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The Earning Capacity Question in California Divorce Cases – In re Marriage of Munn

When a California court considers requests for child or spousal support, it usually takes a hard look at each spouse’s need and ability to pay. That means considering not only how much money each spouse is bringing in but also how much money they could be making. As the state’s First District Court of Appeals recently explained, judges have the power to “impute” income to one spouse in a divorce case, based on his or her earning capacity.

new-5-1474097Husband filed for divorce from Wife in August 2011, following a nine-year marriage in which the couple had four kids. One of the children suffered from a neurological disorder that the Court said prevented her from walking, talking, and using her arms. Wife left her job as marketing executive in 2005 in order to care for the child. Husband, who worked as an investment banker, supported the family financially.

A long, drawn-out legal battle ensued, during which a trial court several times altered the amount of spousal and child support that Husband was required to pay to Wife. In October 2013, the trial court granted in part Husband’s request to impute income to Wife. She had been working in an unpaid position with a start-up company for a year at the time. Wife said that she took the position to get experience after being out of the workforce and that she wasn’t drawing a salary because the business wasn’t yet profitable. Siding with Husband, however, the trial judge said “[t]he problem with not imputing an appropriate level of income to Wife is it distorts the financial reality of this situation.” The court imputed an annual salary of $75,000 to Wife and ordered Husband to pay her nearly $11,500 per month in spousal and child support.

Affirming the decision on appeal, the First District said the trial court didn’t abuse its discretion in imputing income to Wife. “When determining each parent’s income for purposes of calculating the amount of child support, the trial court is not limited to a consideration of the parent’s actual income,” the Court said. “The court may, in its discretion, consider the earning capacity of a parent in lieu of the parent’s income, consistent with the best interests of the children.”

Here, the Court said there was some evidence showing that Wife’s decision to take the unpaid job made it more difficult for her to find paid work. It also said there was evidence showing that the family was living beyond its means. “Imputing an income to [Wife] provided an incentive for her to earn an income closer to her actual capacity, which would, in the long run, benefit the children and serve their best interests,” the Court said.

If you’re considering a divorce or are grappling with support and other issues in California, contact San Jose spousal support lawyer John S. Yohanan. With more than 30 years of experience, Mr. Yohanan is an accomplished family law attorney who has helped a number of clients resolve a wide variety of marital disputes. Call our office at (408) 297-0700 or contact us online to schedule a consultation.

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Getting Divorced in California? Another Reason Why You Need a Lawyer – In re Marriage of Hendrix

‘Long-Term’ Marriage, Spousal Support in California – In re Marriage of Rush

California Court Enforces 20-Year-Old Marriage Settlement Agreement against Reluctant Husband – In re Marriage of Montague