Tag Archive for: imputed income

Approaching Big Financial Decisions During Divorce

If you and your spouse have decided to divorce, you might feel eager to begin moving forward and start your new life. However, caution is recommended when making big decisions, especially those involving finances. Here are a few reasons to consider postponing major financial changes until after the divorce is finalized. 

Making Big Purchases Might Impact Your Eligibility for Refinancing the Mortgage

The property division process often requires couples to purchase new vehicles to replace the ones they previously shared. However, before you buy a new car, consider whether you will need to refinance your mortgage after the divorce.

For example, perhaps you and your spouse are both on the mortgage now, but you plan to keep the family home. You might refinance the mortgage to seek a better rate and account for your new sole ownership. Purchasing a vehicle immediately before applying for a mortgage can significantly impact your eligibility and rates. 

Your lender determines your loan eligibility based on your current assets and income. If either of these changes, they may need to reconsider the loan, adding time to the refinancing process and potentially leaving you with worse interest rates. 

Selling Assets Could Lead to Disputes During Property Division 

Pennsylvania follows an equitable distribution policy for divorce, which means the court seeks to divide assets fairly between spouses. Selling assets or making major investments immediately before the divorce could lead to disputes during the property division process.

A judge may assume you were trying to devalue the estate or hide assets. It may be better to delay big financial decisions until after the divorce, when the property division is finalized. 

The Court Could Impute Income for Alimony or Child Support

When a spouse is “underemployed” in a divorce, meaning they work below their skill level and potential earnings, the court may impute income. This means the court would base spousal support and child support on their earning potential rather than actual earnings. 

If you are currently underemployed, consider exploring other employment opportunities to increase your income. Otherwise, the court may base support obligations on imputed income, which could lead to higher payments than you can reasonably afford. 

Your Financial Habits Could Affect Child Custody Choices

Showing that you are financially responsible is important when navigating the child custody process. Remember, your financial decisions leading up to the divorce can affect your reputation in the eyes of the court. 

The judge may scrutinize your transactions to look for signs that you are financially unstable or irresponsible. Even if you can justify the major purchases you made, a judge may not view them the same way you do. 

Consult With Karen Ann Ulmer, P.C., Before You Make Big Divorce Decisions 

Seeking counsel from an experienced divorce attorney can help you determine which financial decisions and transactions might impact your divorce process. Karen Ann Ulmer, P.C., advises clients throughout the asset protection process, divorce mediation, and child custody negotiations. Schedule a confidential phone consultation with our divorce attorneys by calling (866) 349-4117. 

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What is Imputed Income When Determining Child Support Payments?

Child support payments do not just consider what the paying parent earns but what they should earn to a certain degree. If there is evidence that a parent lowered or ended their income to avoid child support payments, a judge can decide their financial obligations based on what they could reasonably be expected to earn. 

What is Child Support? 

In Pennsylvania, parents must financially support their children until they turn 18 or become self-supporting. The parent with more custodial time is generally entitled to receive child support payments from the noncustodial parent. 

If parents can not agree on a support amount, a judge will do it for them. It will depend on the parents’ incomes and the number of children involved. Income can include: 

  • Social Security payments 
  • Commissions 
  • Bonuses 
  • Pension payments 
  • Retirement savings income 
  • Unemployment compensation 
  • Veteran’s benefits 
  • Rent from properties 

Determining child support obligations can be complicated. Incomes can fluctuate when someone is self-employed, owns a business, or when their earnings are impacted by bonuses or commissions (or lack of them).  

When Does Imputing Income Become Necessary? 

Not all of these paying parents want to pay support or pay as much as they are ordered to pay. They may illegally reduce their income and claim they can not afford to make payments. They may: 

  • Work “under the table” for cash and not declare this income 
  • Quit their job 
  • Take a demotion 
  • Work fewer hours 

When there is credible evidence the parent is intentionally unemployed or underemployed to reduce their support responsibilities, not because of a legitimate issue (disability, layoff, economic downturn), a judge may impute (or attribute) income to them so the child gets adequate support. 

How Does a Judge Decide What a Parent Should Earn? 

Under Pennsylvania law, the judge may impute what their full-time income should be within limits. It can not be more than what would be earned in one full-time job. It also must be based on the parent’s circumstances, including whether they have used substantial good faith efforts to find employment and: 

  • Childcare responsibilities and expenses 
  • Assets 
  • Past employment and earnings 
  • Job skills 
  • Educational level 
  • Literacy 
  • Age 
  • Health (physical and psychological) 
  • Criminal record and other employment barriers 
  • Past efforts seeking work 
  • Local job market 
  • Local prevailing wages 
  • Other relevant factors 

Given all the variables involved, each case is unique. Remember, if you hear of an outcome in another case, it may have no relevance to your situation. 

If you have questions about child support or whether a parent should pay more or less, call Karen Ann Ulmer, P.C., at (215) 752-6200. We represent parties on both sides of this issue and can provide critical legal representation to help you meet your goals. 

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