Do annuities or personal injury damages constitute income for calculating child support?
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Transcript of Do annuities or personal injury damages constitute income for calculating child support?
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Income for Child Support
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CHILD SUPPORT
Marriage of Rothrock
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Marriage of Rothrock
9/83: date of marriage
8/90: F begins receiving monthly annuity payments of $1,700 from a personal injury structured settlement
8/92: date of separation
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Marriage of Rothrock
Marital Settlement Agreement: Monthly annuity payments are F’s separate
property
F to pay child support to M for their three children
Child support to be paid by assignment from annuity
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Marriage of Rothrock
6/05: F files OSC for modification of child support
F argues: Per Heiner, annuity is not income for
calculating child support Unfair to make him pay child support for
funds needed for medical treatment
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Marriage of Rothrock
T/Ct: Annuity is not income for child support
M appeals
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M’s argument: annuities are included within the definition of Family Code, Section 4058(a)(1)
Your ruling?
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Court of Appeal: Affirmed.
Damages received from an undifferentiated
settlement and paid out monthly from an annuity are not includible in income for calculation of child support.
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Marriage of Rothrock
Must meet the common law definition of “income”: the gain or recurrent benefit that is derived from labor, business, or property . . . , or from any other investment of capital”
F.C. 4058 definition of income, based on IRC definition, at 26 USC 61.
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Marriage of Rothrock
26 USC 104(a)(2): Personal injury damages (other than punitive
ones) received by the injured party as either lump-sum or periodic payments are not considered income for federal tax purposes.
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Income?
Family Code Section 4058: (a) The annual gross income of each parent
means income from whatever source derived . . . , and includes, but is not limited to, the following:
(1) Income such as commissions, salaries, royalties, wages, bonuses, rents, dividends, pensions, interest, trust income, annuities, worker’s compensation . . . . (Emphasis added.)
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Marriage of Rothrock
Important Lesson: Look beyond the label
Determine what the purpose of the settlement payment was (e.g., lost earnings)
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