WEALTH AS A PROPER CONSIDERATION IN SETTING CHILD SUPPORT AWARD.
By Bruce Shapiro, Henderson, Nevada
Published in the Nevada Family Law Report, Fall 1993
Reprinted with permission from the State Bar of Nevada 2011
INTRODUCTION
In a recent issue of Inter Alia i attorney Ronald F. Logar criticized the Nevada Supreme Court for its decision in Herz v. Gabler-Herz. ii Mr. Logar’s criticism was premised on his opinion that the Nevada legislature, in adopting NRS 125B.070 and 125B.080 ”intended any deviation [from the statutory guidelines to] be based primarily upon need, as opposed to the wealth of the payor, or any other factor.” iii Mr. Logar also criticized the Court for its failure to require specific findings of fact to justify a deviation from the statutory sum. iv
This article is intended to provide a brief history of the Nevada Legislature’s adoption of Nevada’s child support guidelines and an analysis of the Supreme Court’s holding in Herz. This article concludes that the Supreme Court’s decision in Herz was justified, but that the Court should have required the trial court to justify its deviation with specific written findings.
FACTS OF HERZ
In Herz v. Gabler-Herz, v appellant, the noncustodial parent, argued that the district court abused its discretion in awarding child support in the amount of $1,000.00 per month, per child, for two children. Appellant argued that, pursuant to NRS 125B.070, a district court may not award child support in excess of $500.00 per month, per child, without proving that the additional amount is necessary to meet the child’s needs. vi The Nevada Supreme Court upheld the district court’s award based on the findings that the award was ”fair and equitable” due to the ”vastly different incomes and the financial resources of the parties and the amount of time each parent spent with the children.” vii
LEGISLATIVE BACKGROUND OF CHILD SUPPORT STATUTE
The Child Support Enforcement amendments of 1984 required all states to develop advisory mathematical guidelines to calculate child support awards by October 1, 1987. viii As a result, in 1987 the Nevada Legislature enacted NRS 125B.070 and 125B.080, which were modeled after Wisconsin’s percentage of income formula. ix
The Family Support Act of 1988 created a rebuttable presumption that the guidelines represent the proper child support award and that a deviation from the guidelines will be allowed only upon a written finding that application of the guidelines would result in an unjust or inappropriate mathematical award. x These federal laws recognized the need for more realistic and equitable child support awards which would provide children with a standard of living comparable to that of their noncustodial parent. xi
The congressional mandate for development of guidelines was intended to address several deficiencies in the traditional case-by-case method of setting amounts for child support orders. These deficiencies were described as:
1. A shortfall in the adequacy of child support orders when compared with the true costs of rearing children, as measured by economic studies;
2. Inconsistent orders causing inequitable treatment of parties in similarly situated cases; and
3. Inefficient adjudication of child support awards in the absence of uniform standards. xii
PHILOSOPHICAL BASIS FOR THE DUTY OF SUPPORT
There is an equal duty of both parents to contribute toward the support of their children in proportion to their respective incomes. xiii The needs of a child are in part determined by the income level of the parents and the ability of each parent to contribute support in proportion to his or her income level.
The presumptive amount of child support paid by the noncustodial parent is generally not expected or intended to literally meet one-half of the child’s needs. Rather, the contribution of the noncustodial parent is implicitly matched by equal or greater expenditures in the home of the custodial parents. The percentage of income approach reflects a public policy that, after a family separation, parents should spend on their children the approximate percentage of income that they would have had the family stayed intact. xiv The statutory sum considers the child’s needs, as well as the income that each parent should contribute to the financial responsibility of his or her child. The guidelines, at least in part, are based on the benefit a child will enjoy by receiving a fair portion of the noncustodial parent’s income. Since the custodial parent spends all of his or her income on a combined parent-child household, it is assumed that at least the same percentage will be spent on the child by the noncustodial parent.
The Wisconsin percentage of income presumption generally does not consider the income of the custodial parent. It presumes that the custodial parent will spend the same percentage directly on the ”basic needs” of the child as the noncustodial parent is assessed for child support. xv
In reality, the proportion of income contributed by the custodial parent to the child’s needs may well be greater than that contributed by the noncustodial parent through the support award. The original data upon which the Wisconsin guideline was based showed that, on the average, an intact two parent household spend 25% of both parents’ incomes for the care of one child. To reflect that data, drafters originally proposed a guideline imposing a support obligation of 25% of gross income for one child. xvi Politically, however, the 25% figure was viewed as too burdensome. Through political compromise, the lower figure contained in NRS 125B.070 was adopted. xvii This political process was evident in Nevada whereby, through compromise, the legislature increased Wisconsin’s presumptive amount by one percent to 18% for one child. xviii
PURPOSE AND EFFECT OF STATUTORY MAXIMUM
It may be concluded that the presumptive maximum was an implied legislative conclusion that the basic needs of a child would be met by the time the $500.00 per month, per child in support was paid and that the statute was designed to meet only those needs. The structure of the statute, however, appears to have been designed to facilitate a child sharing in the comparative wealth of a parent. xix This conclusion is supported by the Herz decision as well as Chambers v. Sanderson. xx
The presumptive maximum level of support is a primary concern to those payors who are relatively well off or to those that have the fewest children. The statutory presumptive maximum, like the statutory minimum, has a differential impact on persons at different income levels depending of the number children involved. The ceiling becomes a factor with one child once the payor’s income reaches $33,335.00 per year; for two children, $48,000.00; for three children, $62,100.00, and for four children, $77,450.00. xxi
The practical effect of the ceiling is to impose the same child support obligation on a group of payors across a variety of income levels. The payor with an annual income of $35,000.00 to $50,000.00 is more likely to benefit from the application of the ceiling than the payor with an income of $50,000.00 to $100,000.00 per year, because it is more likely that in the latter range that a court would find grounds to exceed the presumptive maximum. xxii Thus, children with noncustodial parents earning income greater than $35,000.00 are being denied the benefit of additional income. Further, it should be noted that inflation since the passage of the original legislation is sufficient cause for change in and of itself; the ceiling would have to be raised to $608.35 to have the same effect it had in 1987 when the maximum was adopted. xxiii Based on the above referenced factors, it has been suggested that the presumptive ceiling be raised from $500.00 to $1,000.00 per month, per child. xxiv Without the appropriate supporting economic data, however, it seems a maximum of $1,000.00 would be as arbitrary as $500.00.
ANALYSIS
Herz suggested that factors other than need may be properly considered in exceeding the presumptive ceiling, but the opinion does not indicate what other factors might be appropriate. Under its own facts the case suggests that disproportionate wealth is one factor. The Court further indicated that the amount of time that the child spends with each parent was a factor to be considered in exceeding the statutory presumption. Implicitly, the factors set forth in the Court’s opinion in Barbagallo v. Barbagallo xxv are also relevant to the determination of child support.
Herz clearly implies that a purpose of the child support statute is to permit a child to share in the standard of living enjoyed by each parent. In Chambers v. Sanderson, xxvi the Supreme Court criticized the trial court for incorrectly assuming that support in excess of $500.00 can only be awarded on a showing that the needs of the particular child are not met by that sum. Chambers clearly indicates that the Court believes it appropriate for a wealthy noncustodial parent to pay more in child support than a less affluent parent. One may reasonably infer that the statute has a standard-of-living-maintenance purpose, or at least an income-sharing purpose, rather than solely a meeting-of-the-needs purpose. xxvii
The noncustodial parent in Herz apparently did not argue his inability to pay the support obligation ordered or that the support would not directly benefit the child. xxviii The noncustodial parent was a millionaire whose income was determined by the court to be $9,800.00 per month and who had assets of 2-3 million dollars. xxix
Conversely, it may be argued that the noncustodial parent’s income has already been properly factored into the analysis by utilization of the graduated schedule. It is his income that has caused support to max out at $500.00 per month, per child. xxx Under this theory, the purpose of the maximum or cap is self evident: the legislature determined that, as a noncustodial parent’s gross monthly income reaches a certain level, it no longer makes sense to compute the child support award on the percentage basis. xxxi It may be argued that the legislature decided a court should not award an amount of child support in excess of that provided by the graduated schedule, absent a showing than an additional amount was actually needed. xxxii A literal reading of NRS 125B.080(5) may support this theory.
It may also be argued that the statutory cap was in part adopted for the purpose of avoiding an award of de facto spousal support to the custodial parent. xxxiii There is an unavoidable tension between maintenance of a child’s standard of living and partially subsidizing the custodial spouse’s standard of living. Penalizing the child, however, by keeping support awards low enough that the former spouse would not benefit is the greater of these two evils. Further, most expenses of child rearing are commingled with expenditures benefiting the entire household. May one reasonably expect a court to determine a child’s proportionate share of a three bedroom home, transportation of the child to and from school, the child’s food, or other expenses? xxxiv
The intent of the presumptive guidelines was to make the presumptive amount binding absent specific findings justifying a deviation. Nevertheless, the underlying purpose of the child support statute must be looked at before the assumptions may be made. In light of the federal mandate, a review of NRS 125B.070, and the legislative history of Assembly Bill 424, it is clear that the intent of the child support statute was to alleviate the national disgrace of inadequate child support of minor children and not to protect affluent fathers by minimizing child support. xxxv Prior to enactment of the guidelines, child support awards were so low that many children and custodial parents were thrust into poverty or suffered a substantially lower standard of living while the noncustodial parent enjoyed a higher standard of living. xxxvi It is not argued that children should not share a lower standard of living if the parent’s separation results in a lower standard of living for both of the parents. Rather, if the standard of living of one or both of the parents should be enhanced subsequent to the separation, the children are entitled to a portion of that enhancement.
The statutory formula is a means of calculating child support so as to maintain the standard of living that a child would have had if the parents had not terminated their relationship. xxxvii A child’s needs, however, contemplates their continual maintenance at the standard of living they have become accustomed to prior to the separation; the supported child is entitled to more than bare necessities. xxxviii The needs of a child include the ”’comforts and luxuries of life that the child would have enjoyed’ if not for the dissolution of the relationship” xxxix All of the circumstances of the parents must be considered as well as the needs of the child. xl Child support is not just intended solely to prevent a child from reaching poverty. ”Need” has never been interpreted by the Nevada Supreme Court to mean destitution or literal need. xli The basic needs of a child differ with parental income, and parents spend more on children as they earn more. xlii The concept of a statutory cap is not consistent with this principle.
Is it not an injustice to order a noncustodial parent with an income of $100,000.00 per year to pay the presumptive support amount of only $500.00 per month irrespective of what the child’s needs may be? Exceptional circumstances surely include a $100,000.00 per year salary and 2-3 million dollars in assets as the obligor had in Herz. xliii As a matter of common sense, a child’s needs are greater when a parent earns a greater income.
One possible approach is to make the matter one of evidentiary burdens. The statutory ceiling could be eliminated except in those cases where the payor can prove that its application would not alter the life-style of the child. This would have the effect of eliminating application of the ceiling in the majority of cases, while maintaining the Wisconsin approach. The legislature, however, must express its priorities. This proposal would be reasonable if the primary purpose of the statute was to maintain the child’s standard of living rather than protecting payors from subsidizing their former spouses. For example, the statute may provide that the ceiling would not be applicable for payor incomes above $60,000.00 and for these cases a traditional case-by-case analysis would be utilized. xliv
SPECIFIC FINDINGS OF FACT
The implementation of guidelines as a rebuttable presumption requires a court to apply the guidelines unless the result would be inequitable to the parties or children, in which instance, reasons for the deviation must be stated on the record. xlv NRS. 125B.080(6) requires the court to set forth specific findings of fact as the basis for the deviation from the formula. The basis for the deviation must be found in unfairness or injustice in applying the formula. xlvi
A valid criticism of the Herz decision is the court’s failure to require specific findings of fact when the presumption was deviated from. Initially, the original draft of N.R.S. 125B.080 required a court to set forth written findings if the award deviated by five percent either higher or lower than the formula’s presumptive amount. xlvii The five percent provision was deleted from the final version of N.R.S. 125B.080, symbolizing the legislature’s conviction that any deviation from the formula should be justified. The intent of the statutory presumption was to make the presumptive amount binding absent a judicial finding of ”exceptional circumstances.” xlviii
It is not argued that a court should not have discretion to make justified deviations from the statutory formula. It is certainly appropriate to permit deviations in truly unique cases. xlix Such deviations, however, should not be made routinely and premised on arbitrary ”equity” principles. Moreover, when large numbers of cases are exempted from the application of the guidelines, the purpose and goal of the formula is undermined. It is argued that N.R.S. 125B.080(6) was intended to narrow a court’s discretion and should be interpreted as requiring a mathematical or an objective basis for a deviation. Although the Supreme Court has not mandated an objective standard for deviation from the formula, the Court has clearly narrowed the discretion of lower courts to deviate from the formula. l
Specific findings of fact are, in part, required so that the parties may understand the ”justice” of the support award; the parties understanding of the support award may lead to fewer appeals. There should be a requirement that any deviation have a direct relationship to the circumstance that the deviation is purportedly being based on. For example, if a court is going to make a reduction based on the cost of transportation incurred by the noncustodial parent, the actual cost of transportation should be used to calculate any reduction in the support award, rather than simply giving an arbitrary reduction of $100.00 per month. li Conversely, any increase should also be based on specific findings. Although it is argued that the holding in Herz properly considered the noncustodial parent’s substantial income as a proper basis for deviating from the formula, a relationship between the income and the award must be required. A court must be able to justify and substantiate its award with the factors contained in N.R.S. 125B.080(9) and should not have unfettered discretion in setting child support.
CONCLUSION
If the child support statute was meant only to meet the child’s basic needs and not provide for maintenance of the child’s standard of living, than the legislature must specifically override the decisions of Herz and Chambers. The Nevada Supreme Court’s holdings in Herz and Chambers is supported by the legislative history of the child support statutes. It is also clear that recent Supreme Court decisions have narrowed the discretion of the lower courts in deviating downward from the statutory sum while Herz and Chambers apparently expand the lower courts’ discretion in deviating upward from the statutory sum. Alternatively, it may be desirable to make the issue one of evidentiary burden by raising the presumptive ceiling or making the presumption inapplicable when income exceeds a specified amount. In any event, the Supreme Court should give effect to NRS 125B. and require the lower courts to clearly substantiate any deviations from the formula.
i. Wealth, A Substitute For Need, A Critical Look At Gabler-Herz, April, 1992, page 8 [hereinafter ”Wealth”].
ii. 107 Nev. Ad. Op. 20, 808 P.2d 1 (1991).
iii. Wealth, at 9.
iv. Id. at 11-12.
v. 107 Nev. Ad. Op. 20 (1991).
vi. Id. at 1.
vii. Id. at 2. See NRS 125B.080(9) (l) and (j), respectively. It is a well established rule that the amount of child support is a matter within the trial court’s discretion and that such determinations will not be disturbed on appeal unless there is shown to be a clear abuse of discretion. Adkins v. Adkins, 50 Nev. 333, 259 P. 288 (1927); Laird v. Laird, 93 Nev. 687, 572 P.2d 523, 543 (1977). Findings of fact by a trial court will not be set aside unless they are clearly against the weight of the evidence and without reasonable support therein. Fenkell v. Fenkell, 86 Nev. 403 (1970).
viii. Pub. L. No. 98-378, ’18, 98 Stat. 1305, 1321-22 (Codified at 42 U.S.C. ‘ 667 (1987)).
ix. See Nevada Child Support Enforcement Commission Minutes, June 23, 24, 1986, page 3.
x. Pub. L. No. 100-485, 102 Stat. 2343 (Codified at 42 U.S.C.A. ‘669 – (Supp. 1989)).
xi. Id.
xii. See H. Rep. No. 527, 98th Cong., 1st Sess. 49 (1983). See also Williams, Guidelines For Setting Levels of Child Support Orders, 21 Fam. Law Quart. 281, 283 (1987); Advisory Panel on Child Support Guidelines, Development Guidelines For Child Support Enforcement, National Center For State Courts I-3, 4 (1987) (hereinafter “Advisory Panel”.); Child Support Guidelines: Formula to Protect Our Children From Poverty and the Economic Hardships of Divorce, 23 Creighton 835 (1990); Goldfarb, Child Support Guidelines: A Model For Fair Allocation of Child Care, Medical, and Educational Expenses, 21 Fam. Law Quart. 335 (1987); U.S. Dept. of Health and Human Services, Administration for Children and Families, Office of Child Support Enforcement, The Treatment of Multiple Family Cases Under State Child Support Guidelines, U.S. Dept. of Health and Human Services (1991) pages 1-4 (hereinafter “Treatment“) citing U.S. Bureau of the Census, U.S. Dept. of Commerce, Divorce, Custody, and Child Support, Current Population Reports, Series P-23 No. 141 (1985); Bureau of the Census, U.S. Dept. of Commerce, Child Support and Alimony: 1985 (Supplemental Report), Current Population Report, Series P-23, No. 154 (1989).
xiii. See NRS 125B.020(1). See generally Schuele, Origins and Development of the Law of Parental Child Support, 27 J. Fam. L. 807 (1988-89).
xiv. See Nevada Commission On Child Support Enforcement, presented to Governor Richard H. Bryan, October, 1983; Uniform Marriage and Divorce Act 309, 9A U.L.A. 167 (1979). See also Treatment, supra note 12.
xv. See Williams, Development of Guidelines For Child Support Orders, Report To The U.S. Office Of Child Support Enforcement, National Center For State Courts, Sections II and III; Wis. Stat. Ann. 767.25(1) (West 1987). See also supra note 2.
xvi. Espenshade, Investing In Children: New Estimates of Parental Expenditures (1984).
xvii. See Skyless and Zink, Child Support In Wisconsin: Income Sharing As A Standard Of Law, Women’s Legal Defense Fund, Critical Issues, Critical Choices: Special Topics In Child Support Guidelines Development (1987). See also supra note 12.
xviii. See Nevada Child Support Enforcement Minutes, June 16, 17, 1986, page 6, Legislative History.
xix. Child Support Statute Review Committee Report, August 1, 1992 (hereinafter “Committee Report”) at 15.
xx. 107 Nev. Ad. Op. 132 (1991).
xxi. Committee Report at 16.
xxii. Id. at 16-17.
xxiii. Committee Report at 17, using the Consumer Price Index for All Urban Consumers, per the U.S. Department of Labor, Bureau of Labor Statistics.
xxiv. Committee Report at 20.
xxv. 105 Nev. 546, 779 P.2d 532 (1989).
xxvi. 107 Nev. Ad. Op. 132 (1991).
xxvii. Committee Report at 18.
xxviii. Respondent’s Opening Brief at 2.
xxix. Id. at 6.
xxx. Id. at 15.
xxxi. Id. at 3.
xxxii. Id. at 4.
xxxiii. Id. at 11.
xxxiv. Williams, Guidelines For Setting Levels of Child Support Orders, 21 Fam. Law Quart. 281, 287 (1987).
xxxv. Respondent’s Opening Brief at 10. See also supra note 12.
xxxvi. According to one study, the post divorce standard of living for the custodial parent and the children falls by 73% while the noncustodial parent’s standard of living increases by 42%. Brackney, Battling Inconsistency and Inadequacy: Child Support Guidelines In The States, 11 Har. Woman’s L. J. 197, 199 (1988). See also L. Weitzman, The Divorce Revolution: The Unexpected Social and Economic Consequences For Woman and Children In America 339 (1985). See also note 12.
xxxvii. See Advisory Panel, I-3, supra note 12.
xxxviii. Id.
xxxix. Smith v. Smith, 626 P.2d 342 (Ore. 1981).
xl. Id. at 221. “The parents of a child have a duty to provide the child necessary maintenance, health care, education, and support.” NRS 125B.020(1).
xli. See Engebretson v. Engebretson, 75 Nev. 237, 338 P.2d 75 (1959); Sargeant v. Sargeant, 88 Nev. 223, 229, 495 P.2d 618 (1972).
xlii. Williams, Guidelines For Setting Levels of Child Support Orders, 21 Fam. Law Quart. 281, 288 (1987).
xliii. Respondent’s Opening Brief at 6.
xliv. See Committee Report at 19-20.
xlv. See Barbagallo v. Barbagallo, 105 Nev 546 at 552.
xlvi. See Barbagallo v. Barbagallo, 105 Nev. 546, 779 P.2d 532. See also Advisory Panel at I-7, 13; Lewis v. Hicks, 108 Nev._, _P.2d_ (Nev. Ad. Op. 173 December 22, 1992).
xlvii. See Nevada Legislative History, 87-89, A.B. 424 of the 64th Session, Child Support at 77.
xlviii. Barbagallo v. Barbagallo, 105 Nev. 546, 779 P.2d 532, supra; Lewis v. Hicks, 108 Nev._, _P.2d_ (Nev. Ad. Op. 173, December 22, 1992) supra; Advisory Panel, supra I-7.
xlix. See Goldfarb, Child Support Guidelines: A Model For Fair Allocation of Child Care, Medical, And Educational Expenses, 21 Fam. Law Quart. 335 (1987).
l. See Hoover v. Hoover, 106 Nev. 388, 793 P.2d 1329 (1990); Barbagallo v. Barbagallo, 105 Nev. 546, 779 P.2d 532; Lewis v. Hicks, 108 Nev._, _ P.2d_ (Nev. Ad. Op. 173, December 22, 1992).
li. If the cost of transportation is $600.00 per year, than it would proper to give the noncustodial parent an offset of $50.00 per month. It is submitted that any reduction should have a direct relationship to the factor being considered. A court should simply find that there is a transportation expense involved and give an offset in an arbitrary amount.