In Klein v. Klien, filed October 3, 2023, husband argued on appeal that the trial court erred in failing to include in the calculation of wife’s income for the purpose of setting child support amounts she received when she withdrew funds from a retirement account. Wife testified that she “cashed in an annuity in order to pay off some of [her] bills and credit card debt that [she] had as mostly legal fees and some other purchases.” She withdrew the funds in 2020. The child support hearing was held in June 2021.
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Tag: income
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Imputing Income: So What is Bad Faith?
In my last post, Imputing Income: Voluntary Unemployment is Not Enough, I wrote about the bad faith rule; the long-established rule that child support and alimony orders must be based on the actual present income of the parties unless there is cause to impute income. When income is imputed, a support order is based on earning capacity rather than actual income. The bad faith rule provides that earning capacity can be used only when a party is intentionally depressing actual income in deliberate disregard of a support obligation.
So what findings of fact are sufficient to establish bad faith?
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Imputing Income: Voluntary Unemployment is Not Enough
Beware. A child support or alimony order should never contain the word “capacity” or the words “ability to earn” unless it also contains the words “bad faith.”
Maybe that statement is a little extreme, but it is intended to make a point. Alimony and child support obligations must be determined based on actual present income. Earning capacity rather than actual income can be used only when a party is intentionally depressing actual income in deliberate disregard of a support obligation. In other words, it is not appropriate for an order to be based on what a person should be earning- or on minimum wage – rather than on what that person actually is earning unless evidence shows the party is acting in bad faith and the court actually includes that conclusion of law in the order.