While the failure to pay child support is never an excuse for one partner to withhold parenting time from the other, in an increasing number of states, the amount of time a parent spends with their children my affect the amount of child support received.
Historically, many states followed formal guidelines for awarding child support based on the net income of the non-custodial parent multiplied by a set percentage determined by how many children the couple had together. Unfortunately, a 2011 study found fewer than 42 percent of non-custodial parents ever paid everything they owed for child support. If your spouse owns a business or is unemployed, collection becomes even more complex as you can’t be reliably paid through payroll deductions.
Most states are taking a different look and going to an “income share” system for awarding child support. The goal is to make payments more reality-based and take into account different household earning situations. Illinois enacted an “income share” approach effective July 1, 2017. This new approach could significantly impact high net-worth couples who are divorcing as it assumes guidelines for maximum child support that may be significantly less than the family has historically spent on the kids’ lifestyle.
Here are a few things divorcing families should know about “income share” systems.
- Payments are more closely related to state calculated expected child raising costs. The state may have an expenditure table calculating “basic support” as food, housing, clothes, transportation, entertainment, healthcare, personnel care, education and miscellaneous.
- Costs are shared based on each spouse’s income. The court will calculate how much each should contribute to child support as the prorate share of total income of both spouses including the amount each spouse earns as well as the spousal support payments paid or received.
- Payments are based on the difference in earning power. Once each spouse’s contribution is determined, the higher-earning spouse pays only the difference between the two figures.
- Time spent with children counts. If both parents have 40 to 60 percent of the overnights, they may be allocating child support based on the prorated time with the children.
When it comes to “basic support” needs, the following typically don’t count:
- Child care
- Health insurance
- Uninsured and extraordinary expenses
- Extracurricular and school expenses of all sorts
Beyond the cost of “basic support,” the parents will typically negotiate how additional costs are shared. In households where the kids had a much higher standard of living than the “basic support” needs from the expenditure table, you may see the higher income partner paying a large portion of these additional expenses.
The Illinois statute only applies to decisions made after July 1, 2017 so cases that are still currently in progress will be subject to the new laws. Cases finalized before July 1, 2017 are not eligible to be changed solely due to the new law. However, if there is a separate “substantial change in circumstances” which causes the child support to be reviewed in a post-decree case going forward, the new law likely will be factored in.
If you know of anyone contemplating divorce or in the process, please let them know our BDF Divorce Practice Group can help them understand the new child support laws as well as all aspects of divorce from hiring an attorney to separating assets.
A wealth manager and owner at BDF, Heather L. Locus, CPA, CFP®, CDFA® founded our Women’s Service Team and leads our Divorce Practice Group. She loves solving complex problems by balancing the financial and emotional components with tax and legal issues. She has been named one of America’s Top Women Advisors by Forbes and was named a Top 200 Wealth Advisor Moms by Working Mother. In 2017, she authored The Next Chapter: A Practical Roadmap for Navigating Through, and Beyond, Divorce.