Q. I remarried in August, 2009, and my new wife is a doctor. She has one child from her prior marriage and I have two. I am still paying my former wife alimony and child support. We largely depend upon my wife's medical income to make ends meet. Now my ex is threatening to take me back to court to increase my support based upon my new wife's income, while my own income is down from when the court last decided it. My new wife is upset at the idea that my ex can learn anything about the medical practice or income. What are our rights?

Peter, Sacramento, CA

If there has been a material decrease in your income since the time of your last order, you may safely file a support modification motion to lower your child support and to lower or possibly terminate your spousal support. Whether that is advisable based upon your numbers has nothing to do with your new mate's income, and should not cause you to hesitate - but again, it does depend on the actual respective numbers between you and Wife 1, which you did not provide me. You also need not worry about W1 filing a motion to increase (you can't stop her, but she will not win based on W2's earnings). Maybe you should give her this link so she will think twice.

New-Mate Income Generally Cannot Be Considered In Setting Child or Spousal Support

California law is quite clear that new mate income cannot generally be considered against you in ordering or modifying child or spousal support. The controlling California Family statute is section 4057.5.

In the normal situation, Family Code section 4057.5 leaves the Court no discretion to consider your new wife's earnings, period. You do not need to report those earnings on your FL-150 (Income and Expense Declaration). This is a statement of California legislative policy effective in 1993 when this section was added to the Family Code. This is true for both spousal and child support.

However, section 4057.5 does contain an exception for the "extraordinary case" which the statute makes clear is intended to address situations where "where excluding that income would lead to extreme and severe hardship to any child subject to the child support award" or where "a parent ... voluntarily or intentionally quits work or reduces income, or who intentionally remains unemployed or underemployed and relies on a subsequent spouse's income." Even if the court were to find a severe hardship on the children of marriage number one, it would be required not to impose a severe hardship on your wife's child by reallocating her income to you for purposes of supporting your two children.

In practice, so far, Courts almost never find facts sufficient overcome this clear statutory prohibition. So far there is no published California appellate decision defining these extraordinary circumstances. No doubt one day someone will so abuse this protection and hide behind it that we will get a reported decision that fleshs out how bad someone needs to behave before the protection is lost. But "extraordinary" means really extraordinary. In the average case, your new Wife has nothing to be concerned about.

With regard to attorneys fee awards, however, there is authority for an argument that new mate income may be considered in granting or denying an attorney fee request, but the odds are against a judge doing that.

Incidentally, this section also applies to income from nonmarital partners as well as new spouses. In one reported case (IRMO Loh), a trial court was reversed for inceasing dad's child support obligation after the mother produced photos of the father's "lifetyle" to show imputed nontaxable income in the form of his new girlfriend's contributions to him, since she paid for all his toys.

The new mate question is a subset of the "imputed income" situations where a father or mother may quit work or reduce hours because they are relying on their new mate to contribute the difference. That is not likely going to be an extraordinary case, but W1 can separately seek to impute income to you on the basis that you have a higher earning capacity than you are exercising. Earning capacity and imputed income is a blog for another day. Also, I will mention here that another argument exists in favor of W1 that has nothing to do with the right to obtain the records or income of W2: Equalizing the lifestyle's of the two households where yours is rich and grandiose and W1 is impoverished (an extreme example) pursuant to FC section 4057(b)(4).

What About Tax Returns?

The tax returns are privileged as they relate to your new wife's medical practice. For instance, if she is a medical corporation (which I recommend be set up), she will almost never be forced to divulge those records. Even as to your joint returns, you may be entitled to redact the information concerning your new spouse or have the Court review them in camera (meaning they are not turned over to the other side). Your former mate is entitled to see your side of the tax returns, however, and they are not insulated from scrutiny simply because you filed joint with the Doctor Wife. If you don't file jointly, your former wife will almost certainly never get her hands on your new wife's Married Filing Separately (MFS) returns. Structuring things this way may or may not be advisable and you should consult a tax accountant.

An interesting twist here is that because you marry a higher, wealthy earner, your taxes actually increase because under federal IRS (and the California FTB), you are responsible for one-half of your new mate's income - and this is true even if you don't file jointly. One case (County of Tulare vs. Campbell) has held that this additional tax you become liable for can form the basis for a reduction in your support because you have less net income available for support after the tax hit is deducted. Hence, based on these tax consequences you may have an additional argument for decreased support - although a Court may try to deny you some discretionary offset to even the score since this feels a bit unfair to the spouse who is primarily supporting the children and so lessen the downward modification.

For more articles about the ins and outs of new mate income, visit us here!

The take-away: So long as you are not playing games, have not intentionally reduced your income by relying upon your new mate's income, and there is no really extraordinary difference in the two households, your new wife's income is just not relevant and so it is protected.

Be safe out there!

Thurman Arnold

Q. I have two children from a previous marriage. I remarried two years ago, and my new spouse earns $8,500 month. While my hours have been reduced during this recession and my monthly gross averages $3,500. The ex is threatening to take me back to Court to increase child support based upon my new mate's income. Can she do this?

Jason - Santa Barbara, CA

Hey Jason - I used to live in your town!

Of course ex-spouses can always take the other back to court, but that doesn't mean they will win. We call these support modification proceedings. In order to obtain a new order, she must prove there has been some material change of circumstances with regard to her needs, the children's' needs, or your ability to pay a greater sum in support.

The key California statute on when and how new mate income can be considered is Family Code section 4057.5. The basic rule is that courts cannot consider new mate or nonmarital partner income in the context of making child support or support spousal orders. This means as a general proposition that your new wife's income of $8,500/month is not to be inputted into the support guideline formulas.

There are two exceptions where new mate income may need to be disclosed and where it can be considered in setting child support: 1) Where there are "extraordinary circumstances" that would cause the exclusion of this income to create an extreme or severe hardship to a supported child. However, if this hardship is shown, the court must first consider the effect of inclusion of new mate income on any other children including the new mate's children, and so that their interests trump the hardship to the child for which support orders are being sought. 2) By marrying somebody with high earnings, a spouse will pick up additional taxes based upon the other's income. Since as far as the IRS and California Franchise Tax Board (FTB) is concerned, you are liable under community property laws for one-half of your new mate's income, regardless whether you file jointly, the added tax consequences upon this additional income can actually be the basis for a downward decrease in child support (County of Tulare v. Campbell) since there is less after tax income available to you from which to pay support.

There are very few reported California appellate decision on new mate income or which explain how FC section 4057.5 is to be applied. In Marriage of Loh (93 Cal.App.4th 325) a mother/former spouse convinced a trial court, based upon photos of the father's extravagant lifestyle (homes, cars, etc.) which were funded by his girlfriend's income and assets, to impute income to him for purposes of basing a child support award. The appellate court reversed, stating "Evidence of lifestyle, particularly a lifestyle subsidized by a new 'nonmarital partner', is not a cheap substitute for proper discovery of income reported on tax returns."

In a very recent appellate decision (Marriage of Knowles (Oct. 2009) 178 Cal.App.4th 35) a trial court was reversed after it accepted the former wife's argument that the community property income and assets of both he and his new wife should be used to determine his income available for support. The trial court's mistake was include the half that belonged to the new wife, although it could have included just the half that belong to him. There was no evidence of extreme hardship that justified considering the new mate's half.

We've waited a long time for another case dealing with consideration of new-mate income under Fam C section 4057.5. One of the few cases that has, In re Marriage of Wood (1995) 37 Cal.App.4th 1059 is cited here, but it came down in 1995. Neither the statute nor the cases provide any definitive answer regarding what actually constitutes either an "extraordinary case" or an "extreme and severe hardship," although Wood seems to say that new-mate income can be considered where one of the parents is voluntarily unemployed or underemployed.

Rather than arguing for NMI (new mate income), a party seeking to have income assigned to a person who has remarried or is living with a nonmarital partner may find more success by arguing that income should be imputed to that spouse on the basis that they have an earning capacity which is not being realized. For instance, if because your new spouse had sufficient income you chose to quit work or take a lower paying job it might appear you are shirking your support responsibilities. Rather than charging you with NMI, a trial court could find that you had the ability to earn X dollars a month and so charge you for this phantom income by making that the basis for a support award. Then, the community property (including your new mate's share) could be tapped to satisfy this obligation.

Incidentally, a California prenup can be an effective way to limit this exposure.

Author: Thurman Arnold