Imputing Income on Long Island

A common fear some people have when they begin a divorce is that the monied spouse claims to have little or no income.  Essentially, since the spouse either works off the books or takes a lot of the earned money in cash, based on the tax returns, a party can make themselves look cash poor.  When it comes time for the divorce, now the true non monied spouse believes they are in a bind.  While difficult, all is not lost.  Courts will impute income and make an equitable award despite what is shown on the books, as the parties in Sotnik v. Zavilyansky found out.   In that case the husband claimed he made little to no money and thus could not pay for child support and attorney’s fees.  Further because of his income status, he wanted the marital house sold despite the fact that his son was not yet eighteen.

First, addressing the marital estate, Courts are slow to order the sale of the estate if there are minor children who are attending school.  What Courts try to do is allow the custodial parent exclusive occupancy of the estate.   The Court in Zavilyansky correctly stated that when determining the length of time that a custodial parent should be granted exclusive occupancy of the former marital residence,  the Court should balance the need of the custodial parent to occupy the marital residence against the financial need of the parties.  In this case, the Court awarded exclusive occupancy of the residence to the mother until the son turned eighteen, at which point the house was to be sold.  Typically, during this time, the mother will be completely responsible for the carrying costs of the house, i.e. she will pay for the mortgage, utilities and other costs associated with the home.  When her son turns eighteen, the house will be sold. She will first get a credit for all expenses she paid during the time she was in the home.  That money will be returned to her.  After that, any profits left over will then be divided between the parties.  Generally, the Courts will grant the person living in the home the right of first refusal to purchase the home.

Turning to the father’s income, it is well established that a Court need not rely upon a party’s own account for his or her finances but may impute income based upon the party’s past income or demonstrated future earnings.  In other words, the Court may impute income to a person based on his or her employment history, future earning capacity, educational background, or money received from friends or relatives.  How is this accomplished?  As you may be aware, when you institute an action for divorce, the parties are required to file a statement of net worth.  That statement lists all of the expenses that the parties have to pay on a monthly basis.  When you add up all expenses, you come to a number that the household must pay per month.  From that number, at a bare minimum, you can then deduce what the household must earn, as a bare minimum, to meet these expenses.  Once this is done, the Court typically imputes that income to the parties.  So for example, if you have a couple living in Roslyn, in a house with a mortgage of approximately $5,000.00 a month, utilities, food, cable and other  normal every days expenses, and the monies spouse claims they only make $65,000.00 a year, the Court will ignore that party’s yearly income and impute income which makes more sense.

Finally, in the case we’re talking about, child support was awarded.  Typically, when child support is awarded, the payee is required to obtain life insurance to ensure that payments until the emancipation event occurs.  An emancipation event means the child has turned eighteen, moved out and has a full time job; joined the military or graduated college.  Typically, one can calculate the child support obligation and determine the obligation.  Once the obligation has been determined you can determine the amount of life insurance required. Now, you have two options as the one required to purchase life insurance.  First you can simply purchase a policy to cover your obligation.  Second, you can get permission to allow your obligation to slide downward every year.  For example, in this case, the husband’s child support obligation was $140,000.00.  After the first year, clearly, his obligation will be less than $140,000.00.  If you get permission to decrease your obligation every year, you will be allowed to decrease your life insurance policy every year by the amount you have already paid.  This will ensure that the beneficiary does not get a windfall in the event you pass away.

Imputing income is difficult but clearly not impossible.  While you can determine a potential minimum income that the monied spouse may be earning, imputing income is not the best solution however it is better than relying on the monied spouse’s statement of their income. Start gathering all the bills which are paid to keep your household running: mortgage payments, lights, gas, oil, phone, cable, food, car insurance, car payments, camp and anything else that can help give the Court a clearer picture of what your spouse earns. If you’re seeking assistance of any kind with Imputing income, please call a Long Island Divorce attorney at Divins & Divins, P.C. for a free consultation.

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