Beware of “True Up” Provisions and Changing Child Support Formulas
When calculating child support, complex mathematical formulas are utilized which take in account prior and subsequently born children, health care costs, and the number of overnights exercised by the parent paying child support, to name a few. These are constant considerations in virtually all child support calculations.
Because the child support calculation formula is used to determine child support for numerous types of parents across many types of economic circumstances, it remains fairly general. Stated differently, the income, status, and finances of each parent is different, and as such, a basic formula is required to keep calculations fair and manageable.
The Child Support Guidelines offer further guidance for how to handle income as it is defined in the Guidelines for situations that are not common among most cases and not included in the basic formula1. There are Guidelines and Commentary to address how this income may be treated.
In other words, the Guidelines and Commentary offer detailed explanation of what to do with income not captured within the general formula used to compute child support. These address most of the myriad of unique situations a given parent and family may face, filling in the “gaps” of the general child support calculation formula.
Over time, the formula the Guidelines are based upon, along with the Commentary have been revised to make each version better and fair to the parents and children. Thus, if you are paying or receiving child support, it is critical to keep abreast of the changing tides of child support obligations. Failure to do so may have significant financial consequences, as a recent case of the Indiana Court of Appeals highlights.
Ciyou & Dixon, P.C. blogs have addressed some of the non-standard components that may arise in given case, such as bonuses and other irregular income are generally treated, and specifically, a recent Court of Appeals decision regarding Social Security benefits for children. However, this blog will examine a “true-up” provision to account for irregular income.
One way this is addressed in certain cases, such as with an annual bonus, is by the support payor paying a percentage of the bonus to child support when received. However, parties can also contract with each other to determine how to handle irregular income or income not included in the child support calculations, so long as they do not contract away a child’s right to child support, which belongs to the child.2 And, the provisions must be generally consistent with the Guidelines.
In a recently decided case in the Indiana Court of Appeals, the parents entered into a contract involving a “true-up” provision to determine Father’s extra support obligation3. Precisely, in Schwartz v. Heeter, Mother and Father agreed that they would calculate Father’s support obligation using the formula in 2009, and then each year, the parties would calculate the extra support obligation using the most current gross taxable income, with Father paying the difference.
A dispute arose when Father continued to calculate his obligation difference from what he was paying weekly using the 2009 formula. Under his calculations, his support obligation difference totaled $6,556.00 from what he paid weekly. Mother, disagreed, using the new 2010 child support formula, which calculated that Father owed $53,990.00 extra support.
This matter could not be resolved, and it went to trial. The trial court found that Father should have used the 2010 formula for his 2011 payment, and an appeal ensued. In other words, the trial court agreed with Mother that father owed $53,990.00 in additional child support above his weekly support obligation.
The Court of Appeals examined the language of the contract between the parties which discussed the calculation of gross taxable income being used for line one (1), “with all other factors remaining the same for purposes of calculating the parties’ adjusted child support obligation”.
Based on this language, the Court of Appeals held that the contractual language required continued application of the 2009 formula for child support, agreeing with Father’s calculations. This is because the weekly child support obligation for father was determined and paid under this 2009 formula. Thus, until Mother properly motioned to modify same, the 2009 formula was appropriate.
The Court of Appeals took into consideration the Guidelines and their application, but also the contractual language between the parties, ultimately relying on the parties’ language to help determine what they had actually agreed to in order to determine support.
In some regards, Mother’s failure to keep aware of changes in child support formulas was a mistake cost her as much as $47,434.00.
The complexity of formulas, revisions, guidelines, and contracts can be a tall mountain litigants have to climb in order to properly care for and attend to their families and children, whether by paying support or receiving it. By understanding the complexities and nuances of agreements and rules, and staying abreast of changes that are put out on the Indiana Supreme Court’s website, you and your attorney can make a plan that has the best outcome possible for you and your children.
We hope that this blog has been informative about the complex calculations of child support. And also helps you to remember that post-divorce or adjudication of paternity, until the children are emancipated and support of all types ceases, there is always the potential for change. The key is to stay advised of your situation and the law.
If you do this, this blog has met its educational goal. Ciyou & Dixon, P.C. advocates practice throughout the State of Indiana. This blog post was written by attorney Bryan L. Ciyou, Esq. and Jessica Keyes.