If you have a child with special needs, there may be tax implications and government benefits available. It is important to consider these so that your child’s needs can be met without jeopardizing the child’s eligibility for government benefits.
To be successful in child support negotiations, one has to understand a bit about the laws of their jurisdiction, have a solid understanding of key issues to consider and be alert for the major pitfalls to be avoided. Staying out of court and using alternative dispute resolution (ADR) modalities such as mediation or collaborative law allow you to customize your child support agreement to your unique family situation. ADR is the less-stress, lower-cost way to resolve child support. As an added benefit, it allows for creative, situation-specific solutions that you design with the help of a professional such as a mediator.
Here are my top 10 tips for successfully navigating child support negotiations.
1. KNOW YOUR STATE’S MODEL FOR DECIDING CHILD SUPPORT. You certainly don’t need to be a lawyer to effectively negotiate child support, but you should at least have a basic understanding of the way child support is addressed in your State if you were to let a judge decide the issue for you. The majority of states in the U.S. use an “Income Shares” approach. This approach assumes that both parents share responsibility for the financial support of their children and is grounded in the assumption that children should receive the same level of support as if their parents were still living together. Using the approach, a court assigns support to each parent based on their proportional share to the combined “family income” even though the parents live apart. A minority of states take the “Percentage of Income” approach, where the non-custodial parent is required to pay a fixed percentage of his/her income based on the number of children entitled to support.
2. KNOW YOUR STATE’S AGE LIMITS FOR CHILD SUPPORT. The vast majority of State laws terminate child support at age 18. A number of States extend child support to up to age 19 if a child is still in high school. A few states, including New York, extend child support to age 21.
3. DETERMINE EACH PARENT’S INCOME. “Income” is typically defined very broadly in most States as income from “all sources”. It includes obvious things such as wages, tips, overtime, bonuses, social security, pensions and alimony received. It may also include gambling winnings, gifts and debt forgiveness. Self-employment income can be complicated to determine, so this is an area where an accountant can be invaluable. If a parent has income that fluctuates from year to year, you may want to consider averaging income over a number of years. For parents who voluntarily chose to be unemployed or underemployed, income can be imputed based on past earnings history or their ability to earn based on their level of education and experience.
4. DETERMINE WHO IS THE PARENT ENTITLED TO SUPPORT. This may seem self-evident, but what about cases where parents share parenting time equally? Does that mean neither one pays or receives support? Not necessarily. In most jurisdictions, an equal parenting schedule is just one of many considerations. For instance, if the parents have a schedule of equal parenting time but one makes $250,000 per year and the other makes $40,000 per year, in most jurisdictions the higher wage-earner would still owe some support to the lower-wage earner. But an equal parenting schedule typically would involve some reduction in the payor-parent’s support obligation in consideration of that parent providing for the children’s needs in his/her home half the time. That being said, courts generally try to avoid children having two drastically different standards of living. So a parent who makes $500,000 may still pay quite a bit of support to a parent earning $30,000 even though they have a 50/50 parenting schedule.
5. “ADD-ON” EXPENSES CAN ADD UP. In child support, there is the base amount of support which is considered as contribution generally to shelter, food, clothing, transportation and other basic needs. The cost of health insurance premiums, out-of-pocket health-related expenses, childcare costs and educational expenses for tuition/room/board are considered “add-ons”. Add-on expenses are typically divided in a pro rata fashion based on the parents’ incomes. For instance, if Parent A earns $100,000 per year and Parent B earns $50,000 per year, the combine parental income is $150,000 and Parent A’s pro rata share of add-on expenses would be 2/3 and Parent B’s pro rata share of add-on expenses would be 1/3.
6. KIDS AIN’T CHEAP. We’ve talked about shelter, food, transportation, health care, day care and tuition. But what about musical instruments, ballet lessons, ski equipment, cell phones, tablets, laptops, proms, Bat Mitzvahs, car insurance for teen drivers and more? Many States do not consider these as reimbursable or add-on expenses. That is why it is important that these be considered in your negotiations.
7. SPECIAL NEEDS. If you have a child with special needs, there may be tax implications and government benefits available. It is important to consider these so that your child’s needs can be met without jeopardizing the child’s eligibility for government benefits. There are financial planners and lawyers who specialize in these situations. Seek their professional advice to ensure that your negotiated child support agreement doesn’t inadvertently disqualify your child from important government benefits.
8. TAXES SUCK. This is a truism, for sure. But recent legislation, such as the American Rescue Plan Act of 2021, provides for substantial tax credits, child care credits and stimulus benefits for families with children. There are no reliable Cliff Notes for the Internal Revenue Code. DO NOT GO IT ALONE. Seek the advice of a tax professional so that you and your Ex can maximize the family benefit of these incentives. Never pay Uncle Sam more than you legally have to.
9. AVOID COURT – AT ALL COSTS. It may seem odd that an attorney is advising you to avoid court. Please, hear me out. Family Courts are there to help families who can’t help themselves, families who can’t work out their differences. But family court is no place for YOUR family. Even the most educated, well-meaning stranger in a black robe will not know you, your children, your hopes, your dreams and your finances in the level of detail that you do. Don’t let that stranger in a black robe decide your children’s future or determine your financial destiny. Using the support and guidance of a mediator or collaborative family law attorneys, you can craft the smartest, fairest outcome that meets your children’s needs without either parent being unfairly disadvantaged. Many of my clients take the approach of looking at each parent’s total household needs (including caring for the children in their respective home) and their total disposable income and then deciding a level of support that puts each parent on equal footing financially. Some even use a joint account into which each parent deposits what is determine to be their fair share of child support and the expenses for the children are paid out of that account. This neutralizes the fear that some parents have that their child support isn’t always directly benefitting their children.
10. DON’T SWEAT THE SMALL STUFF. This is true generally in life, and it is true in child support. If you gave your kiddo $15 for that field trip, maybe let one ride and leave it off the “child support balance sheet”. Because, honestly, orthodontia is around the corner, so save your energy for negotiating how to pay for that gorgeous smile your kid is gonna sport once the braces are paid for and removed!
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