EP 155: The Key Basics of Child Support

child-support-divorce

This episode of the Divorce and Your Money Show is about child support. This one of the most essential issues of divorce when children are involved. We will answer some basic questions about child support in this episode.

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What is child support? 

It is a mandatory payment that occurs during divorce whenever there are minor children present (under the age of 18 or 21, depending upon your state). Child support lasts until the child is an adult. The only exceptions are some children with disabilities who require support into adulthood. From a tax perspective, child support is not taxable income to the person receiving it, and is not tax-deductible for the person paying it. This differs from spousal support – the person who receives spousal support pays taxes, and the person paying it receives a tax deduction.

Who gets child support? 

The parent who has primary custody of the children receives child support. In the case of 50/50 child custody arrangements, there is usually one parent who is considered the guardian or custodial parent. The guardian still receives some child support in 50/50 custody arrangements, albeit less than if they had primary custody.

Why does child support exist? 

Child support laws were made to ensure that children grow up with all of their needs taken care, hopefully living a similar lifestyle to what they were before the divorce. These laws were created when our society was different – men were the primary income-earners, and women stayed at home and raised the children. If a couple divorced, the woman was often left to raise the children alone, with little job skills to support her family. Before these laws existed, the husband could run off and not be required to pay anything, leaving his children in poverty. These laws exist to ensure children are taken care of.

How is child support calculated? 

Every state has specific rules on child support, so you can search online for your state + “child support calculator.” In general, the calculation depends on the spouses’ income levels, how many children there are, and sometimes other factors. These calculations usually don’t allow much leeway, except at high income levels. The laws may dictate a certain percentage of earnings be paid up until a certain income level, say $200,000. If your income exceeds that limit, your child support will be determined either in negotiations with your spouse or before a judge. However, for most people, the guidelines will be pretty firm and you have to abide by those calculations. It isn’t an area that you should fight over, because it’s not going to be flexible.

How is child support paid? 

Usually, child support is paid directly from one spouse to the other on a monthly basis. Some people choose to go through an intermediary. If you don’t pay your child support, your employer may garnish your wages. Likewise, if your ex-spouse is not making child support payments, you can file a claim with their employer to garnish their wages.

What if you are concerned your child support payments aren’t being used for the children? 

Sometimes, the ex-spouse treats child support like free money that they can use for whatever they want. If this is the case, consult your attorney. There are remedies to ensure child support is being used for the kids. If you receive child support, make sure that full amount goes towards the children’s food, clothes, schooling, etc. Document all of your child support expenses so that if someone were to ask at any point in the future, you could show how much you spent, and on what, in a given month. It can come back on you later if you aren’t clearly documenting everything.

This is an important topic if you have minor children when you get divorced. Make sure you know the basics of child support in your state and what to expect.

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Thank you for listening!

Shawn Leamon, MBA, CDFA

Dallas, Texas

Shawn C. H. Leamon is Managing Partner of LaGrande Global, a firm that helps successful families manage large financial transitions like divorce, inheritance and selling a business.

He earned his Bachelor of Arts from Dartmouth College, double majoring in Economics and Philosophy, and his Masters in Business Administration at Spain’s IE Business School.

Before founding LaGrande Global, Shawn helped manage $1.1 billion in client assets at Bernstein Global Wealth Management. He also worked as a credit research analyst at J.P. Morgan. He is a Certified Divorce Financial Analyst, and he has been an advisor to numerous high-stakes divorce cases.

Shawn is the author of two well-received finance books: Managing Private Wealth: Principles, and Divorce and Your Money: The No-Nonsense Guide, both published in 2016.

In his spare time, Shawn is an ultra-endurance athlete and has competed in events as long as 24 hours. He is an Eagle Scout and a member of the Alumni Board of Greenhill School.