Planning for Child Support Issues in a High-Asset Divorce

Child support issues may very well occur in an ordinary divorce case. But as cantankerous as the issue might be for the average joe, these issues are typically even more complicated to settle in cases of high-Asset divorces.

But wait – some readers might say – I came into the marriage with a prenuptial agreement that pre-set all of the terms of child support in the case of a future divorce. To that, we issue a warning to brace yourself. A prenuptial agreement can include terms that speak to child support, but that is not the last word on the matter. Tennessee law does not permit a prenuptial agreement to unilaterally set the terms of child support (or child custody). The law specifies that Tennessee family courts retain the ultimate authority in determining such matters, with their decision based on considering the child’s best interest and calculating appropriate levels of support utilizing applicable guidelines.  This means that while the terms set in the prenuptial agreement may stand – they might not. This will depend on the court’s calculation of what the level of child support should be.

So, high net-worth individuals should just expect to be subjected to the same salary examination and formulaic calculation that individuals going through a regular divorce are subjected to, right? Well – not exactly. While calculating the average Joe’s child support obligations by assessing his salary may work quite well, there are simply additional considerations that must be taken into account for high net worth or high asset individuals.

This article will briefly discuss some items clients should keep in mind and take into account when facing a high-asset or high net worth divorce in Tennessee. Understanding what to expect can help readers to set their expectations and better position themselves to successfully negotiate a resolution to any child support issues. Of course, for official legal advice and guidance in your specific situation it is important to consult with experienced legal counsel for official advice.

Income for support purposes

It would simply not be fair to the child, or in their best interests, to calculate an individual’s child support obligations by only factoring in a parent’s base income – what can be thought of as a salary. While using the average middle class citizen’s salary as the main point for determining child support may be fair in some circumstances, high net worth individuals often have other categories of income. For example, many might be self-employed, operate their own business, have capital gains income, or investment income that is not reflected in a base income.

“Base” income

A base income is often taken, for example, when a person operates their own business. A base income is something akin to a salary that is taken out at regular intervals – be that monthly, bi-weekly, yearly, etc. This set amount is paid out regardless of any profit fluctuation in the business.

It is easy to see how using a business owner’s base income for support calculations the same way that an average citizen’s salary is used would result in unjust calculations. A school teacher, for example, likely does not have the additional revenue streams (mentioned briefly above) that actually exist in high net worth individuals’ lives. A high net worth individual’s base income is probably not truly reflective of their net worth or what would be a just child support payment. As one example, Jeff Bezos, one of the wealthiest people who has ever lived, reports his base income as $81,840 dollars. And this is truly his base income. But if this was the sole thing used to calculate child support the result would be wildly unjust. Reportedly, in 2023 Mr. Bezos actually made over 7.9 million an hour, every hour.

Contact Fort, Holloway & Rogers

The Franklin high-asset divorce attorneys at Fort, Holloway & Rogers understand the nuance and complexity inherent in high asset divorces and the special considerations required in all spheres when navigating a high asset divorce. Contact our office today to learn how our expert team can help you navigate through your own case.

Sources:

forbes.com/sites/maryroeloffs/2023/08/23/halle-berry-reaches-hefty-child-support-settlement-why-celebrities-end-up-paying-such-high-sums/

finance.yahoo.com/news/jeff-bezos-made-over-7-172628289.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAJ_K49KL1dOak2emYHp4xudh2vFyB4nj-smdqQE73odMLROW0RfF7ymTPvwqW2xl-mX9b-rcdZjkocVbPo7HbzmaWWruFXG8tvo_QytP47wE_h1fiy-yPff7tlo3fi–Qa0F98uR0LLX1e747tiyfpi76IIDzWYiq0UiibM_98nb