Posted by: koherston | August 26, 2013

Imputed Income Reversed in Lebanon Child Support Modification: Muhlstadt v. Muhlstadt

Facts: Father and Mother, the parents of one child, divorced in 2008. The agreed parenting plan designated Mother as the primary residential parent, provided for equal parenting time, and established Father’s ongoing child support obligation.

In 2011, Father petitioned to modify child support, alleging that there had been a significant variance in the parties’ incomes since the divorce.

Mother testified that both before and after the divorce, both Father and Child would each receive $22,000 per year from a trust fund. Father acknowledged receiving that payment at the time child support was established, but testified that he was no longer receiving money from the trust fund. He testified that he is not the owner of the Trust, that he has no control over the Trust, and that he has not and does not receive any benefits directly from the Trust. He presented evidence that his mother is the only beneficiary that is required to receive distributions from the Trust, and that all other distributions were at the discretion of the Trustee. Father testified that he receives distributions from the Trust on an “as needed” basis.

The trial court dismissed Father’s petition on the grounds that there was not a significant variance in his income, i.e., it found that he was still receiving income from the Trust just as he had at the time of divorce. In so finding, the trial court stated:

The Court finds that Father has the ability to provide documentation with regard to the Trust and/or its distributions and has not provided it. Father has not proved that he cannot obtain $22,000 per year from the Trust at this time and has testified that he now receives distributions on an “as needed” basis. It is not clear to the court that the Father could not obtain even more than $22,000 per year from the Trust if he requested it. Father has failed to provide Trust documents, K-1s or any documentation regarding gifts which could be indicated on his mother’s tax returns.

Father appealed.

On Appeal: The Court of Appeals reversed the trial court.

Modification of an award of child support must be based on a “significant variance” as defined in the Child Support Guidelines. A significant variance is defined as “at least a fifteen percent (15%) change between the amount of the current support order (not including any deviation amount) and the amount of the proposed presumptive support order.”

To determine if a modification is possible, a child support order must first be calculated on the Child Support Worksheet using current evidence of the parties’ circumstances. If the current child support order was calculated using the income shares guidelines, compare the presumptive child support order amounts in the current and proposed orders. If a significant variance exists between the two amounts, such a variance would justify the modification of a child support order unless, in situations where a downward modification is sought, the obligor is willfully and voluntarily unemployed or underemployed.

Once a significant variance has been shown, the Child Support Guidelines requires the court to modify the ongoing child support obligation.

After reviewing the record, the Court disagreed with the trial court, noting:

The evidence is consistent with Father’s testimony that he no longer receives the $22,000 he was receiving at the time the original child support obligation was set and that he receives money from his mother on an “as needed” basis. The evidence also shows that he is not a beneficiary of the [Trust] and, thereby has no ability to compel the trustee to provide him with information regarding the Trust; that he does not receive distributions directly from the Trust; and that he has no ability to compel payments to him from the Trust. There is no evidence showing or a finding by the court that Father’s failure to provide the Trust documentation was willful or contrived; indeed, a willful failure to provide the information would be contrary to Father’s interest in presenting the petition. While [the Child Support Guidelines] provide[] that “gross income” for purposes of setting support includes “[g]ifts of cash”, Father’s inability to provide the specific information which the court referenced in its order does not permit the court to effectively impute gift income to him in the absence of proof that he continued to receive such.

Accordingly, the trial court was reversed and the case remanded.

Muhlstadt v. Muhlstadt (Tennessee Court of Appeals, Middle Section, July 19, 2013).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce, Matrimonial and Family Law Attorney.


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