Category Archives: Attorneys’ Fees

CA Appellate Court Caps Bonus Spousal Support Payment Based on Change of Circumstances and Reasonable Expectations of Parties

January 30th, 2019

Usually, a person who has been ordered to pay spousal support does not run to court seeking a reduction in support after she or he has just received a large raise — the risk being the court could order an increase in support because of the increase in the payor’s income. But in the recent case of T.C. V. D.C. a wife who was paying support to her former husband sought a court ordered reduction in spousal support after she landed a new job with much greater earnings.

Wife’s Salary Skyrockets and She Wants the Court to Reduce the Amount of Support She Must Pay?

Why would the high earning wife take this risk? Wife took this risk because she was paying her ex-husband a base support payment every month tied to her base salary, plus she was paying her ex-husband a percentage of all income that exceeded her base income — and, unfortunately for Wife, the parties’ Marital Settlement Agreement had no cap on the amount of bonus support that she paid to Husband. Think about it: Originally, Wife was paying base support to Husband of less than $1,000 plus she was paying him 10% of her excess/bonus income. At the time of the Marital Settlement Agreement, Wife’s projected “excess” annual earnings (i.e. her annual bonuses) totaled $9,900, meaning Husband would receive an additional $990 annually as an additional “bonus support” payment. Wife agreed to pay this bonus amount even though Husband acknowledged in the Marital Settlement Agreement that the BASE amount of support met his needs and his expenses at the time of the divorce were reflective of the parties’ marital standard of living. Therefore, the bonus payment was gravy as it exceeded his needs as well as the marital standard of living.

Fast forwarded a couple of years later, Wife found a great new job and her “excess earnings” were dramatically higher — $250,000 higher than before! Translation: Per the terms of the Marital Settlement Agreement, Wife’s annual bonus support payment went from $990 to $25,000!

When the Wife filed her request to reduce her support payment, Husband argued that per the terms of their Marital Settlement Agreement wife could not escape the 10% bonus payment no matter how high Wife’s excess earnings were. In layperson’s terms, Husband argued “a deal is a deal.” In legal terms, Husband argued, that there was “no change in circumstance” because at the time the parties reached their original support agreement there was an expectation that Wife’s earnings would increase.

At trial, the court found in favor of Wife. The trial court found that there was a change in circumstance and the trial court then capped the bonus payment to $990/year as that was the bonus amount Wife paid at the time of the Marital Settlement Agreement.

Husband appealed, and the appellate court agreed with the trial court that there was a change in circumstance which warranted a modification of Wife’s support obligation. The court reasoned that although at the time the parties entered into their original agreement they had contemplated an increase in Wife’s earnings, they had not contemplated such a dramatic increase in Wife’s earnings. Huge win for Wife, right? Not so fast. The appellate court went on to state that the $990 annual cap was inappropriate because the Marital Settlement Agreement stated that the base amount of support paid met husband’s needs and the parties’ standard of living. Therefore, the parties had agreed to a support payment that exceeded the parties’ marital standard of living by inclusion of the bonus provision.

Why Bonus Provisions in Marital Settlement Agreements Should Always Include Caps from the Payor’s Perspective

Generally, the payor of support wants their Marital Settlement Agreements to include a statement that the support paid meets the supported parties’ needs and the parties’ marital standard of living. Establishing the marital standard of living and husband’s needs is good practice as those agreed upon facts generally limit a supported spouse’s ability to seek a significant increase of support in the future. Fortunately for Wife, the Marital Settlement Agreement in T.C. v. D.C. included such a provision. But in this case, the problem was not the marital standard of living, it was the gravy – Wife’s agreement to pay bonus support meant she was willing to pay husband support that exceeded the parties’ marital standard of living. Therefore, when drafting Marital Settlement Agreements, if there is a bonus support provision, the support payor should insist to a cap on the amount of bonus support paid.

Ultimately, the net result of T.C. V. D.C. is Husband was not capped at the original $990 annual bonus, but the court can establish some reasonable cap, based on the parties’ expectations at the time they entered their marital settlement agreement.

The Petition – Parts 7 (d), (e), (f)/(g), and (h); Part 8

January 20th, 2015

The Petition breakdown wraps up today.  The Judicial Council updated the Petition and Response as of January 1, 2015.  The information contained in the pre- and post-updated forms are (for the most part) the same.   However, in seeking to complete the task at hand (a walk-through of the Petition), the final components are briefly discussed below.

Part 7(d) (Parentage)

If a child is born after marriage, the child is considered of the marriage and the child of the two parents.  Fam. Code § 7541.  If a child is born prior to the marriage (to the parents), the Petitioner (or Respondent) can request that the court find the pre-marriage child a child of both parties.  This is in lieu of a separate parentage action.

Part 7(e) (attorney’s fees)

Payment of attorney’s fees in conjunction with a family law matter is governed by Family Code Sections 2030-2034.  The Court looks at a number of factors including the requesting party’s need and the other party’s ability to pay.  These are not the only factors, and the Court is also required to review the level of difficulty of the case as well as the spousal support factors (discussed below) as they relate to the payment of fees.

Parts 7(f), (g) (spousal support)

Temporary and long-term (or permanent) spousal support will be discussed in a separate blog post.  The Court is required to review a number of factors in determining post-judgment support.

Part 7(h) (property)

Previous blog posts described the difference between community property and separate property.  The Petitioner and Respondent can ask the Court to award community property to him/her and confirm his/her separate property to him/her.

 Part 8 (child support)

Child support will be addressed in a separate blog post.

Continue to check back to this blog for further information on support (child and spousal) as well as other news and updates as they relate to family law in California.

Sanctions – disobey orders at your own risk!

August 18th, 2014

When a judge makes an order, it is not optional.   A party can certainly appeal a decision, but an order is an order – even if the judge orders you (or your attorney) to meet and confer to discuss an issue.  Failure to talk to opposing counsel may result in sanctions as it did in this case.

The link provides a summary of the family law litigation (re child support arrears).  In addition to the general rule to comply with a court’s order, the story also provides a reminder that many (though admittedly not all) issues can be resolved between the parties (or their attorneys) without court intervention, if the parties are reasonable and wish to avoid unnecessary litigation.

It’s Tax Season Again

January 23rd, 2013

With the arrival of tax season, it is important that you take a few moments to consider the tax issues inherent to your dissolution case and/or Judgment for Dissolution.  In order to avoid common problems associated with filing your taxes during and after your dissolution, you should review the following:

1.         Your current Order or Judgment for spousal or family support.

2.         Your current Order or Judgment for child support.

3.         Bank records demonstrating amounts that you have paid or received for spousal support during the calendar year.

4.         Your current Order for child custody and visitation.

5.         Any correspondence or billing statements from your attorney indicating any amount or portion of your attorney’s fees and costs paid during the calendar year that pertained to:

a.         Income tax analysis, income tax advice, and income tax planning regarding your dissolution.

b.         Production (or enforcement) of income (spousal support).

c.         The acquisition and preservation of title to an asset.

After reviewing these records, you should note:

1.         Whether your spousal support Order indicates the payment of deductible or non-deductible/taxable or non-taxable spousal support.  If your Order contains provisions for a lump sum buy-out of spousal support you need to understand whether that amount is taxable or deductible.

2.         How much family or spousal support was ordered versus how much you actually received or paid.  If you received or paid an amount different from the payment specified in your Order, you should consult with your attorney.

3.         Whether your spouse’s calculation of the amount that he or she paid you or received from you for spousal or family support matches your calculation.  You may trigger an audit if the amounts claimed by each party do not match.

4.         Which party is entitled to claim any children as dependents.

5.         Whether you are eligible under your custody schedule to claim Head of Household status.  Again, it is a good idea to verify with your spouse/former spouse which of you intends to claim Head of Household in order to avoid unnecessarily triggering an audit.

If you have any questions regarding your support and/or custody Orders, you should consult with a CPA or tax attorney before filing your returns.  If you have your tax returns professionally prepared, you should gather the above-referenced information and/or records to take to your tax professional.  If you prepare your own taxes, you should consult the appropriate sources to determine how to properly present this information on your returns.