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Rombro & Manley LLP

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Unique child support issues can affect high-earners

On Behalf of | Sep 13, 2022 | Family Law

Like other states, California’s courts will calculate their child support orders based on a set formula. In many cases, this makes the calculation of a child support order relatively simple.

However, for those parents in the Manhattan Beach area who are privileged to earn a high income, calculating child support is often more difficult than simply submitting a copy of a paycheck to the court.

Oftentimes, high-earners have multiple sources of income

Frequently, high-earners receive a significant portion of their income, if not most of it, from sources other than the typical job where they work as an employee.

For child support purposes, the definition of income is very broad. In addition to traditional wages, it includes income from many other sources, including investments like annuities and dividends.

As part of wages, discretionary bonuses, overtime pay and even certain fringe benefits can count as income.

It can also include income from what was a gift or an inheritance, such as income a parent receives from a trust.

Many high-earners receive income from a business, and this income also counts for child support purposes.

While the business owner may deduct the actual cost of operating their business year-to-year, for child support purposes, courts usually will not allow for depreciation. This is true even if the business can claim such deductions on their taxes.

Guidelines may have to be adjusted for special circumstances

High-earners in Southern California may also find themselves in situations where they believe applying California’s guidelines strictly would not be appropriate.

For example, if the guidelines get strictly applied, a high earner may wind up paying an amount that, while correct under the formula, is much more than what a child needs to maintain their standard of living.

On the other hand, many times, children of high earners are involved in special activities or educational opportunities which may require parents to contribute additional child support.