Calculating Child Support for Overtime and Bonus Income
Calculating child support awards in California can be a complicated process. Determining child support is a nuanced, multi-step process that requires taking all sources of income into account. The income and assets of both parents will be considered, including investments, stocks, pensions, disability, veteran benefits, Social Security, inheritances, income from rental property, trust income, and more.
However, child support orders can get even more complicated when you take bonuses and overtime into account. When determining child support, the court typically looks at the prior calendar year’s income as a reasonable measure of future income. When using this approach, the court treats future income as if it has already been received (based on the fact that it was received in the year prior). As you can see, this approach becomes problematic when there is unexpected income involved, such as overtime or bonus pay.
California Family Code Section 4058 states that, for child support purposes, “the annual gross income of each parent means income from whatever source derived.” Combined with California Family Code Section 4604, which allows the court to adjust child support orders to accommodate seasonal or fluctuating income, supported parents in California absolutely have a right to a portion of income from overtime and bonuses.
If you are going through a divorce, child support negotiations, or preparing for another family law matter, contact The Law Office of Heath L. Baker. Mr. Baker understands how to navigate the emotionally charged family court system. As a Riverside native himself, Mr. Baker can help you and your family find a solution and get through a difficult time. Call (951) 222-2228 or contact us online to schedule your free consultation today.
Bonus income is particularly difficult to account for when determining child support awards. Since bonuses are rarely guaranteed and the amount can change from year to year, it is hard for both parties to define a fair portion of these earnings that will be used for child support. As a supported parent, you want to make sure you and your child receive a fair percentage of these earnings as part of your overall child support agreement. As the support obligor, you want to make sure you are not overpaying for child support this year based on last year’s bonus income.
Sometimes one or both parents have income that varies, fluctuates, or is otherwise unpredictable. When calculating child support, the court often uses a Smith-Ostler order to account for commissions, bonuses, or overtime income. In these cases, the court will set an amount for child support and issue a Smith-Ostler order to account for overtime and bonus income. The Smith-Ostler order will set a fixed percentage of all bonus income to be paid as additional child support.
The fixed Smith-Ostler percentage is determined the same way the original support amount was determined; it will take certain factors into account, such as the amount of time spent with the child and the overall income.
The purpose of the Smith-Ostler order is to minimize the need for future litigation and ensure fair child support orders. Without a Smith-Ostler order, the spouse receiving support would have to file a court order for a portion of the other’s bonus income every time he or she receives a bonus. Plus, if a bonus amount decreases from one year to the next, a Smith-Ostler award keeps the supporting spouse from paying a larger percentage of his or her income as a result. Instead, the Smith-Ostler order sets a fixed percentage that allows for variation in bonus and overtime income from year to year.
Background of the Smith-Ostler Order
Smith-Ostler orders are derived from Marriage of Ostler & Smith (1990). In this case, Clyde and Vicki had married at age 17 and raised multiple children together. Vicki was a stay-at-home mother to take care of the children while Clyde worked toward his master’s degree in banking. At the time of the divorce proceedings, Clyde had risen to the position of chief financial officer and executive vice president of a major bank corporation.
Clyde received significant bonuses from the bank every year, which greatly affected the overall household income, but at the time of the trial there were no standards in place for taking bonus income into account. The trial judge stated, “No future bonus is guaranteed. It would therefore not be appropriate to base a support order on Husband’s bonus income and then require him to file motions to modify at such times as the bonus is reduced. It would be more fair to all parties to base the support order on Husband’s income from salary and dividends, and to allocate a portion of the future bonus income to the children and to Wife by way of a percentage interest so that future litigation will not be necessary as the bonus income changes.”
In the inaugural Smith-Ostler order, the judge awarded 10 percent of the bonus income for each minor child and 15 percent of the bonus income for the wife, adding up to 35 percent of total bonus income.
Contact The Law Office of Heath L. Baker
The Law Office of Heath L. Baker is dedicated to finding the best solution for you and your family. Mr. Baker has years of experience investigating the facts and applying legal expertise to your family’s situation. You can count on the Law Office of Heath L. Baker to thoroughly investigate and diligently prepare your case to win.
You deserve compassionate and hardworking representation in your family law matter. For issues of divorce, child support, spousal support, or visitation rights, trust The Law Office of Heath L. Baker. Mr. Baker represents clients in all Riverside and San Bernardino courts, as well as select locations in San Diego and Orange County. Call (951) 222-2228 orcontact us online to schedule a free consultation.