Collecting Spousal Support from a Self-Employed Spouse

Even when a spouse has no gross income for tax purposes, there still may be income attributable to them for the calculation of spousal support.

In a recent unpublished opinion filed July 11, 2009 by the 4^th District, 3^rd Division, the court discussed the issue of income for spousal support purposes. There the parties separated after 25 years of marriage. Husband was an entrepreneur, rather than employee with a steady paycheck, and the court set spousal support in the amount of $3,000 per month. The following year after the parties separated, Husband incurred some investment losses and paid no federal income tax. Husband accordingly argued that in the two years following his divorce, he had no income due to the decline in his business attributable to the economy. The court however disagreed.

The Family Code, which governs family law cases, does not define “income” and thus the term is open to the court’s discretion. Additionally Family Code Section 4330 (a) permits the court to order a party to pay spousal support for a time the court determines is just and reasonable.

The court concluded that although there was no gross income attributable to Husband for tax purposes, there was still income attributable to him for purposes of spousal support. Husband’s “income” was the money he had available to him for paying his own reoccurring monthly expenses. Husband still had a steady cash flow available to him coming from his business entities even though the businesses were operating at a loss. Husband was still able to draw a salary from his operating companies despite such losses and the court considered this cash available to him income.

The calculation of spousal support requires the consideration of multiple factors. The court will look at the ability of the supporting party to pay, the paying party’s earning capacity, which includes earned and unearned income and other assets, and the standard of living during the marriage. Thus in the case at hand, the court rejected the outright principle that an individual who has no gross income for tax purposes or business profits does not have any income for spousal support purposes. Rather the court here looked at the salary the Husband drew each month instead of focusing on the business losses.

Collecting spousal support can be a complicated issue. For more information contact our Certified Family Law Specialists. We offer a private consultation and our lawyers are skilled in a variety of family law issues including spousal support matters. Feel free to send us an email or call our office at (714) 667-0045, where our attorneys will be able to speak with you directly.

Spousal Support Post-Judgment Modification by Agreement

Laguna Beach / Huntington Beach / Newport Beach Spousal Support Lawyers

What to do When Your Spouse Isn’t Paying the Full Amount of Spousal Support:

Has your spouse recently stopped paying the full amount of spousal support or alimony the court previously ordered them to pay to you? If so, you have a few questions to ask yourself.

First, did you and your spouse both mutually agree to this modification? Couples may enter into an agreement to reduce or waive future court-ordered support payments but to be effective it must be the product of mutual assent, meaning both parties must come to an agreement on the matter. (Irmo Sabine and Toshio (2007) 153 Cal.App.4th 1203, 1217). If both parties have talked about the modification and both agree to the change, then the modification will likely be enforceable. However, if both spouses did not expressly agree to the change in support, than the full amount will likely still be owed by the payor.

Next, if you and the other party did not mutually agree to a reduction of support, have you waived or given up the right to the full payment? In a recent case, a husband was not paying his ex-wife the full amount of spousal support ordered by the court. The wife waited for four years before going to court and attempting to collect the money that was not paid to her. The husband argued that she had waived or released her right to the money. The court did not agree. The court stated, “Waiver is the voluntary relinquishment of a known right. To constitute a waiver, it is essential that there be an existing right, knowledge of its existence, and an actual intention to relinquish it.”  The court found the wife did not waive her right to the full amount owed to her by her ex-husband. The fact that she merely accepted the lower support payment did not constitute a waiver of her right to the full payment because this did not show she intended to relinquish or let go of her right to the money owed to her. She simply accepted less money but did not ever state or act in a manner implying that she did not want the full spousal support payment. Therefore, after four years, she was still entitled to the full spousal support payment owed to her, plus interest.  For more on collecting past due spousal support, click here. 

Collecting spousal support can be a complicated issue. For more information contact our Certified Family Law Specialists. We offer a private consultation and our lawyers are skilled in a variety of family law issues including spousal support matters.  Feel free to send us an email or call our office at (714) 667-0045, where our attorneys will be able to speak with you directly.

Newport Beach Spousal Support Attorneys

Two Recent Cases Involving Post-Judgment Spousal Support Modifications

One party’s failing health and the division of his or her retirement benefits does not constitute changed circumstances sufficient to justify the modification of a spousal support order.

To modify an existing spousal support order, California law requires a change in circumstances since the entry of the existing order.  In a recent unpublished case, In re Marriage of Nelson, the Sixth District Court of Appeals determined that the one party’s declining health and the division of his retirement pension is not sufficient changed circumstances to warrant a modification of a spousal support order.

In Nelson, the parties negotiated a Martial Settlement Agreement (MSA) which provided that neither party would receive spousal support, but allowed the court to modify spousal support in the future upon a showing of changed circumstances.   The MSA was incorporated into a judgment of dissolution in 2007.  A Qualified Domestic Relations Order (QDRO) entered at the time of the parties’ dissolution divided Husband’s CalPERS retirement benefits between Husband and Wife.  Further, the QDRO specifically noted that Wife would soon begin receiving $2,209 of Husband’s retirement benefits $5,822 monthly retirement payment.

In March 2008, Husband filed a motion requesting spousal support from Wife on the basis that her portion of his CalPERS retirement benefits reduced his income from $5,822 per month to $3,729 per month. He further argued that he his earning ability was reduced as a result of his disability and declining heath, while Wife’s salary and portion of his CalPERS benefits increased her monthly income to nearly twice what Husband was earning.  Husband argued that, although he was aware of his health problems at the time the MSA was entered, his condition had worsened. 

The trial court determined that Husband’s failing health as well as the reduction in his CalPERS benefits did not constitute sufficient changed circumstances to warrant a modification of the spousal support order.  The trial court noted that Husband’s condition and medical expenses were not significantly different from when the MSA was entered.  Further, the court noted that, because Husband did not rely on his ability to earn when he negotiated the MSA in 2007, his alleged inability to work would constitute a changed circumstance.

The Court of Appeals agreed.  Citing In re Marriage of Dietz, the court stated that the payment of a supported spouse’s retirement benefits is not a change of circumstances because an increase in the other spouse’s income should have been expected at the time the MSA was entered.  Because Husband knew that the division of his CalPERS benefits would reduce his income and increase Wife’s income, her receipt of portion of his benefits did not constitute a change of circumstances. Further, the court noted that Husband must have demonstrated that he was able to work at the time the MSA was entered and that he intended to supplement his income with this CalPERS benefits in order for his failing health and inability to work to constitute a change of circumstances.

 Although the supported spouse’s failure to attempt to become self-supporting within a reasonable amount of time may constitute changed circumstances sufficient to modify a support order, the trial court’s failure to properly warn the supported spouse that support will terminate for failure to become self-supporting is sufficient to prevent the court from terminating an existing support order.

In issuing a spousal support order, the supporting spouse may request that the court warn the supported spouse of his or her obligation to become self-supporting within a reasonable time following the termination of the marriage.  This warning is called a Gavron warning. In another recently unpublished case, In re Marriage of Kavanaugh, the court determined that the Gavron warning should contain a statement that the support order will terminate if the supported spouse fails to become self-supporting before the court can terminate an existing spousal support order.

In Kavanaugh, the parties divorced in 2002 after a 22 year marriage.  A post-judgment spousal support order required Husband to pay Wife $4,065 per month.  The trial court notified Wife that the purpose of spousal support is to enable her to become self-supporting within a reasonable amount of time. 

Husband lost his job in 2006 and the parties agreed to temporarily reduce spousal support to $2,000 per month until February 2008.  In March 2008, Husband filed a motion to modify spousal support, citing the poor economy as changed circumstances.  Husband also argued that Wife had not attempted to improve her earning capacity since the 2002 support order. The trial court reduced spousal support to $2,000 per month and ordered that Husband’s support obligation would terminate on December 31, 2010.  The court explained that this was sufficient time to enable Wife to become self-supporting.

The Court of Appeals reversed, concluding that the trial court’s statement regarding the goal of spousal support was insufficient to warn Wife that support would terminate if she did not attempt to become self-supporting.  The court maintained that Wife was lead to believe that spousal support would continue indefinitely, as the order provided that support would continue until the death of either party of the wife’s remarriage. 

Spousal support obligations, particularly in long-term marriages like the one in Kavanaugh, is an issue that is frequently contested in dissolution cases. Kavanaugh illustrates the importance of having a knowledgeable family law attorney to ensure that the spousal support order in your case is fair to both parties.  Particularly in our changing economy, you want to ensure that your rights and obligations to spousal support are clearly defined at the beginning of your case so as to avoid complications and expensive future legal battles regarding spousal support modifications. 

Our experienced spousal support attorneys can assist you to ensure that your spouse is put on notice as to his or her obligation to become self-supporting. In Kavanaugh, the court conceded that Wife’s failure to attempt to become self-supporting could justify a change of circumstances sufficient to modify Husband’s support obligation.  Nonetheless, the court declined to terminate spousal support because the supported spouse did not receive a sufficient Gavron warning.  A legally proper Gavron warning at the beginning of your case can save you considerable time and money down the road.  In today’s economy where money can be tight, and living in more expensive areas such as Newport Beach, Dana Point, or Laguna Hills, we can you can protect you from a prolonged support obligation by ensuring that your spouse is properly notified of his or her obligation to seek gainful employment.

We can also protect your right to receive spousal support.  Our experienced attorneys can assist you in obtaining the best support order that will maintain the standard of living you and your spouse established during your marriage.  We will also assist you in obtaining an order that will allow you to seek the education and training you need to find employment that will allow you to become self-supporting.  Feel free to contact us today to schedule your free intial meeting with one of our attorneys.

For more information about spousal support, click here.

For frequently asked questions regarding spousal support, click here.

For more information about post-judgment modification and enforcement motions, click here.