Case Watch For Mediators:
Financial Help from Family Could be Considered ‘Income’
The following case
analysis is part of a regular series we publish to help you broaden your
knowledge of rulings of Georgia’s appellate courts that may affect your
practice. Remember: mediators should not give legal advice or opinions.
Jarvis v. Jarvis looks at whether or not money parties receive from family members during their marriage and separation can be considered as income by the Court and thus affect a party’s overall financial liability for spousal and child support.
The Jarvis parties were married for 10 years and had three children. The Husband had a base salary of $125,000 ($10,416 a month), and the trial court assessed against him a child support payment of $3,370 a month and an alimony payment of $1,500 a month. That left him a gross monthly income of $5,546. Since the Wife’s own monthly income was $3,750, she ended up with a total gross monthly income of $8,620. Granted, she had physical custody of the couple’s three children.
The Husband testified that his mother had provided financial support for many years prior to the separation, and helped to fund his expenses after the separation. This support included money for attorney fees, credit card bills, temporary support obligations and various other living expenses. The Husband did not dispute that he received this support from his mother. (This case shows that the divorce was filed in August 2009, but was not finalized until March 2011, some 19 months later.)
The case noted that the Husband had a “potential” bonus of $125,000 and had earned an average of $200,000 per year. He was going to need it, as the trial court assessed $125,000 against him for the Wife’s attorney fees.
In Jarvis, the money the Husband received from his mother was admissible as income to him.
If parties knew in advance that any monies they receive to smooth out a divorce transition would be used against them, would they accept? At what point does accepting financial assistance create a diminishing return for the party?
Life Insurance: As to the life insurance, the trial court ordered the Husband to maintain a life insurance policy of at least $500,000, with Wife and children as the named beneficiaries. Nothing too unusual here.
But, in an unusual move, the Court ruled that in the event of the Husband’s death, his estate would pay child support as a stop-gap measure if there was any delay in the payment of his life insurance proceeds to the Wife.
The Wife’s attorney was very creative in requesting that the Husband’s estate continue to maintain child support even after his death until the life insurance kicked in. The Supreme Court found that there was no authority that would prevent the Husband’s estate from temporarily paying child support as a stop-gap measure in the event there is a delay in the payment of Husband’s life insurance proceeds.
Life insurance provisions are fairly standard in cases with minor children. However, the provision in Jarvis goes a little further in assuring that no payments are missed because someone dies. This type of provision, no doubt, will start showing up in agreements drafted by attorneys of custodial parents.
Mediation? There was no mention of whether or not the parties attempted mediation prior to their five-day bench trial. It would appear, however, that the mediator would have had to be exceptional for the Husband to voluntarily agree to pay $58,440 annually to the Wife, resulting in a total annual income to her of $103,440, including her own income; and the Husband reducing his income to $66,560. In looking at the amount of child support, there must have been some allowable deviations, as a vanilla child support worksheet indicates that the Husband’s monthly amount based on the income of the parties and three children was only $1,825. If you increase the Husband’s income to his “potential” of $200,000, the child support is still only $2,451 a month.
Do you think it would be likely that a party would agree to pay the spouse $125,000 in attorney fees? It would have been more instructive for us if the case had told us the amounts the mother gave the Husband, and how much she paid for his attorney. Did the trial court believe that the mother would also pay this debt to the Wife’s attorney?
There are many parties who have to rely on relatives to make it through the financial transition of the divorce process. Anytime parties separate, it is difficult to make ends meet. It is admirable for a party not to make their children suffer any financial loss by actively supplementing their income from money from family members.
Supplemental family income would be an area for mediators to discuss if additional payments were consistent, substantial and the party receiving the payments admitted to them. It appears from the Jarvis case that the amount and frequency of supplemental payments would be the best arguments that the payments were a pattern and “could” be considered in determining the financial circumstances that a trial court “may” consider when making an award.
Again, we deal with possibilities and the elimination of surprise at court. If the payments constituted a substantial monthly amount, one might even suggest that they should be added into the parties’ monthly income prior to determining the amount of the child support to be paid by the worksheet.
Is Jarvis a novel way to locate any “financial circumstances,” or will it cause parties to refuse to borrow to meet temporary obligations if they are exposed to a permanent increase in additional financial exposure?