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Monday, November 24, 2014

Three Ponies or Four?

Each state has child support guidelines that set a presumptively correct amount of child support when parents split.  However, some states permit judicial discretion at the low- and high-income ends of the spectrum.  I have previously written on the former, and next year I have a forthcoming Hofstra Law Review article on the latter.  In it, I start to explore the extremely difficult question of what parents owe to their children when there is a lot of money on the table.  One Kansas court has stated that three ponies are enough, even for the wealthiest of children.  Others have argued that reasonable needs of the child are the limit, while yet others argue there is no limit.  Some states use a percentage of income as a limit, which increases up to a certain income amount before decreasing.  The child support guidelines, catalyzed by federal law, aimed to prevent these sorts of inconsistencies—but the question of fairness gets far grayer in high-income cases, leaving much room for debate.

Posted by Margaret Ryznar on November 24, 2014 at 04:30 PM | Permalink

Comments

Yes, courts seem fine awarding the lower income spouse lots of money in a big money case. Here, only a prenup would have avoided this result. The judge decides what's a fair division, but since there are so many ways to divide big money, there is so much more room for disagreement.

Posted by: Margaret Ryznar | Nov 26, 2014 2:42:02 AM

Not your typical family law situation, for sure. How about this?

http://verdict.justia.com/2014/11/26/gets-black-gold-harold-hamm-ordered-pay-1-billion-divorce-settlement

Posted by: Joe | Nov 26, 2014 12:10:36 AM

Both interesting points for me to think about. It's true that discretion leads to more litigation, and only the high-incomes invite discretion in the child support context. On the other hand, everyone else has the right to litigate whether the presumptive amount under the Guidelines should be rebutted--but that is hard to win and therefore indeed reduces litigation for non-high-income earners. As to the second point, that could work, except that often there is such a big income inequality between former spouses it is hard for the lower income spouse to have significant skin in the game. Also, in theory, the custodial parent already has some skin in the game by virtue of paying for the day-to-day life of the kids. But, your point is an interesting way to think about the cases wherein the lower income spouse has money on the table too.

Posted by: Margaret Ryznar | Nov 25, 2014 2:11:20 AM

You'd think this would be a good opportunity to compromise by exchanging two longtime policy goals. For years, one faction has criticized reducing child support shares for high income individuals on the basis that these individuals are paying far less than the could -- and indeed, far less than they would absent divorce. On the other hand, another faction has complained for years about the "hidden" alimony issue you talk about in your article -- that high income child support is drastically in excess of the child's support needs. They want a system where support obligations correspond with actual money expended on the child.

So why not trade one preference for the other? Uncapped child support exposure over a certain income, BUT support amounts have to be allocated to actual expenses paid (or better, some percentage thereof). The custodial parent wants to live in a big, fancy house? Fine, show the court the mortgage bill and the noncustodial parent will have to pay 20% (or whatever amount we want to attribute to the child) of it. Fancy private school? Great. The custodial parent has to pay 30%, the noncustodial has to pay 70%. As long as the custodial parent has some meaningful skin in the game, you disincentivize him or her from the whole "spending other people's money" moral hazard, and you address the "hidden" alimony problem.

Posted by: Huh | Nov 24, 2014 6:32:04 PM

I have a slightly different take than the pure fairness angle.

We subsidize family law in a lot ways, including obtaining and enforcing child support orders. But when the parties are fighting over the questions of three or four ponies does it really make sense to use limited judicial and enforcement resources? Should there perhaps be sliding court fees? Or mandatory private arbitration?

I realize that the question could be asked about a broad range of litigation (Apple vs Samsung anyone?) but here it looks like the public interest is at a nadir.

Posted by: brad | Nov 24, 2014 5:57:36 PM

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