Child Support – Self-employment income

One of our Alabama Divorce Questions readers asks a couple of good questions about the standards for calculating entreprenueral income for figuring child support. I did my best to answer the questions.

One of the most often-invoked strategies of enterprenuers is to argue that their income is the salary they pay themselves. Rule 32 of the Alabama Rules of Judicial Administration makes it clear that this is not what’s relevant. The standard is gross receipts minus ordinary and necessary business expenses, plus any depreciation or amortization.

Burden is on child support recipient

The Alabama Court of Civil Appeals says the burden of proving that a child support arrearage exists is on the recipient. In the case of C.M. v. B.S.L., Case No. 2030938 (Ala. Civ. App. January 14, 2005), the court acknowledged that the burden of proving that a credit AGAINST child support is on the payor.

It’s important to note that in this case there was not a court-ordered child support award. Instead, the court was interpreting the effect of a handwritten agreement signed by the parties on the inside cover of a receipt book.

The appeals court affirmed the lower court’s imposing a two-year statute of limitations on the arrearage pursuant to Ala. Code $ 26-17-8. This drastically limited the recipient’s recovery.

The lesson is clear for child support recipients. Do not rely on extra-judicial agreements about child support. Enforcing them is materially more difficult. Instead insist on a court order for child support. Once there is a court order in effect, each monthly payment is a judgment, and the statute of limitations for each monthly payment becomes 20 years from its due date.

Living in Man’s House Doesn’t End Alimony

The Alabama Court of Civil Appeals says ending alimony after divorce takes more than showing that the wife/recipient lives in a house owned by a member of the opposite sex. In McNatt v. McNatt, No. 2030638 (Ala. Civ. App. January 14, 2005), the court reversed the finding of a trial court that the wife had been cohabitating with a member of the opposite sex.

The appeals court said, “To evaluate the permanency of a relationship to determine whether a former spouse is cohabiting with a member of the opposite sex, this court has considered whether the former spouse is sharing a dwelling with a member of the opposite sex; whether the former spouse has ceased to date other members of the opposite sex; payment of the former spouse’s creditors by a member of the opposite sex; and the purchase of clothes for the former spouse by a member of the opposite sex.”

In the McNatt case, the appeals court noted that the evidence showed only that the wife/recipient lived in an apartment owned by her employer and that there was no evidence of any sexual relationship between her and the employer. The wife/recipient testified that she paid rent on the apartment and denied any romantic or sexual relationship.

Only one health insurance counts

It’s an abuse of discretion for the court to count the cost of health insurance for both parents when it calculates child support using the Alabama child support guidelines. This from the Alabama Court of Civil Appeals in Volovecky v. Hoffman, No. 2030291 (Ala.Civ.App. 12/30/2004). The divorce decree had required the father to provide health insurance, and he had complied. In a modification case, however, the court included the cost of health insurance for both the father and the mother. The appeals court reversed, instructing the trial court to recompute child support based on the cost of health insurance provided by the father.

Child support – no offset for alimony

The Alabama Court of Civil Appeals ruled in December that it’s not appropriate to reduce income by alimony when figuring child support. The father had argued in the case of Spears v. Spears (Ala. Civ. App. 2004) that his income for child support purposes should be reduced by the alimony he was required to pay to his ex-wife. The court said that Rule 32 is clear: it’s “pre-existing” alimony, not alimony from this case.