Income for Child Support

CHILD SUPPORT Marriage of Rothrock

Marriage of Rothrock 9/83: date of marriage 8/90: F begins receiving monthly annuity payments of $1,700 from a personal injury structured settlement 8/92: date of separation

9/83: date of marriage

8/90: F begins receiving monthly annuity payments of $1,700 from a personal injury structured settlement

8/92: date of separation

Marriage of Rothrock Marital Settlement Agreement : Monthly annuity payments are F’s separate property F to pay child support to M for their three children Child support to be paid by assignment from annuity

Marital Settlement Agreement :

Monthly annuity payments are F’s separate property

F to pay child support to M for their three children

Child support to be paid by assignment from annuity

Marriage of Rothrock 6/05: F files OSC for modification of child support F argues : Per Heiner , annuity is not income for calculating child support Unfair to make him pay child support for funds needed for medical treatment

6/05: F files OSC for modification of child support

F argues :

Per Heiner , annuity is not income for calculating child support

Unfair to make him pay child support for funds needed for medical treatment

Marriage of Rothrock T/Ct: Annuity is not income for child support M appeals

T/Ct: Annuity is not income for child support

M appeals

M’s argument : annuities are included within the definition of Family Code, Section 4058(a)(1) Your ruling?

M’s argument : annuities are included within the definition of Family Code, Section 4058(a)(1)

Your ruling?

Court of Appeal : Affirmed. Damages received from an undifferentiated settlement and paid out monthly from an annuity are not includible in income for calculation of child support.

Court of Appeal : Affirmed.

Damages received from an undifferentiated settlement and paid out monthly from an annuity are not includible in income for calculation of child support.

Marriage of Rothrock Must meet the common law definition of “income”: the gain or recurrent benefit that is derived from labor, business, or property . . . , or from any other investment of capital” F.C. 4058 definition of income, based on IRC definition, at 26 USC 61.

Must meet the common law definition of “income”: the gain or recurrent benefit that is derived from labor, business, or property . . . , or from any other investment of capital”

F.C. 4058 definition of income, based on IRC definition, at 26 USC 61.

Marriage of Rothrock 26 USC 104(a)(2): Personal injury damages (other than punitive ones) received by the injured party as either lump-sum or periodic payments are not considered income for federal tax purposes.

26 USC 104(a)(2):

Personal injury damages (other than punitive ones) received by the injured party as either lump-sum or periodic payments are not considered income for federal tax purposes.

Income? Family Code Section 4058 : (a) The annual gross income of each parent means income from whatever source derived . . . , and includes, but is not limited to, the following: (1) Income such as commissions, salaries, royalties, wages, bonuses, rents, dividends, pensions, interest, trust income, annuities , worker’s compensation . . . . (Emphasis added.)

Family Code Section 4058 :

(a) The annual gross income of each parent means income from whatever source derived . . . , and includes, but is not limited to, the following:

(1) Income such as commissions, salaries, royalties, wages, bonuses, rents, dividends, pensions, interest, trust income, annuities , worker’s compensation . . . . (Emphasis added.)

Marriage of Rothrock Important Lesson : Look beyond the label Determine what the purpose of the settlement payment was (e.g., lost earnings)

Important Lesson :

Look beyond the label

Determine what the purpose of the settlement payment was (e.g., lost earnings)

THE END

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