Do annuities or personal injury damages constitute income for calculating child support?

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    13-Dec-2014

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California courts frequently struggle with the issue of what constitutes income for the purpose of calculating child support. In a recent decision, a California court relied on common law and federal codes to determine whether or not a montly payment from an annuity from an uncharacterized personal injury settlement constituted income for the purpose of calculating child support.

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  • 1. Income for Child Support
  • 2. CHILD SUPPORT Marriage of Rothrock
  • 3. Marriage of Rothrock
    • 9/83: date of marriage
    • 8/90: F begins receiving monthly annuity payments of $1,700 from a personal injury structured settlement
    • 8/92: date of separation
  • 4. Marriage of Rothrock
    • Marital Settlement Agreement :
    • Monthly annuity payments are Fs separate property
    • F to pay child support to M for their three children
    • Child support to be paid by assignment from annuity
  • 5. Marriage of Rothrock
    • 6/05: F files OSC for modification of child support
    • F argues :
    • Per Heiner , annuity is not income for calculating child support
    • Unfair to make him pay child support for funds needed for medical treatment
  • 6. Marriage of Rothrock
    • T/Ct: Annuity is not income for child support
    • M appeals
  • 7.
    • Ms argument : annuities are included within the definition of Family Code, Section 4058(a)(1)
    • Your ruling?
  • 8.
    • Court of Appeal : Affirmed.
    • Damages received from an undifferentiated settlement and paid out monthly from an annuity are not includible in income for calculation of child support.
  • 9. Marriage of Rothrock
    • Must meet the common law definition of income: the gain or recurrent benefit that is derived from labor, business, or property . . . , or from any other investment of capital
    • F.C. 4058 definition of income, based on IRC definition, at 26 USC 61.
  • 10. Marriage of Rothrock
    • 26 USC 104(a)(2):
    • Personal injury damages (other than punitive ones) received by the injured party as either lump-sum or periodic payments are not considered income for federal tax purposes.
  • 11. Income?
    • Family Code Section 4058 :
    • (a) The annual gross income of each parent means income from whatever source derived . . . , and includes, but is not limited to, the following:
    • (1) Income such as commissions, salaries, royalties, wages, bonuses, rents, dividends, pensions, interest, trust income, annuities , workers compensation . . . . (Emphasis added.)
  • 12. Marriage of Rothrock
    • Important Lesson :
    • Look beyond the label
    • Determine what the purpose of the settlement payment was (e.g., lost earnings)
  • 13. THE END
  • 14. www.Pasadenadivorce.com (626) 683-8113

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