Archive for March, 2011

A Comparison of Child Support under the Maryland, Virginia and D.C. Guidelines

Friday, March 11th, 2011

            Here is a comparison applying the child support guideline of each local jurisdiction to a typical case:  two children, sole custody, $0 health insurance and $0 child care costs and combined monthly income of $10,000, non-custodial parent’s income is $7,500 and custodial parent’s income is $2,500:

District 

total support                $25,174/12 = $2,098              

custodial % of income                            .75

recommended support order               $1,573

Maryland

total support                                        $1,811

custodial % of income                            .75

recommended support order               $1,358

Virginia

total support –                                      $1,577

custodial % of income                            .75                  

recommended support order               $1,183

Again, applying the child support guidelines to a case with the same facts except combined monthly income of $15,000, non-custodial parent’s income is $11,250 and custodial parent’s income is $3,750

District of Columbia:             

total support                $35,152/12 = $2,929

custodial % of income                            .75

recommended support order               $2,197

Maryland:                                           

total support                                        $2,847

custodial % of income                            .75

recommended support order               $2,135

Virginia

total support –1,597+.051 x $5,000 = $1,832   1

custodial % of income                            .75

recommended support order               $1,374

            As you can see, at higher incomes, child support is much lower in Virginia than in Maryland or the District.

1/  Total support for two children increases $5.10 for each $100 dollars of combined income between $10,000 and $20,000.

Child Support Guidelines – Upper Limits on Combined Incomes

Thursday, March 10th, 2011

            Maryland recently revised its statute to increase the income limit of the child support guideline to combined monthly income of $15,000, and increase support payable at all income levels.  The Maryland guidelines do not explicitly apply to cases where combined monthly income exceeds $15,000, but Maryland case law suggests that it can be appropriate to determine child support in above guidelines cases by extrapolating at the marginal rate applicable at the highest guidelines bracket.  The most popular Maryland child support calculator, SASI-CALC, extrapolates in that way.

            The District of Columbia child support guidelines apply up to combined monthly income of $20,000.  The District’s guidelines do not apply presumptively to cases where the parent’s combined income exceeds $20,000 per month, but support cannot be less than it would be at $20,000 combined income.

            The Virginia statutory child support charts end at combined monthly income of $10,000 but the statute explicitly provides for the rate of child support on monthly incomes exceeding $10,000.  For example, total support for two children increases $5.10 for each $100 dollars of combined income between $10,000 and $20,000.  So no case is “above the guidelines” in Virginia.

Child Support in Maryland, Virginia and the District of Columbia

Wednesday, March 9th, 2011

We’ve been looking at various financial issues in divorce.  This post and the next two are about child support and how the local jurisdictions are similar and how they differ. 

            The amount of child support payable is determined under statutory guidelines in all three local jurisdictions.  The law in each jurisdiction provides that the amount of support determined by applying the guidelines to the facts of the case is presumptively the correct amount of support to be ordered.

            The District of Columbia revised its guidelines recently and all three jurisdictions now use a shared income model as the basis for the child support guidelines.   Shared income models are based on the notion that the amount of money needed to support the child(ren) should be based on the combined incomes of the parties and then allocated between the parties in proportion to their respective incomes.  The shared income model also takes account of the number of children and whether custody is sole or shared.  All three jurisdictions add reasonable day care costs to the basic child support obligation that is divided between the parties and all three jurisdictions adjust for health insurance costs attributable to the children.  See DC Code Sec. 16.916.01, MD. Code F.L. Article Sec. 12-204, Va. Code Sec. 20-108.2.

            One big difference among the jurisdictions is that in the District child support is payable for a child until age 21.  In Maryland and Virginia child support ends at age 18, except that support continues for a full time high school student until the earlier of high school graduation or the child’s nineteenth birthday.

Life Insurance to Assure Payments to Former Spouse

Monday, March 7th, 2011

Recently I wrote regarding using life insurance to assure payment of child support.  Another scenario is life insurance to protect the alimony payment – the spouse being the beneficiary of the policy.  This is a straight forward consideration flowing from payer/insured spouse to payee/beneficiary spouse.  The insured wants less coverage and less premium, the payee/beneficiary spouse wants more coverage.

            Premiums on a policy of life insurance on the alimony payer benefit the alimony payee.  Payments to a third party on behalf of or for the benefit of a spouse or former spouse can qualify as alimony.  Paying insurance premiums can qualify if the payer spouse is not obligated to pay under the insurance contract – because in that situation he or she is not simply paying his or her own expense.  Generally, the owner of the policy is the person who is obligated to pay the premiums.  So in order for premiums on the life of the insured/alimony payer’s life paid by the insured/alimony payer to be deductible as alimony, the alimony payee must be the owner of the life insurance policy.  The parties’ Agreement should require the insured/alimony payer to pay the premiums on the payee’s behalf and the parties’ Agreement should state that such payments are alimony.

            Another situation where life insurance can be appropriate is to replace a survivor annuity if it is unavailable or available only on undesirable terms.  A traditional defined benefit pension pays a lifetime annuity to the retiree.  Federal law generally requires married persons to elect what is known as a joint and survivor annuity payment option, unless the employee’s spouse agrees otherwise in writing. In divorce, the parties can agree to a joint and survivor annuity or the court can order it.  Under this option, if the non-employee spouse survives the employee spouse, the pension payer continues the annuity payments at a reduced rate to the non-employee spouse for his or her life. 

            The initial payment (during the joint lives) under a single life annuity payment option is higher than the initial payment under the joint and survivor annuity option.  Depending on the amount of that payment reduction, it may make financial sense to elect the single life annuity and buy life insurance on the employee’s life to protect the income stream for the non-employee in the event that he or she is the survivor. The advice of an experienced life insurance professional can be very useful in doing this analysis.

Life Insurance to Assure Payment of Child Support

Thursday, March 3rd, 2011

The decision to pay money to an insurance company now so that the insurance company will pay others after you are dead is usually undertaken with some ambivalence.
If you have minor children, you generally still need life insurance coverage post-divorce but it is a prospect that many people find even more distasteful at that time. Add to this, the fact that the divorce court generally cannot order a party to obtain or continue life insurance. (In Virginia, the court can order a party to continue existing life insurance coverage and designate children as beneficiaries if the party has a duty of support to such minor children. Va. Code Sec. 20-108. D) So the party who is proponent of the life insurance coverage, usually the economically dependent spouse, will often have to make a concession on some other issue to get the desired life insurance coverage. In many cases, since that concession would means less money now to the economically dependent spouse, the concession is not made and the life insurance is not agreed to. As a result, many divorced fathers and mother have far less life insurance coverage than a married parent with similar income, net worth and family responsibilities would have. One more risk for children of divorce.

When we represent the economically dependant spouse, or in case where there are two significant income earners, we look carefully at apparent life insurance needs and counsel clients to seek an agreement requiring adequate life insurance coverage. When we represent the higher earner, if there are minor children, we counsel our client to carefully examine the life insurance need and think it through before bargaining for lower coverage.

It is always necessary from the insured’s viewpoint for the Agreement to provide for reduced coverage as the future financial obligation decreases over time. This is especially important if the life insurance policy does not lock in level premiums per unit of coverage for the duration of the obligation. It is best to consult with an experienced life insurance agent with a highly rated insurance company while the marital settlement agreement is being negotiated to determine the availability and cost of coverage.

 
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