Calculating Support with Fluctuating Income
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How does the court calculate support when the payor’s income fluctuates from year to year?
In most cases, the court will look at the support payor’s income over the last 12 months; however, the 12-month rule does not work where the payor’s income fluctuates from year to year. When income fluctuates, the court must calculate future income based on a representative sample of past income, (See Marriage of Riddle (2005) 125 Cal.App.4th 1075), but what is a representative sample?
In Marriage of Pletcher (2021) 68 CalApp.5th 906, 915, 283 CR3d 728, 733-734, the Court of Appeal suggested courts should expand the data set to include additional years that capture the payor’s fluctuating income, such as a 5-year average instead of the 12-month rule.
In Pletcher, Husband managed an investment business, his income fluctuated year to year based on the market. Over a five-year period, Husband’s income varied from $490,000 a year, to $1,590,000 a year. The Trial court relied on the Husband’s most recent year of historical income to determine spousal support, which was husband’s best year ever by a wide margin. The Court of Appeal found the Trial court erred in using the most recent 12 months of income to calculate husband’s temporary spousal support, especially when it was unlikely the Husband’s income would be that high again. The Court of Appeal said the time period in which income is calculated must be long enough to be representative, as distinct from extraordinary, to generate a representative sample.
If your income fluctuates from year to year, it is important to explain to the court how and why your income fluctuates, and provide a representative period of your income history, so the court has the appropriate data to analyze to create a fair support order.
Do you have to return to court every year to modify support based on the fluctuation?
Alternatively, the court could use what is referred to as the Smith/Ostler approach, which involves setting support on an amount of income guaranteed to be received each year, such as a base salary, and then ordering a percentage of any extra pay or bonuses for income that goes above the guaranteed amount to be paid as additional support.
If you have fluctuating income, it’s in your best interest to speak with an experienced family law attorney to help you determine the best approach based on your specific situation. Contact The Reape-Rickett Law Firm to meet with one of our highly qualified attorneys at (888) 851-1611 or Contact Us today to get the answers you need.
