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Early Retirement - A Golden Opportunity or a Mirage for Support Payers?

Over the last two years, the economy has wreaked havoc on the American workplace. Michigan is struggling to come back from double digit unemployment, employees are increasingly unhappy at work, and both private and public employers continue to offer incentives to the most experienced and highest wage earners in an effort to downsize and improve the bottom line. To many employees, the economic incentives to move on to a different job appear to be a golden opportunity to avoid the inevitable pink slip. However, for a child support payor, leaving a job voluntarily in these times can set you up for a child support obligation well beyond your future ability to pay. Clients want a reduction in child support because their income has decreased. As family law practitioners we must assess and be prepared to defend the issues of imputation of income and analyze whether even requesting a reduction of child support is logical.

A trial court has discretion to impute income whenever a parent voluntarily reduces or eliminates income or has the unexercised ability to earn. Stallworth v. Stallworth, 275 Mich App 282, 738 N.W.2d 264 (2007); see also 2008 MCSF 2.01(G). So, what does it me to be voluntarily unemployed in this economy? Does the Michigan teacher who has been teaching for over 30 years voluntarily become unemployed and subject himself to possible imputation of income when he accepts an incentive to retire? Previously, the Michigan Court of Appeals struggled with whether any evidence of bad faith or intent to avoid child support payments was required before imputation could occur. Dunn v. Dunn, 105 Mich App 793, 798-799; 307 N.W.2d 424 (1981); Rutledge v. Rutledge, 96 Mich. App. 621, 625; 293 N.W.2d 651 (1980). However, in Rohloff v. Rohloff, the Court concluded that motivation was a factor for the trial court to consider, but bad faith is not a requirement to imputation of income. Rohloff v. Rohloff, 161 Mich. App 766, 769-799; 411 N.W.2d 484 (1987). Therefore, faced with the challenge of validating an early retirement, the family law practitioner’s best defense against imputation of income is found in section 2.01(G)(2) of the Michigan Child Support Guidelines.

In order for the court to impute income, it must determine that the parent in question must have 1) an actual ability to earn, and 2) a reasonable likelihood of earning the potential income. 2008 MCSF 2.01(G)(2). As a result, securing evidence regarding the parent’s job search, availability of work in the area, testimony from former supervisors and co-workers regarding potential layoffs is critical. In some cases, even securing a vocational expert may be in order, depending upon the financial stakes. The factors for the court to consider in this analysis include some of the following: (1) educational level and any special skills or training, (2) prevailing wage rates in the local geographical area, and (3) evidence that the parent is able to earn the imputed income.

Recently, in an unpublished Michigan Court of Appeals decision, Chipps v. Chipps, No. 291755, February 23, 2010, Justice Murray’s concurrence suggests courts exercise caution before interfering with an employment choice during a marriage regarding how one wants to earn a living. However, the legal standard for imputation of income in Ghidotti and Rholoff and adopted by the Michigan Child Support Formula remain untouched. Until the appellate courts provide more guidance, family law practitioners requesting modification of child support must be weary of the potential issues involving a request to impute income for purposes of calculating child support, and defend their case accordingly.

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