Q. My son who is a fire captain is going through a divorce/custody dispute. The problem is that during the summer months/fire season he works overtime. June-Sept. However, does not work significant overtime throughout the year. The court, however, is computing his child support based on his gross annual salary. This causes an extreme hardship for him in that he has to borrower from everyone to make ends meet until the summer comes around and hope for overtime to catch up his past due bills. Is there a way to request the court to calculate his overtime/seasonal pay separate from his annual salary in computing child support? Kindly advise. Thank you.
Greetings Christine –
Wow, he has got a mother who loves him! Yes there is. These are the issues that he needs to noodle.
The Court Has Two Options
There are basically two options for the Court: 1) adding it into gross yearly income (which forces your son to budget and save for the long-haul) or 2) an Ostler-Smith situation where he pays a percentage of the higher monthly income months. I’ve written about those situations on the site. Fluctuating income situations are governed by Family Code section 4064.
He is lucky in that it sounds like there is no spousal support component, because with say spousal support and child support and two children, the percentage of income is at least 10% apiece. It makes a difference whether the percentage is from his gross or net income from the higher earnings. Because there is no spousal support component that he would get a spousal support tax deduction for, it is more likely that the percentage will come from gross - a higher number. There is no clear appellate explication of whether gross income or net income should be used as the starting point for Ostler-Smiths; the reported cases address gross earnings analyzes, but they also were hybrid SS and CS situations. Read further about Ostler-Smith Orders here.
Generally you are looking at a 10% per child surcharge when a Smith-Ostler is done (up to 35% according to existing appellate decisions), without spousal support (SS) in your son's situation which is often higher for the spouse than the child support per minor. Surprisingly, the support exposure kind of equals out over the year in terms of the total freight, whether the court orders guideline CS or a percentage during the high months.
Incidentally, that higher percentage would require a base-line regular monthly income against which to charge the percentage. That may be why a judge would be reluctant to micro-manage the situation. It is just easier for the Court to add the total gross income together for the year and put the burden on your son to save for the leaner months; this appears to create a windfall for the mother, but it may not. Also, there has been an increasing judicial reluctance in some counties to use Smith-Ostlers. Where is this case pending? It requires a couple more steps to render a percentage of income order than to just throw it all into an average.
Ostler-Smith Orders Have Downsides for the Payor
Ostler-Smith orders can cut both ways in terms of risk, and the difficulty lies in accurately projecting the next year's income.
For instance, assume that in 2016 your son had overtime of $4,000/month during the five month fire-season in California. Based upon that, he could be forced by a percentage order to pay 20% gross of that for two children for the affected months, or $800/month more for those months. Or, if we go the other route, the extra $4,000/year gets added into his yearly gross instead and he pays a higher monthly average based on the prior twelve month figures.
What happens if he instead earns $2,000/month in overtime for those five months? He is overpaying support in 2017 when he receives the lower income, but then he has to file an RFO to reduce CS in the late Fall of 2017, after the fire season ends when his income picture is clear. Thus, he has the burden and expense of going back to Court, which could take God knows how long - particularly if he is Los Angeles County - and by the time his matter is heard (in 2018?) maybe we get Santa Ana winds again, and suddenly his current overtime is way up again. Will a court adjust his support obligation retroactively for the prior period where he had less income? Probably not. Plus, he can only get a modification to become retroactive to the date he filed his RFO to modify child support.
If we just had a percentage of income order, nobody would be forced back to Court - including the mother, who could request attorney fees for defending your son's application.
The biggest downside to Smith-Ostlers involves bonus income, and not so much overtime, where suddenly a bonus leaps up unexpectedly - with a percentage of income order already in place, the earner has to pay a higher amount which wakes the sleeping dogs, who otherwise would likely never have learned about the increase in average monthly income that the bonus causes, because there is no independent obligation by a payor to disclose these bonuses absent a court order to disclose them, once a divorce has been concluded. By the time those parties might get caught, the bonus has been spent and the next year's may not be so good!
I believe family court bench officers have the obligation to think through these things, and not to reject Smith-Ostlers because they require a little more effort. And that support payees should like them, for exactly the reasons set forth in the foregoing paragraph. If you compare the a Guideline support amount in the Xspouse or Dissomaster over the course of 12 months, with the average support that a parent or spouse will receive if they get a percentage of income over the course of the year, it is pretty much the same. Problems arises with surprises. Smith-Ostlers really create the possibility for a windfall to the support recipient, especially in bonus situations as opposed to simple fluctuating income. Not so much if they believe the payor may earn less in coming years.
In my experience, most payors would prefer to pay the Ostler-Smith add-on even if it means paying more than otherwise. It avoids the month-to-month stress of having too high a burden in the lower income months, and creates certainty. This is preferable to over-paying, just to keep the stomach acids down! Plus, it is a nice surprise for the greedy payee? Just kiddin' on that remark! I support fair market value settlements. In fact, most people on both sides prefer fair market settlements. There is just so much inexpert confusion about what is "fair market".
As to support obligations involving fire-fighters generally, a very important decision was handed down in February that you must read - IRMO Shimkus (2016) 244 Cal.App.4th 1262!
Hope this helps. Please support us on social media and your grown up boy is very fortunate to have you!
Author: Thurman W. Arnold III