As you learned when you got your CFL™ Certification, determining each parent’s monthly gross income for child support involves several factors. And in high-income cases, like Hanrahan v. Bakker, negotiating the assets to include under the law isn’t always easy.
In this case, among other issues, the Pennsylvania Supreme Court decided whether the high-income child support guidelines accounted for the reasonable needs of the children. The Court also examined whether a voluntary contribution to an irrevocable non-grantor trust for the children’s benefit was appropriate for deviating from the guidelines.
Trial Court Process
Attorneys Michael Hanrahan and Jeanne Bakker married in 1992, and had two children born in 1998 and 2004. The couple divorced in 2009. They agreed to exchange tax information and recalculate child support yearly based on their net incomes and Pennsylvania guidelines, “provided, however, either party may apply to the Court to adjust child support and/or their share of Child Expenses for the year based on relevant factors.”
The main issue was that Pennsylvania child support guidelines are based on economic studies of child needs. For parents with high incomes, especially those that rise dramatically, it’s harder to calculate support based on those guidelines.
From May 1, 2010 through April 30, 2011, the father’s monthly support payment was set at $15,878, which was calculated based on his 2009 income of $4,010,938, while the mother’s 2009 income was $183,635. By 2012, the father’s income had climbed to $15,500,000, yet the mother’s income was $105,000. That year, the ex-husband had deposited $2.5 million into an irrevocable non-grantor trust for the children. In 2013, he paid roughly $70,000 for the children’s private school tuition and camps.
Though Mr. Hanrahan disagreed with the child support calculation, which would have averaged about $60,000 monthly, he agreed to continue to pay the $7,851 monthly child support he paid the previous year.
The trial court later issued an amended order concluding that the father owed a monthly total of child support of $52,289 for May 1, 2013 to August 8, 2013, and $59,206 for August 9, 2013 to April 30, 2014.
The trial court rejected Mr. Hanrahan’s claim that it needed to conduct a discrete analysis of the children’s reasonable needs in applying the high income guidelines and concluded that the analysis had been removed from the child support guidelines. The court also found that the father was entitled to a downward deviation for support purposes based on his voluntary $2.5 million trust contribution on behalf of the children.
Pennsylvania Supreme Court Ruling
The Supreme Court sided with the trial court when it decided it could deviate from the presumptive minimum guidelines in this high-end child support case.
In its ruling, the Pennsylvania Supreme Court noted that a trial court first conducts a preliminary analysis by calculating the basic child support amount to be divided based on the parties’ incomes.
“That preliminary analysis requires the court to take the applicable basic support obligation from the support schedule found at Rule 1910.16-3 (based on a combined net income of $30,000 per month and the number of children involved) and to add to that value a specific percentage of combined monthly net income (CMNI) above $30,000.16. Thus, for a high income case involving two children, the rule at the time called for the court to use $3,777 (or $3,836 after the 2013 amendment) as the standard support schedule value, which represented how much an intact family having a CMNI of $30,000 would spend on two children. The court then was required to add eight percent of the remaining CMNI (or 11.6 percent after the 2013 amendment) to that value to arrive at the basic child support amount.”
After the court determines the basic child support amount, it needs to adjust for “substantial or shared custody and allocations of additional expenses” under the law. In the third step, looking at the legal factors involved, the court should “determine whether deviation from the presumptive minimum is warranted in arriving at its final child support award.”
The Court also found that the trial court’s decision to award a downward deviation of the father’s support obligation based upon his voluntary trust contribution was in error.
“To countenance a rule permitting consideration of a voluntary trust contribution for deviation purposes would be to permit an obligor to reduce his or her support obligation by unilateral action. We conclude that, irrespective of the donee’s intent and any benefit ultimately received by the children, a policy legitimizing downward deviations of child support awards on this basis is not in the best interests of children.”
The ruling returned the case to the Superior Court for further proceedings and entry of an order consistent with the Supreme Court’s opinion.
The financial knowledge and skills you gain from the CFL™ Certification for Divorce Practitioners are helpful tools you can use regularly in your trial preparation. They also add to your success as a leader in your field. Learn more in our free information packet today.
Pacourts.us. (2019). [online] Available at: http://www.pacourts.us/assets/opinions/Supreme/out/Majority%20Opinion%20%20VacatedRemanded%20%2010358733138511486.pdf?cb=1 [Accessed 12 Jun. 2019].