March 01, 2014

Introduction

In cases where a child receives Social Security benefits based on a divorced parent’s earnings, that parent’s child support obligation may be impacted. While Courts have generally recognized that there should be some adjustment to the amount of child support, courts in various jurisdictions have differed as to the proper method to account for the receipt of the social security benefits. Following are some cases of interest addressing the issue.

ARTRIP v. NOE, 311 SW 3d 229 (2010) – KY: Supreme Court

Facts of the Case: When the parties divorced in 1997, Levodis Artrip (Mother) was awarded primary residential custody of the parties’ two minor children. When Ms. Artrip moved to Florida in 2007, primary custody was transferred to Mr. Noe who petitioned the trial court for child support. Ms. Artrip was ordered to pay child support in the amount of $563.79 a month.

In 2008, Mr. Noe became disabled and as a result, the children began receiving approximately $800 a month from Social Security. Ms. Artrip petitioned the court for a $265 reduction in her support obligation based on the children’s receipt of these benefits.

Trial Court Decision: The trial court granted Ms. Artrip’s request and reduced her obligation by one-third of the Social Security benefits determining that under Kentucky law, the children’s Social Security benefits were an “independent financial resource” that allowed for an appropriate adjustment of the child support guidelines. Mr. Noe appealed the decision.

Appellate Court Decision: The Kentucky Court of Appeals reversed the trial court finding that only Mr. Noe, as the disabled party, could claim a credit for the children’s Social Security benefits. Ms. Artrip appealed the decision to the Kentucky Supreme Court.

Supreme Court Decision: The Supreme Court affirmed the appellate court decision. The court found that it defied common sense to hold that a non-disabled parent should be entitled to a credit for his or her child support obligation due to the disability payments of the disabled parent. The benefits were earned by Mr. Noe, made on behalf of Mr. Noe, and paid in part from contributions from Mr. Noe’s own earnings. Thus, only Mr. Noe would be entitled to claim a credit for the children’s benefits.

ALEXANDER v. ALEXANDER, 2009 Ohio 5866 – OH: Court of Appeals

Facts of the Case: The parties were married in 1990 when Mr. Alexander was 51 and Ms. Alexander was 26. Two children were born during the marriage. In 1993, Mr. Alexander was diagnosed with cancer and subsequently retired at the end of 1994. As a result of his disability, Mr. Alexander began receiving Social Security benefits, including $16,800 annually on behalf of the children.

Trial Court Decision: The trial court determined that Mr. Alexander’s income available for support was $54,445 and Ms. Alexander’s was $125,500, exclusive of the Social Security benefits received by the children. Based on the above, the court determined that Mr. Alexander’s annual child support obligation was $7,839. The court ordered Mr. Alexander to pay half of the monthly Social Security benefits toward the children’s private school education and to deposit the remainder in 529 accounts for the children. The court credited Mr. Alexander with the full amount of the Social Security benefits received by the children, concluding that he had no further support obligation.

Ms. Alexander appealed the decision, arguing that the trial court had abused its discretion by crediting the Social Security payments against Mr. Alexander’s support obligation without ordering that she receive a portion of the benefits. Further, Ms. Alexander argued that the trial court had erred by not including the $16,800 in Mr. Alexander’s income for purposes of determining support.

Appellate Court Decision: The Court of Appeals affirmed the trial court decision in respect to its denial to order a portion of the benefits be paid to Ms. Alexander and ruled that Mr. Alexander was entitled to a dollar-for-dollar credit against his support obligation.

The court then determined that the $16,800 should be included in Mr. Alexander’s income available for support and remanded the case to the lower court to recalculate support based on Mr. Alexander’s revised income and to determine if the Social Security benefits received by the children still exceeded his support obligation.

CLARKE v. CLARKE, 828 N.W. 2d 318 (2012) – MI: Court of Appeals

Facts of the Case: When the parties divorced in 2007, the judgment of divorce provided that the parties would share joint physical and legal custody of their only child. The judgment also provided that no child support would be payable by either party but could be ordered if either party had a catastrophic change in income in the future. In 2008, Mr. Clarke lost his job and moved for a change in custody and petitioned for child support. The trial court denied the request for change of custody but ordered Ms. Clark to pay $300 a month in child support.

In 2012, by agreement of the parties, the minor child began to reside exclusively with Ms. Clarke. Also in 2010, Mr. Clarke, who was then 64, collected Social Security benefits for himself and the minor child from July through September. When Mr. Clarke discovered that the child’s benefit was being paid directly to Ms. Clarke, he withdrew his application for Social Security benefits and repaid all the benefits paid to himself and the minor child.

Ms. Clarke petitioned the court to cease her child support and require Mr. Clarke to pay child support to her.

Trial Court Decision: The trial court terminated Ms. Clarke’s child support obligation and ordered Mr. Clarke to pay $578 a month in support based on his unexercised ability to receive Social Security benefits. The court determined that it had the ability to impute the Social Security benefits as income because Mr. Clarke had voluntarily eliminated them. Mr. Clarke appealed the decision, arguing that his decision to defer receipt of the Social Security benefits was motivated by his ability to receive increased benefits in the future and only distributed benefits could be used to determine income available for support.

Appellate Court Decision: The Court of Appeals ruled that “if the evidence shows that a parent would receive the same Social Security benefit regardless of when he or she elected to receive the distributions, and absent some other compelling reason, the decision to defer the payment may be properly characterized as a voluntary reduction in income. But if the evidence shows that a parent would receive a larger benefit if he or she decided to defer payment until a later date, and again absent any evidence suggesting a contrary motivation, then such a decision could properly be characterized as a prudent investment strategy.”

The case was remanded to the trial court to determine the reason Mr. Clarke chose to discontinue his receipt of Social Security benefits with the instruction that should the trial court find that Mr. Clarke was motivated solely by the opportunity to collect increased benefits in the future, the trial court should determine that Mr. Clarke does not have an unexercised ability to earn income.

JOHNSON v. JOHNSON, Indiana Supreme Court (December 12, 2013)

Facts of the Case: The parties’ 1999 divorce decree granted physical custody of the parties’ two children to Ms. Johnson with the parties sharing joint legal custody. Mr. Johnson agreed to pay $90 per week, per child, in support, to provide health insurance for the children, and to pay half of the uninsured medical expenses.

In 2011, Mr. Johnson requested an additional modification in child support because he began collecting Social Security retirement benefits and, as a result, Ms. Johnson was receiving weekly benefits of $324 on behalf of the children.

Trial Court Decision: The trial court credited Mr. Johnson for the children’s Social Security benefits by including them in Ms. Johnson’s income, reducing his weekly obligation to $138, down from $150 per week. Mr. Johnson appealed, claiming that the court improperly computed the credit resulting from his Social Security benefits. Mr. Johnson argued that the court should have credited the amount of the benefits against his child support obligation rather than including them in Ms. Johnson’s income.

Appellate Court Decision: The case was remanded to the trial court to refigure the child support obligation to give Father an appropriate credit against the basic child support obligation while also providing the children the appropriate standard of living. In its decision, the appellate court cited the Indiana Child Support Guidelines that provide, in part, that:

“Social Security Retirement benefits may, at the court’s discretion, be credited to the noncustodial parent’s current child support obligation. The credit is not automatic. The presence of Social Security Retirement benefits is merely one factor for the court to consider in determining the child support obligation or modification of the obligation.”

The appellate court disagreed with the method the trial court used for computing the child support obligation. Although by adding the weekly amount of the benefits to Mrs. Johnson’s income did increase Ms. Johnson’s income and, correspondingly, reduced Mr. Johnson’s percentage share of the total income, it also had the effect of applying the reduced percentage to a greater amount of total income. Thus, the trial court’s calculation did not really give Mr. Johnson a “credit” for the retirement benefits the children received. Further, a dollar-for-dollar credit to Mr. Johnson’s child support obligation was not appropriate as it would have reduced Mr. Johnson’s child support obligation to zero. Mr. Johnson still had an obligation to support his children.

Mr. Johnson requested transfer to the Indiana Supreme Court. Supreme Court Decision: The Supreme Court affirmed the trial court’s original decision finding that the trial court had properly used its discretion in setting the amount of support, taking into consideration the appropriate standard of living of the children, Mr. Johnson’s ability to pay, and Mr. Johnson’s obligation to support his children.

ADAMS, SR. v. ADAMS, 107 So. 3d 194 (2012) – AL: Court of Civil Appeals

Facts of the Case: As part of their 2007 settlement, the parties agreed that Mr. Adams would pay $2,000 a month in child support for their two-year-old child. In addition, Mr. Adams was to pay all private education costs beginning when the child entered kindergarten, provide health insurance for the minor child, establish a trust fund for the child, and establish and fund a 529 college fund for the child. Because the parties’ income far exceeded the uppermost income level of the child support schedule, the judgment acknowledged that the child support amount deviated from the guidelines but was “fair and reasonable” and more than sufficient to provide for the child’s needs.

In 2010, Mr. Adams was still working and earning an income, but having turned age 66, began collecting Social Security benefits. Once Mr. Adams began collecting benefits, the child also became eligible to receive benefits. As representative of the minor child, Ms. Adams began receiving monthly Social Security dependent benefits of $1,163 for the child.

Mr. Adams filed a petition to modify support, arguing that he was entitled to a dollar-for-dollar reduction in support equal to the child’s Social Security benefits. Ms. Adams requested an increase in child support.

Trial Court Decision: After hearing testimony, the court determined that Mr. Adams’ income had increased $1,500 a month since the divorce while Ms. Adams’ monthly income had decreased by $2,666. Additionally, Ms. Adams’ expenses had not increased since the time of the divorce and Mr. Adams was providing in excess of $8,000 a month over and above his basic child support obligation. The court denied Ms. Adams’ request for an increase in support and also denied Mr. Adams’ request to credit the dependent benefits against his support obligation.

Appellate Court Decision: The Court of Civil Appeals upheld the trial court’s decision denying Ms. Adams’ request for an increase in support but reversed the decision denying Mr. Adams’ request for a credit against his obligation. The court concluded that granting Mr. Adams a credit was not unfair to the child because, with or without the credit, the child would be receiving the same amount ordered in the divorce judgment, an amount that was more than adequate to meet the child’s reasonable needs. Further, the court found that the actual source of the payments is not important to the custodial parent as long as the payments continue to be made in conformance with the divorce judgment.