Everything is income

In case the Child Support Guidelines have not yet made this fact clear enough, everything, everything, everything a party earns may be considered income for purposes of child support calculation.  In Hoegen v. Hoegen, 89 Mass. App. Ct. 6 (2016), the Appeals Court reversed a Probate Court decision that a father was not obligated to include income he got from vested, restricted stock units (RSU) in calculation of child support.

In brief, the parties had a separation agreement that included a child support amount that was higher than the child support guidelines amount at that time.  As part of that agreement, the parties agreed to revisit their finances each April to evaluate whether child support should be adjusted.  The mother also explicitly waived any rights to the father’s stock plan.

In 2013, the father filed a modification, in relevant part seeking to extend financial review to every three years instead of every year.  The mother filed a counterclaim, in part seeking to recalculate child support to include “all” of the father’s income. Although the Probate Court increased child support, it excluded the RSU income from consideration as it was listed as an asset on the father’s financial statement at the time of the divorce and because the mother had waived any interest in the stock plan in the separation agreement. 

Reversing the Probate Court, the Appeals Court found that, while not specifically included on the Child Support Guidelines list of income types, the RSU falls under the last item on the sample list, the catch-all phrase stating that “any other form of income or compensation not specifically itemized may be included.”  This is because the father received a certain amount of RSUs in his compensation package, and his pay stubs showed that he regularly earned income from the RSUs.  The Appeals Court further found that the mother’s waiver was invalid because of the established principle under Massachusetts law that parents may not bargain away their children’s right to appropriate child support under the guidelines. 

In addition, the Appeals Court decided that the increased child support order should have been retroactive because the Probate Court failed to make a specific finding that a retroactive order would be against the child’s best interest, unjust, or inappropriate, and when the RSUs were added in, the father was likely significantly underpaying child support. To top it off, the Appeals Court found that because the Probate Court did not provide any explanation for its denial of the mother’s motion for attorney’s fees, on remand, it should reconsider this issue as well.

The lesson here is that in forming separation agreements, parties must understand that EVERYTHING they earn as income likely will be considered for purposes of child support obligations, and so cannot be excluded from future child support calculation by waiver.