Robert J. Rivers, Jr., Esquire
Our Child Support Guidelines (the "Guidelines") "are not meant to apply where the combined annual gross income of the parties exceeds $250,000.00. In cases where income exceeds this limit, the court should consider the award of support at the $250,000.00 level as the minimum presumptive order. Additional amounts of child support may be awarded in the Court's discretion." Child Support Guidelines, Part II, Section C (2009) (emphasis added). Unfortunately, notwithstanding the significant overhaul of the Guidelines which occurred in 2009, there remains little guidance for attorneys and judges in fashioning an appropriate level of child support where the income levels of one or both of the parties exceed the Guidelines. Nevertheless, based upon case law in the Commonwealth, as well as cases from other jurisdictions regarding such matters, it appears well-settled that awards of child support in cases outside the Guidelines require an in-depth analysis of and focus upon the "reasonable needs" of the child in light of the available resources of the parents and their respective standards of living.
Perhaps one of the first appellate cases in the Commonwealth dealing with child support orders which exceeded the Guidelines cap was IC. v. EM., 36 Mass. App. Ct.
446 (1994). In that case, the Appeals Court affirmed an award of $400.00 per week in child support where the income level of the noncustodial parent exceeded $75,000.00 annually (which was the Guidelines "cap" existing at that titne). In so doing, the Appeals Court specifically focused upon the needs of the child and noted that, "[o]n the evidence before him, including the mother's income, the judge was warranted in determining that the child's needs would be met by a weekly award of $400.00," Id. at 450.
Cases in other jurisdictions have been in accord with the holding of J.C. v. E.M. that where the Child Support Guidelines do not apply, the focus should be upon the realistic needs of the child, almost uniformly concluding that child support in excess of a child's reasonable needs cannot stand for two reasons: (1) excess support constitutes the improper distribution of the obligor parent's estate; and (2) excess support provides an inappropriate windfall to the child. See Generally Earley v. Earley, 484 N.W.2d 125 (S.D. 1992) (expenses of mother should be excluded in conducting analysis of child's needs); Ford v. Ford, 600 A.2d 25 (Del. 1991) (excess child support payments constitute an impermissible distribution of a parent's estate); Kathy G. v. Arnold D., 501 N.Y,S.2d 58 (1986) (needs of child are controlling); Edgar v. Johnson, 731 P.2d 131 (Ariz. 1986) (purpose of child support is not to raise the standard of living of the custodial parent).
Our appellate court reaffirmed the principle that child support orders in cases which exceed the Guidelines cap should be premised upon an analysis of the child's reasonable needs. Pearson v. Pearson, 52 Mass. App. Ct. 156, 160-161 (2001). In so doing, however, an analysis of a child's reasonable needs does not preclude the court from taking into account the higher standard of living of the noncustodial parent in determining the child's needs. Brooks v. Piela, 61 Mass. App. Ct. 731, 736 (2004); contrast Smith v. Edelman, 68 Mass. App. Ct. 549, 553-554 (2007) (request for increased child support properly denied where there was no material disparity in standard of living in parents' households and children's needs were being adequately met). Nevertheless, a child's needs must always be tempered by the so-called "Three Pony Rule" which stands for the proposition that "no child needs three ponies" arid "humorously summarizes the many concerns with the seemingly exorbitant child support demands or calculations that abound in cases involving high income payors." K. Hogan, Child Support in High Income Cases, 17 J. Am. Acad. Matrim. Law. 349, 352 (2001).
Obviously, reasonable persons can and often do differ when it comes to determining what is, in fact, the appropriate level of child support to be paid by a non-custodial parent in any given case based upon an analysis of the child's reasonable needs. While a lack of clear and uniform mathematical Guidelines is problematic, there has developed in the Commonwealth a small sampling of both published and unpublished appellate case decisions which establish some trends in the application of a reasonable approach to determining child support orders in cases which exceed the Guidelines cap. Among those reported cases that have analyzed child support orders in cases where gross income exceeded the then-existing maximum applicable levels under the Guidelines are the following (some of which were initial determinations of child support, while others involved requests to modify existing child support obligations):
At the time of the proceedings, Father's gross income totaled approximately $625,000.00 annually (while Mother was herself earning approximately $54,000.00 annually). Ultimately, a child support obligation of $70,000.00 annually (exclusive of an ongoing alimony obligation of $37,000.00 annually as well as an earlier agreement between the parties by which Mother agreed to pay the children's private school costs and Father agreed to pay their college tuition costs) was ordered by the trial court and affirmed by the Appeals Court. This amount of periodic child support (exclusive of ongoing alimony and other unreported obligations) totaled approximately 11% of the obligor's gross, pre-tax income.
Because the appropriate level of child support that was ordered in each of these cases was based upon the specific facts of each case, it is difficult to identify any specific formulaic approach that could be applied "across the board" to each and every case which exceeds the Guidelines cap. Nevertheless, each of these cases does provide a potentially relevant example when addressing an appropriate level of child support to be paid where gross, pre-tax income is well in excess of the limits set forth in the Guidelines.
Of course, because child support payments are neither taxable to the recipient nor tax-deductible by the payor (I.R.C. 262), the availability in any given case of designating child support payments as tax-deductible "alimony" or "unallocated alimony and child support" under I.R.C. 571 may play a significant role in determining the reasonableness of an obligor's support obligation. For example, a child support obligation of $60,000.00 (which is necessarily paid with "net, after tax" income) has the net effect of absorbing as much as $100,000.00 of an obligor's gross, pre-tax income; while a tax-deductible "unallocated alimony and child support" obligation of $60,000.00 actually absorbs as little as $36,000.00 of an obligor's net, after-tax income (assuming for illustration purposes a combined marginal state/federal/payroll tax obligation of 40%). As such, these income tax ramifications should be given appropriate consideration when fashioning the tax treatment of any such award. Child Support Guidelines, Part II, Section A (2009); see also Fechtor v. Fechtor, 26 Mass. App. Ct. 859, 866-867 (1989) (court should consider and minimize tax consequences); Spires v. Spires, 74 Mass. App. Ct. 1118 (2009) (unallocated alimony and child support order comprising 30% of husband's gross income affirmed where husband was professional football player earning over $1 million annually).
Every case brings with it certain unique facts and circumstances. In those cases where the gross, pre-tax income of the parties is in excess of the limits set forth in the Guidelines, advocacy takes on great importance. Counsel representing child support obligors should stress to the court that the proper focus in such cases should begin with an analysis of the "reasonable needs" of the child. To that extent, a careful determination of the actual expenses of the child should be undertaken. If it can be shown that some alleged expenses of the child are either unreasonable, inflated or are otherwise illusory, counsel should highlight those expenses clearly so that the court may easily identify the discrepancies which exist and make appropriate adjustments to the purported "needs" of the child.
Conversely, counsel representing parents seeking an award of child support should strive to prepare a weekly budget which delineates, to the greatest extent possible, the current expenses of the child. Nevertheless, because a child's expenses are often a function of available income sources, counsel representing the parent seeking an award should also consider preparing a budget which attempts to approximate, within reason, those additional expenses which would likely be incurred in the future for the child's benefit if additional amounts of child support were received from the other parent. See Brooks v, Piela, 61 Mass. App. Ct. 731, 733, n. 4 (2004) (presently existing expenses of child as reported by parent are typically based upon current financial resources and are therefore not necessarily indicative of child's overall needs). Because many of a child's categorized expenses in high income cases frequently include direct payments to third parties providing services for the child's benefit (i.e., extracurricular activities, camps, private school, etc.), it may prove to be more efficient (and often times more palatable to a child support obligor) to structure an overall resolution which includes the obligor making payments directly to third parties providing services for the child rather than seeking to otherwise increase the amount of periodic child support being paid directly to the other parent.
Unfortunately, because each case has its own specific facts and circumstances, it is unlikely that any clear "across the board" mathematical formula may be gleaned from an analysis of the appellate case law that presently exists. Nevertheless, there does exist a small sampling of both published and unpublished appellate case decisions which establish some potential trends in the determination of reasonable child support orders in cases which exceed the Guidelines limit. While by no means the product of any scientific analysis, the insight that may be gained from an analysis of these appellate cases, and the parameters within which discretionary orders have been made, does offer some small measure of guidance to practitioners, and perhaps, a so-called "sanity check" for purposes of determining a reasonable level of child support under similar factual circumstances.
Mr. Rivers is a partner in the Boston law firm of Lee, Rivers & Corr LLP. He was a member of the Child Support Guidelines Task Force that promulgated the current Child Support Guidelines (effective January 1, 2009).
1 This article was originally published in the March, 2011 edition of Massachusetts Lawyers Journal (Vol. 18, No. 7 - Mass. Bar. .Assn.).