Imputed Income From Assets in California Child Support

Child support in California is not limited to wages or employment-based income. Courts have the authority to consider broader financial resources when determining support obligations, including income generated from assets such as real estate, pensions, or investment portfolios. This principle was clarified in the appellate decision In re Marriage of Dacumos, 76 Cal.App.4th 150, which remains a foundational case in California family law.

This article examines the Dacumos case, relevant statutes, procedural considerations, and the broader implications of imputing asset-based income in child support cases. It also provides practical guidance for parents navigating these disputes.

Case Overview: In re Marriage of Dacumos

A California Appellate court recently affirmed a trial court decision to impute a father’s rental income (based on the fair market rental value and the net equity in his properties) and distributions from his pension when calculating his income to determine child support payments. In re Marriage of Dacumos, 76 Cal.App.4th 150 is one of the first reported cases to consider rental income and earnings from assets in calculating child support.

The father argued that the California child support guidelines do not permit the court to impute income based on assets, as opposed to imputing income based on earnings from employment. Family Code Section 4058(b) allows the court to “impute income based on the earning capacity of a parent instead of the parent’s actual income, consistent with the best interests of the child.” Therefore, the issue before the court was whether the definition of earning capacity is limited to earnings from work or could be extended to include earnings from assets.

The court found no authority that excluded the ability to find an “earning capacity based on assets” and held that such a limitation would not be appropriate in determining child support.

Statutory Basis for Asset-Based Income

The court emphasized that Family Code section 4058(a) defines income broadly as “income from whatever source derived.” This means that courts are not confined to wage income, but may also consider:

• Dividends and distributions from investments
• Rental income from real estate holdings
• Pension distributions and retirement benefits
• Other non-wage financial returns, including capital gains and business distributions

By interpreting “earning capacity” as the ability to bring in financial return, the court made clear that assets are a legitimate source of income for child support purposes.

Legislative Intent and the Best Interests of the Child

Family Code section 4053 highlights that the state’s top priority is the best interests of the child. Parents are legally obligated to support their children according to their circumstances and station in life. The Dacumos decision reinforced that limiting child support calculations to wage income alone would undermine this principle, as children might be deprived of support despite a parent’s significant asset base.

By allowing courts to impute income from assets, the ruling ensures that children benefit from the full scope of a parent’s financial resources, not just their paychecks.

Case Significance in California Child Support Law

The Dacumos case has remained influential for more than two decades because it expanded the judicial approach to child support. While earlier cases primarily focused on wage income, Dacumos clarified that passive income and potential returns from assets also fall within the statutory definition of income.

This case is often cited alongside other child support cases, such as In re Marriage of Regnery, where courts recognized the importance of fair and accurate income determinations in promoting children’s welfare. Together, these cases form a framework for courts to ensure equitable and comprehensive child support orders.

When Can Income Be Imputed from Assets?

Courts may decide to impute income from assets in several situations, including:

Voluntary Underemployment or Unemployment

If a parent reduces working hours, retires early, or otherwise limits their employment in an attempt to minimize child support, the court may consider asset-based income.

Hidden or Underreported Income

When a parent’s lifestyle suggests undisclosed resources, courts may examine real estate holdings, investments, or business interests for potential income streams.

Significant Asset Ownership

Parents with valuable assets, such as rental properties, retirement accounts, or investment portfolios, may be held accountable for the financial potential of these resources.

Failure to Generate Reasonable Returns

If a parent allows properties to sit vacant or fails to invest assets prudently, the court may impute a reasonable rate of return based on market standards.

Procedural Considerations in Asset-Based Imputation

The process of imputing income from assets involves specific procedural elements that parents should understand:

Burden of Proof

The party seeking to impute income must typically present evidence showing the value of the asset and its ability to generate income. This may include appraisals, financial records, or expert testimony.

Role of Expert Witnesses

Forensic accountants, property appraisers, and financial advisors often play a key role in establishing fair market rental values or projected investment returns.

Evidence and Documentation

Courts expect detailed documentation. Parents who fail to disclose their assets risk sanctions or unfavorable rulings, as full financial disclosure is a central requirement in California’s family law process.

Temporal Considerations and Changing Asset Values

Imputed income is not static. Courts may revisit child support orders if the asset values or financial conditions of the parties change. For example:

• A downturn in the real estate market may lead to reduced fair market rental values.
• A depleted pension fund may no longer generate the same level of income.
• A parent who sells or liquidates assets may see child support obligations recalculated.

Modification petitions are available to adjust child support orders when there is a material change in circumstances.

Comparisons with Employment-Based Imputation

There are important distinctions between imputing income from employment and from assets:

• Employment-based imputation focuses on whether a parent is working to their full earning capacity, considering education, skills, and job opportunities.
• Asset-based imputation evaluates whether existing assets could reasonably generate income, regardless of employment status.

Both approaches share a common goal: ensuring that child support reflects the parent’s true financial ability, not just their reported earnings.

Comparisons with Spousal Support

Asset-based income can also play a role in spousal support determinations. Courts may use similar reasoning to assess a spouse’s financial ability to contribute to support obligations. While the statutes differ, the principle of considering all available financial resources applies across both child and spousal support.

Practical Guidance for Parents

Parents facing the possibility of asset-based imputation should take proactive steps:

• Maintain clear records: Keep accurate documentation of property values, investment returns, and pension distributions.
• Seek expert evaluations: Professional appraisals and financial analysis can provide a stronger basis for court decisions.
• Understand disclosure obligations: Full transparency is required, and failure to disclose assets can result in penalties.
• Plan for modifications: Be prepared for support orders to change if asset values rise or fall significantly.

Comparisons with Other Jurisdictions

While California’s approach is comprehensive, not all states allow asset-based income imputation to the same extent. Some states focus narrowly on employment income, while others follow California’s broader interpretation. The national trend, however, is toward recognizing the role of all financial resources in supporting children.

FAQs on Imputed Income and Child Support

Can rental income be imputed for child support in California?

Yes. Courts may calculate the fair market rental value of properties and treat it as income, even if the parent is not actively renting out the property.

Does asset-based income apply to pensions and retirement accounts?

Yes. Distributions or potential returns from pensions and retirement accounts can be considered as income.

What if I am unemployed but own valuable assets?

Courts may impute income from your assets to ensure that your child’s financial needs are met, even if you lack wages from employment.

Can a parent challenge imputed income?

Yes. Parents can contest imputation by presenting evidence that the asset cannot realistically produce income or that such imputation would be unjust.

What happens if I fail to disclose assets?

Failure to disclose assets can result in sanctions, adverse rulings, or contempt of court. Full disclosure is legally required in child support proceedings.

Is California unique in imputing income from assets?

Not entirely, but California is among the states with broader statutory definitions of income, making it more common for courts to consider asset-based earnings.

Get Legal Help

Determining child support is complex, especially when income from assets is involved. Courts take a comprehensive approach to ensure that children receive adequate support, but this often leads to disputes requiring legal expertise.

At Reape Rickett, our family law attorneys provide experienced guidance on child support calculations, asset valuations, and court representation. We help parents protect their rights while ensuring that children’s best interests remain the top priority.

Contact Reape Rickett today for a confidential consultation and get the clarity you need to move forward with confidence.