Current New Jersey Court Rules, Appendix IX-A to R. 5:6A at 2334 (2009).]
The parties agree that Rick’s child support obligation should be calculated from the maximum guidelines-based amount plus a discretionary amount based on the factors in N.J.S.A.and as further explained in Caplan v. Caplan, 182 N.J. 250, 266, 271 (2005). The guidelines-based amount, however, must be allocated between the two parents. The trial court erroneously required that Rick pay the full $606 per week maximum in guidelines-based child support. 2A:34-23,
“That both parents share the obligation to support their children . . . is well established in this state.” Pascale, supra, 140 N.J. at 593. “Child support is the right of the child and the responsibility of both parents.” Ibid. The basic child support amounts contained in Appendix IX-F “represent the average amount that intact families spend on their children [including] the child’s share of expenses for housing, food, clothing, transportation, entertainment, unreimbursed health care up to and including $250 per child per year, and miscellaneous items.” Child Support Guidelines, supra, Appendix IX-A at 2320-21.
The sole parenting worksheet contained in Appendix IX-C of the Court Rules, and the related line instructions contained in Appendix IX-B, show that once the basic child support amount is obtained from Appendix IX-F, the support amount is then allocated between the parents based on the percentage of their individual net income. Child Support Guidelines, supra, Appendix IX-B at 2350, 2353, Appendix IX-C at 2378-79. Even where the parents’ combined income exceeds the child support guidelines, the maximum support under the guidelines must be allocated between the parents based on their relative net incomes. Caplan v. Caplan, 364 N.J. Super. 68, 89 (App. Div. 2003), aff’d, 182 N.J. 250 (2005).
The trial court attributed 73% of the total combined income to Rick and 27% to Cheryl. Rick contends that these percentages are incorrect because they do not account for income taxes payable by each party on gross income. Rick states that the correct percentage allocation of net income after taxes is 64% to him and 36% to Cheryl and, therefore, the amount of guidelines-based support to be allocated to him should have been $388, not $606.
We cannot determine the correct percentages of income from the record presented because the trial court’s opinion does not include a finding regarding applicable income tax rates. It is clear, however, that the percentages for each parent should be based on net, after-tax and after-alimony income, not gross income. Child Support Guidelines, supra, Appendix IX-B at 2346-50. Thus, the $100,000 alimony obligation imposed upon Rick must be subtracted from his income and added to Cheryl’s. Id. at 2346. Then the applicable federal and state income tax rates should be applied, possibly by determining the effective tax rate from filed tax returns, and net income should be calculated for each parent. Id. at 2346-47. The combined net income of the two parents should then be divided into the individual net income of each parent to produce the relative percentage of net income. Id. at 2350. Each parent is responsible for support of the children up to the maximum $606 of the guidelines in accordance with his or her percentage of the total combined net income.
After allocating the maximum guidelines-based child support in this way, the court must determine whether and how much additional discretionary child support is appropriate. In Caplan, supra, 182 N.J. at 271, the Court said, “[W]here the combined net income of the parties exceeds the maximum income under the guidelines . . . the trial court must consider the factors set forth in N.J.S.A.to determine the amount of the supplemental support award and then combine that amount with the guidelines-based award.” The factors set forth in N.J.S.A.are: 2A:34-23(a) 2A:34-23(a)
(1) Needs of the child;
(2) Standard of living and economic circumstances of each parent;
(3) All sources of income and assets of each parent;
(4) Earning ability of each parent, including educational background, training, employment skills, work experience, custodial responsibility for children including the cost of providing child care and the length of time and cost of each parent to obtain training or experience for appropriate employment;
(5) Need and capacity of the child for education, including higher education;
(6) Age and health of the child and each parent;
(7) Income, assets and earning ability of the child;
(8) Responsibility of the parents for the court-ordered support of others;
(9) Reasonable debts and liabilities of each child and parent; and
(10) Any other factors the court may deem relevant.
The Supreme Court approved the approach adopted in this court’s opinion in Caplan for determining how much discretionary child support is appropriate and in allocating that additional discretionary amount between the parents. Caplan, supra, 182 N.J. at 271. First, as the trial court did here, the court must determine the reasonable needs of the children and subtract from that amount the maximum guidelines-based award. The resulting figure will be the discretionary amount to be added to the guidelines child support amount. Caplan, 364 N.J. Super. at 90.
Then, the court must analyze the factors outlined in N.J.S.A. 2A:34-23(a) and determine each party’s responsibility for satisfying those remaining needs. It is the result of that analysis that is to be utilized when determining the fair and equitable allocation of the remaining needs of the children between the parties.
The Supreme Court also suggested an alternative approach to determining the discretionary amount of additional child support. The trial court can “consider certain categories of expenses that are partially included in the guidelines award and . . . calculate a fair additional support amount for those . . . categories.” Id. at 272. The Court indicated that “the choice of the methodology to employ in arriving at a child support award” for high income parents is left to the trial court’s discretion. Ibid. “Under either method, the trial court’s goal is to calculate a child support award that is in the best interest of the child after giving due consideration to the statutory factors and the guidelines.” Ibid.
Here, the trial court considered each of the statutory factors and determined that the children’s expenses, when living in a manner comparable to the marital lifestyle, were $51,672 per year. After subtracting the annual guidelines-based support amount of $31,512 ($606 x 52), the court allocated the remaining $20,160 between the parents according to its determination of their relative percentage of gross combined parental income, 73% to Rick and 27% to Cheryl. Rick was ordered to pay $283 per week as additional discretionary child support, calculated as 73% of $20,160 divided by 52 weeks. That allocation was erroneous.
While percentages must be applied to the guidelines-based child support obligation, relative percentages of the parents’ incomes are not to be used to allocate any discretionary award above the guidelines-based amount. Caplan, supra, 182 N.J. at 271.
[B]ecause the income and assets of each party are only two of the many statutory factors the trial court must consider in determining a fair and just child support award, the allocation equation utilized under the guidelines-based award has little or no application to the amount of additional support determined through analyzing the N.J.S.A.factors. 2A:34-23
On remand, the trial court must determine a fair allocation of the discretionary additional child support based on analysis of the statutory factors and not by a fixed formula of percentages.
In recalculating Rick’s child support obligation, the trial court should ensure that certain specified expenses of the children are not double-counted both to determine the amount of child support and as separate obligations under the divorce judgment. The divorce judgment of November 9, 2000, incorporated the terms of the arbitration award, which, in turn, required Rick to pay two-thirds of all uninsured medical, dental, and prescription drug expenses; 100% of the son’s orthodontia expenses; and two-thirds of summer camp, tutoring, and psychiatric evaluation expenses of the children.
After the plenary hearing of 2004, the trial court modified these obligations by order dated September 9, 2004, to require that Rick pay 75% of unreimbursed medical, dental, and drug expenses after the first $250 per child per year; 75% of the children’s expenses for summer camp, tutoring, driving lessons, auto insurance, SAT preparation courses, and one vacation per year; and 100% of expenses for riding and tennis lessons and computers for the children. These obligations were in addition to child support and alimony payments to be paid by Rick.
This court’s 2006 opinion reversed the child support and alimony determinations but left intact the remaining relevant provisions of the September 9, 2004 order. Bennett v. Bennett, supra, No. A-0939-04T1 (slip op. at 41-42). Rick argues persuasively that the weekly child support obligation imposed after remand by the trial court’s order of January 17, 2008, includes expenses such as vision care, psychiatric counseling, orthodontia, and vacations and, in effect, he is required to pay twice for these expenses.
After the prior remand, the trial court reviewed with rigorous detail Cheryl’s 2003 case information statement (CIS) and made specific findings regarding the expenses Cheryl had listed. The court concluded that the combined reasonable expenses of Cheryl and the children were $10,978 per month, or $131,736 per year. Based on that finding of fact, and imputing potential earnings to Cheryl of $39,561 per year, the court awarded alimony of $100,000 per year, or $1,923 per week.
The court then painstakingly separated the expenses attributable to the children in Cheryl’s CIS, apparently without adequate aid from the parties’ submissions. The court concluded that the children’s expenses totaled $51,672 per year, that is, slightly less than $1,000 per week. Based on that calculation and the determination that Rick pay the $606 per week maximum of guidelines-based child support, the court concluded that a discretionary award was appropriate and ordered Rick to pay an additional $283 per week, for a total child support obligation of $889 per week.
The trial court’s diligent efforts appear to have strayed in including expenses for eye care, psychiatric counseling for the son, orthodontia, vacation, and summer camp in determining the children’s expenses pertinent to the child support order. The court also referred to age-appropriate expenses such as driving lessons, auto expenses, and college preparation courses that may arise in the future. Because these expenses were separately addressed in the parties’ divorce judgment and subsequent modification order of September 9, 2004, they should not have been included in determining the recurring expenses of the children for purposes of calculating child support.
Alternatively, if the trial court intended to include these expenses as part of Rick’s regular child support obligation, the existing provisions requiring Rick to pay 75% or 100% of those non-recurring expenses contained in the September 9, 2004, order should have been expressly modified.
Rick argues next that the combined alimony and child support awards exceed Cheryl’s budgetary requirements as determined by the court. He contends that adding Cheryl’s imputed income of $39,561, the $100,000 in alimony, and his child support obligation of $46,228 per year will net Cheryl, after taxes, substantially more than $131,736 per year that the court determined is necessary to maintain Cheryl and the children in a comparable lifestyle to that acquired during the marriage, see Crews v. Crews, 164 N.J. 11, 16 (2000), or that an intact family would provide for the children, see Caplan, supra, 182 N.J. at 268.
Again, we have insufficient information to determine whether the total award to Cheryl substantially exceeds the needs found by the trial court. Income tax rates must be considered to calculate net disposable income. When awarding financial support, the trial court has discretion to approximate Cheryl’s and the children’s needs and Rick’s support obligation. Precise matching of needs and Cheryl’s total income, including support from Rick, is not required. Because we must remand for recalculation of child support, the trial court can again consider whether the total amounts that Rick is ordered to pay, including alimony, approximate its findings regarding Cheryl’s and the children’s financial needs.
Although we find no valid criticism of the court’s award of increased alimony to Cheryl, child support and alimony are interrelated obligations. The amount of alimony ordered affects the amount of child support that is each parents’ obligation. Child Support Guidelines, supra, Appendix IX-B at 2346. Alimony should normally be ordered first and then child support calculated, as the trial court did here. Ibid. The trial court separated the expenses of the children and Cheryl to the best of its ability without detailed information from the parties. If on remand the accounting changes for the children’s and Cheryl’s expenses, the trial court will naturally have discretion to determine whether any adjustment in alimony is appropriate in conjunction with recalculation of Rick’s child support obligation.
Finally, Cheryl moved before this court to dismiss Rick’s appeal and for attorney’s fees. By order dated October 28, 2008, this court denied Cheryl’s motion to dismiss but reserved decision on Cheryl’s request for attorney’s fees. We find no basis to award Cheryl attorney’s fees related to the appeal. We make no determination regarding whether either party is entitled to attorney’s fees in the trial court. In addressing revisions to the child support order, the trial court may consider whether attorney’s fees should be awarded in accordance with the factors listed in Rule 5:3-5(c).
In conclusion, we reverse so much of the trial court’s order of January 17, 2008, requiring Rick to pay a total of $889 per week in child support, and we remand for recalculation of an appropriate award of child support in accordance with the Court Rules and Caplan v. Caplan, supra, 182 N.J. 250. The trial court shall have discretion to adjust the order for alimony in conjunction with its child support order. In all other respects, the order of January 17, 2008, shall remain in effect.