An Irvine Child Support Attorney from Our Firm Can Assist with Child Support Calculations for High Wealth Families

For high-net-worth parents, child support can present some unique challenges during the divorce process. This is because both (i) one or both parents’ incomes may far exceed the income levels contemplated by California’s Child Support Guidelines, and (ii) one or both parents may wish to address expenses that fall outside of the realm of traditional child support payments. Fortunately, California law addresses these contingencies, and parents who have access to significant financial resources have a number of options for addressing child support and other child-related costs during their divorce. Our Orange County family lawyers will explain all of the guidelines to you and help you address your individual concerns. 

Deviating from California’s Child Support Guidelines for “Extraordinarily High Income”

For most parents, determining their child support obligations is a relatively straightforward matter of applying a formula established under California’s Child Support Guidelines (the “Guidelines”). However, as this formula establishes a direct correlation between parents’ incomes and their child support obligations, for high-earning parents, application of the formula can lead to disproportionate and unnecessary financial responsibilities.

In order to address this issue, the Guidelines provide an exception for parents who earn “extraordinarily high income,” such that, “the amount determined under the formula would exceed the needs of the children.” What constitutes an extraordinarily high income is relative, and must be determined on a case-by-case basis taking into account the family’s total income, lifestyle and child-related expenses.

Providing for Extraordinary Expenses Not Covered by Child Support

Court-mandated child support is intended to cover necessary child-related expenses. This includes things like food, clothing, education, basic entertainment and recreation, and health care insurance premiums. In appropriate circumstances, parents can also establish child support obligations with regard to childcare expenses, uninsured health care costs, travel expenses related to parenting time, and special educational needs.

But, for high-net-worth parents, these types of expenses will often just scratch the surface of the amount of money they spend on their children. Many high-net-worth parents also pay for things like:

• Private tutoring
• Private lessons
• Extracurricular activities
• Travel sports
• Live-in childcare care providers
• Unnecessary items and luxuries

Additionally, many high-net-worth parents choose to send their children to private schools.

These are all costs that may not be covered by the guideline amount. However, during the divorce process, high-net-worth parents can address these costs through other means. Parents have a significant amount of flexibility to structure payment obligations outside of traditional child support, and parents can also utilize trusts and other planning tools to ensure that money for child-related expenses will be available. Ultimately, the key is to avoid focusing on the limitations of California’s Child Support Guidelines, and instead focus on developing an arrangement that meets your needs and those of your children.

Speak with an Orange County High-Net-Worth Divorce Lawyer at Seastrom Tuttle Murphy Dockstader

If you are considering a divorce and have questions about child support or any other issue you will encounter during the divorce process, we encourage you to get in touch. To speak with one of our experienced Irvine high-net-worth divorce lawyers in confidence, please call 949-474-0800 or contact us online today. 

Common Questions About Child Support in High-Income Orange County Cases

Does the guideline formula still apply when a parent’s income is very high?

The guideline is presumptively correct in every case, but it can be rebutted. California law recognizes that where a parent has an extraordinarily high income, the formula can produce an amount that exceeds the children’s needs, and in that situation the court may order less than guideline. The burden falls on the high-earning parent to show that the guideline figure is more than the children reasonably need. That is an evidentiary showing about the children’s actual circumstances, not an argument about the fairness of the formula, and it fails when it is presented as the latter.

What counts as income for child support?

The definition is broad. It reaches salary, bonus, commission, self-employment earnings, distributions from a closely held business, rents, interest, dividends, and the realized value of equity compensation. For a business owner, income available for support is reconstructed from the entity’s records rather than taken from the tax return, adding back personal expenses paid by the company and normalizing owner compensation. Where income is irregular, courts often use a representative averaging period, or set a base order plus a percentage of bonus income actually received.

How are private school, activities, and other extras handled?

Separately from the base support figure. Child care necessary for employment and uninsured health care costs are mandatory add-ons, ordinarily divided equally. Other expenses, including private school tuition and extracurricular activities, are discretionary and are commonly allocated in proportion to the parties’ incomes. In higher-income cases these add-ons can rival the base order in size, so it is worth specifying in the judgment which expenses are covered, who selects and enrolls, and how reimbursement is documented and paid.

Can a high-income support order be modified?

Yes, on a material change of circumstances. In high-income cases the change is most often a shift in the composition of compensation rather than in its total, a move from cash bonus to equity, a business sale, a change in the timeshare, or a child’s changed needs. Because volatile compensation invites repeated motions, the better practice is to build the mechanism into the original order, a base amount plus a defined percentage of variable compensation with an annual true-up, so that a fluctuation in income adjusts the support rather than returning the parties to court.

About the Firm

Seastrom Tuttle Murphy Dockstader is a family law firm in Irvine representing clients throughout Orange County, and in Los Angeles County. The firm practices family law exclusively. Its attorneys include Fellows of the American Academy of Matrimonial Lawyers and of the International Academy of Family Lawyers, and attorneys certified as specialists in family law by the State Bar of California Board of Legal Specialization. Call 949.474.0800 to discuss a high-income child support matter with the firm.