Divorce Mediation Blog

Should People Pay Alimony and Child Support from Unearned (Capital Gains, Interest and Dividend) Income?

Wednesday, May 09, 2012

There is an interesting inconsistency between how income is defined in the Massachusetts Child Support Guidelines (CSG), and how the same kinds of income are treated in our new alimony statute. The question is: in applying support formulations to the income of the paying party, do interest, dividends and capital gains income from investment of property “count”? The Child Support Guidelines (CSG) say “yes” while the new (as of March 1, 2012) alimony statute says “no”.

The CSG definition of income is extremely comprehensive, and it includes interest and dividends, and capital gains received as a “regular source of income”. What makes capital gains a regular source of income? Is the key that there is some income every year? Most years? Does it matter if it varies greatly from year-to-year? Should it matter if the capital gains did not come from the paying party’s “business” trading, as opposed to “personal” investment? However determined, this income it “counts”.

The Massachusetts Appeals Court recently decided a case called Wosson v. Wosson, in which the trial judge included the capital gains income of the father in setting his child support payment, but then reversed herself by excluding it in response to the father’s motion after trial. The Appeals Court did not say that the trial judge could not do this, but it sent the case back to the trial judge because she is required to explain her reasoning under the CSG through “findings”, which she had not done. (A judge may deviate from the CSG, but must explain her action by writing her factual reasons.)

Meanwhile, the new alimony law says that a judge should not take into consideration income that is gained by the investment of property that the paying party receives or keeps in a divorce judgment. We presume that the legislature’s reason for doing this is to avoid what is commonly called “double dipping”, something that happens when a spouse receives an asset in divorce, then has to pay support from the asset or its investment income/gains, after the divorce. (We will talk about “double dipping” more in a later entry.)

Whatever the reasoning of the legislature in making the new alimony laws, it did exclude income generated by divided assets from consideration in the alimony law, while CSG includes it in deriving support for children. Does this matter? It does, if for no other reason, that in some cases, the paying party pays both alimony and child support; and confusion can result in deciding how to define his or her income for calculation purposes.

Should the uses of income be different?

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