When divorced parents suffer a cut in pay or a job loss, they often are entitled to a reduction in any child support that they have been ordered to pay. After all, child support in California is almost always based on a computer formula that looks at basically four factors: the number of children; the timeshare with the children; the income of the custodial parent; and the income of the non-custodial parent.
But in a new decision, filed today by California’s Court of Appeal, an order reducing the father’s child support from $17,500.00 per month to $9,842.00 per month was reversed. In this case (Marriage of Usher, from Los Angeles County), the facts established a 2009 divorce with an agreed upon child support amount of $17,500.00. This amount was higher than child support would have been under the guidelines, but the parties are always free in California to agree to support that is higher or lower than what a computer would generate.
In order to change child support after the divorce case is over, the person seeking a change has to show sufficiently material changed circumstances. In Usher, the father claimed (in June, 2014, when he filed a motion to lower child support) that his income had changed from $350,000.00 a month when the parties had entered into their agreement, to $70,106.00 a month five years later. Based on these numbers, the dad wanted child support to drop down to $5,184.00 a month.
But the mother countered with evidence that her ex had assets of over $67 million. An expert the mother hired gave an opinion that the rate of return on these assets was 4.5 percent. The father, in turn, had an expert who thought 4.5 percent was too high and that the assumed rate of return should be one percent.
The trial court went with the one percent rate of return and lowered child support to $9,842.00. But writing for the three justice panel, the Hon. Nora Manella noted that “in evaluating a request for modification of an existing support order, the focus is generally on whether there has been ‘a reduction or increase in the supporting spouse’s ability to pay and/or an increase or decrease in the supported [party’s] needs'”. In this case, said Justice Manella, the father “presented no evidence of a substantial change in his financial ability to pay the agreed support”. Also, despite the reduction in his income, the father “presented no evidence of a cutback in his own lifestyle. Rather, the evidence established that six months after respondent requested a downward modification of child support, he moved from a $2.1 million residence in Santa Barbara to a $19.2 million home in Montecito, while continuing to maintain his $6.6 million Italian vacation home”.
The Usher court also noted that with respect to wealthy individuals, judges must consider the substantial wealth in setting child support. Quoting an earlier decision, the appeals court stated that “‘” [c]learly where the child has a wealthy parent, that child is entitled to, and therefore ‘needs’ something more than the bare necessities of life”‘”. Because the parties had agreed in 2009 that their one child’s needs required support in the amount of $12,500.00 a month, the justices ruled that there needed to be evidence that the child’s needs had decreased in order to maintain a lifestyle commensurate with his father’s.
As a separate ground for reversing the trial court, the justices found that the one percent figure used to determine the reasonable return on the father’s assets was unreasonable. There was no evidence of the father’s actual return on his assets. In addition, the justices ruled that even if there was indeed evidence of only a one percent return, it was an abuse of discretion to limit child support based on that figure. In the words of today’s opinion, “[j]ust as a parent cannot shirk his parental obligations by reducing his earning capacity through unemployment or underemployment, he cannot shirk the obligation to support his child by under-utilizing income-producing assets”. What bothered the appeals court was that the father was admittedly not following a more prudent investment policy simply because he did not want to tie up his assets in case of an emergency. But the court observed the father had sufficient assets to still allow him to keep a significant portion in cash or money market funds for emergencies while still earning more than a one percent return.