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Imputed income is a fancy was of saying "earning potential." In a divorce proceeding, when determining child support, courts will look to see how much each of the parent's can pay to support their children, based on a variety of factors. If the judge feels that a parent isn't earning their true potential, the judge will impute income on to that parent in order to manipulate the child support calculations and final amounts owed.
No Sandbagging Allowed
Usually the parent that has greater physical custody of the child, or has less income, tends to receive child support from the other parent. But it's not quite that simple. Though courts look at current wages in order to determine child support, one side can argue that the other is underemployed, or unemployed, for no good reason, in essence "sandbagging" their earnings so as to receive greater child support. So, how does this work in practice?
Best Interest of the Child That Both Parents Are Maximally Employed
Most states, like California, look at the "best interest of the child" when determining child support. They want parents to maximize their earnings while still being good custodial parents. But judges do have a keen eye on what earnings a parent should be making.
Sometimes, parents intentionally reduce their income in order to either reduce their child support payments or increase the amount they receive. A parent may cut back on hours worked per week, change to a less demanding or less lucrative job, or refuse to work altogether. In these cases, a judge may impute income to that parent. Meaning, they may claim that parent should be making more money in order to be the best parent they can to their children, and attribute a higher income to them in the child support calculations than they actually receive.
Employment and Willingness to Work
At issue here is whether the unemployment, or underemployment, is voluntary or involuntary. If it is voluntary, the court will impute income to that parent up to the amount they believe is in line with his or her true earning capacity. To determine if the unemployment status is voluntary or involuntary, the court will look at three things: ability, opportunity and willingness to work.
Ability is determined by education level, work skills, and employment history. Opportunity is determined by available local job opportunities in their field. Willingness is determined by examining the parent's history of searching and applying for jobs, and attending interviews. Often, expert witnesses are brought in to determine ability, opportunity, and willingness. Imputed income is always decided on a case-by-case basis, and when earning capacity seems ambiguous, minimum wage is used.
Income Not Always Imputed
Sometimes, courts do not impute income even when the other parent is unemployed. If the parent is making a good faith effort to find a job, or has been enrolled in higher education classes, judges may not impute income. In some states, if that parent has always been the "stay-at-home" parent, judges won't impute income, meaning judges won't expect the parent to suddenly become employed because of the divorce.
Imputed income can be a complicated, and lucrative, topic in any divorce proceeding. If you are contemplating divorce, and are concerned about child support, speaking with a child support attorney about imputed income, among other topics, can prove to be a great investment in your new future.