Inside Track: Is support different in high-income cases? A discussion of Ladwig and Chen:

State Bar of Wisconsin

Sign In

Top Link Bar

  • InsideTrackInsideTrack

News & Pubs Search

Advanced
  • Is support different in high-income cases? A discussion of Ladwig and Chen

    For years, family lawyers have discussed whether child support and maintenance are evaluated differently in high-income cases. Several recent cases indicate that attorneys should be cautious in assuming that the rules are different in high-income cases, according to authors Margaret Hickey and Megann Senfleben.
    Share This:

    This article is published courtesy of the Summer 2010 State Bar Wisconsin Journal of Family Law newsletter, published by the Family Law Section.

    Margaret Hickey Megann Senfleben

    By com margaret beckerhickey Margaret W. Hickey and com megann beckerhickey Megann M. Senfleben, Becker & Hickey, S.C., Milwaukee

    Oct. 20, 2010 – First, what is a high-income case? The median household income in Wisconsin was $50,578 in 2007.1 In 2008, less than 10 percent of Wisconsin taxpayers reported adjusted gross income on their state returns of $100,000 or higher.2 The Wisconsin Child Support Rules under DCF 150 give “high income” adjustments at the following amounts of gross income: $84,000 and $150,000.3 At the time that this rule was adopted by the Wisconsin Legislature as the cutoffs for a “high income” payer, joint tax returns showing more than $100,000 of adjusted gross income were less than five percent of all returns filed.4

    Several recent Wisconsin cases shed light on what the trial court must do to have support awards upheld in high-income cases. The critical lesson from these cases is that the presentation of the facts to the trial court, and the trial court’s application of the law to those facts, will be analyzed on appeal to determine whether the trial court’s conclusion exhibits a proper exercise of its discretion. While each case must be taken on its own facts, it is the presentation of evidence to support the statutory factors that will matter on appeal. Appellate courts will apply the same legal theories to high-income cases, but the results may differ due to the greater resources available. Appellate courts do not apply any special rules to the analysis of support in high-income situations but will apply the rules to the facts and defer to the trial court’s conclusion if there is no abuse of discretion.

    The Ladwig case

    Is support different in high-income cases? A discussion of <em>Ladwig</em> and <em>Chen</em>

    The child support and maintenance holdings in Ladwig v. Ladwig remind us of these lessons. Daniel and Judith Ladwig were married for 13 years and had two minor children.5 Daniel, a 46-year-old surgeon, had a average annual income of $900,000 at the time of the divorce.6 Judith, also 46 years old, had a high school education and had been employed as a medical secretary prior to the marriage.7 During most of the marriage, she devoted her time to raising the couple’s children and did not work outside the home.8 At the time of the divorce, she was employed as an account manager earning $21,840 per year.9

    The divorce judgment provided for a nearly equal division of the $3 million marital estate.10 The parties were awarded joint custody and equal placement of their two children.11 The trial court held that applying the child support percentage standards would be unfair to Daniel and set child support at $4,000 per month with automatic annual increases of $250 per month in 2008, 2009, and 2010, instead of ordering the $8,455 per month that would be due under the percentage standard.12 The trial court awarded maintenance to Judith for three years at $3,000 per month for 18 months, followed by $1,500 per month for the remaining 18 months, reasoning that “Judith would have ‘assets far beyond what most high school graduates with office occupations expect to be able to have on their own.’”13 Judith appealed the child support and maintenance orders.

    On appeal, the court of appeals reversed the trial court’s child support determination because the trial court had failed to adequately discuss the statutory factors of § 767.511 necessary to deviate from the percentage standard and had failed to place the burden on Daniel to show why applying the percentage standard was unfair to him or to the children.14 The court of appeals also reversed the trial court’s maintenance determination because it did not meet the support and fairness objectives and because the trial court erred in evaluating the standard of living Judith was entitled to post-divorce.15 On remand, the court found that no deviation from the child support percentage guideline amount of $8,455 was warranted because Daniel had not carried his burden of proof.16 The remand court also ordered Daniel to pay $4,700 per month in maintenance for 15 years. It reasoned that this amount was necessary to support Judith at the pre-divorce standard of living and that 15 years would place the parties at retirement age.17 Daniel appealed the child support and maintenance awards, arguing that they were excessive.

    In the second appeal, Ladwig II, the court of appeals reiterated the requirement that the court must find “by the greater weight of the credible evidence that use of the percentage standard is unfair to the child or the party requesting deviation” and must consider the factors listed under § 767.511(1m).18 The remand court looked to these factors and found that the Ladwig children would have enjoyed a “highly comfortable lifestyle” if the marriage had not ended in divorce and that Daniel’s income was sufficient to support the children at the high standard of living and still be fair to all.19 The remand court also gave “great weight to the best interests of the children factor” and found it in the children’s best interests to be supported at the standard of living they would have enjoyed had the marriage continued, when there was sufficient income to support two households at that standard “without a significant burden to either parent.”20

    Daniel cited Parrett v. Parrett and argued that there was no basis in the record for finding that the Ladwig children required $8,455 per month ($16,910 if the same amount were applied in each household) to maintain their standard of living.21 In Parrett v. Parrett, the court deviated from the guidelines because there was no basis to find that the child had a need “even approaching that amount.”22

    The Ladwig II court, however, found Daniel’s reliance on Parrett v. Parrett misplaced in light of the later-decided Hubert case.23 The court in Hubert v. Hubert reversed the trial court’s deviation from the child support guidelines because the trial court had ignored relevant factors, including: the desirability of the mother’s staying at home with the children, the cost of day care if the mother did not stay at home, the children’s educational needs, and the best interests of the children.24 In Nelsen v. Candee, the court explained that Hubert was a corollary to Parrett, providing that “even when the guideline-based amount seems large on its face, the large award may be appropriate to maintain a child in a pre-divorce lifestyle.”25 Therefore, even when the percentage amount may be more than what the children actually need, the percentage amount may be necessary to allow the children to enjoy the same lifestyle they would have enjoyed if the marriage continued.26

    The Ladwig II court was satisfied that the remand court had properly exercised its discretion in ordering child support at the percentage standard after considering the parties’ standard of living, the best interests of the children, and the budgets and income of each party.27 Daniel had not carried his burden of proving that use of the percentage standard was unfair to him, so the court affirmed the child support order of $8,455 per month.28

    On appeal, Daniel argued that the maintenance award of $4,700 per month for 15 years was excessive because Judith’s budget, as he characterized it, was only $6,920 per month. However, the remand court determined that Judith required $13,584 per month to maintain a pre-divorce standard of living.29 The court of appeals found that the remand court had properly exercised its discretion in determining Judith’s budget and in setting a maintenance award of $4,700, which when combined with the child support award of $8,455 per month provided her a reasonable amount to meet her budget.30

    Daniel also argued that a maintenance term of 15 years in a 13-year marriage was an abuse of discretion because there was no support in case law for a maintenance award that exceeded the length of a medium-duration marriage.31 In addressing this argument, the court stated that there were “no hard-and-fast rules in setting the duration of maintenance; rather, the facts of each individual case drive the determination.”32 When determining the duration, the remand court considered three factors: the ability of the recipient to become self-supporting by the end of the term at a standard of living reasonably comparable to the marital standard, the ability of the payer to continue support for an indefinite time, and the need for the court to continue its jurisdiction concerning maintenance.33 Specifically, the remand court found that Judith’s earning capacity was around $30,000 per year and she did not have the ability to become self-supporting at the marital standard of living.34 Further, the remand court ordered maintenance for 15 years because that time period would bring Judith and Daniel to retirement age, which took into account the time during which Daniel would be able to continue supporting Judith and accounted for the time during which the court’s involvement might be necessary.35 Because the remand court considered the relevant facts and applicable case law and arrived at a reasonable award of maintenance, the court of appeals concluded that the remand court properly exercised its discretion, and it affirmed the maintenance award.36 Again, the lower court’s proper analysis of the facts and application of the statutory factors was key in the appellate court’s decision.

    The Chen case

    In Ladwig, the court relied heavily on Daniel’s ability to pay the percentage amount of child support. Because he could pay the percentage amount and still maintain his standard of living, the court did not find the child support order of $8,455 per month to be unfair to him. Similarly, the court in Chen v. Warner relied heavily on the father’s ability to pay the increased child support order and still maintain his standard of living when it ordered an increase in the child support payments after the mother quit her job as a physician to stay home with the children.37

    In Chen, the mother, Dr. Chen, filed a motion to amend the divorce judgment to require the father, Dr. Warner, to pay child support, arguing that a substantial change in circumstances warranted child support, which had previously been held open.38 At the time of the divorce, Chen and Warner both worked full time and earned about the same amount.39 They agreed to no child support or maintenance between them and had equal placement, following a week on, week off schedule.40 Several years after the divorce, Chen, who had accumulated over $1.1 million in investments, believed that she could support herself and the children on the income from her investments and quit her job to be a full-time parent, but she did not seek child support at that time.41 Shortly thereafter, the stock market dropped, Chen’s income from investments decreased, and she could not find employment in her community or nearby communities for her nonplacement weeks.42 She then sought child support from Warner.43

    While he testified that an at-home parent was preferable to a full-time child care provider, Warner argued that Chen should have sought employment in more remote communities to meet her support obligation in the off-placement weeks.44 Warner argued that because Chen’s decision was unreasonable and amounted to shirking, the court should impute income to her, which would effectively reduce his support obligation.45

    The court engaged in a detailed analysis of the facts to determine whether Chen’s choice was reasonable in light of her child support obligation. It used a “shirking” analysis even though it stated that shirking was perhaps too strong a word.46 The court defined shirking, based upon prior case law, in the following language:

    A circuit court would consider a parent’s earning capacity rather than the parent’s actual earnings only if it has concluded that the parent has been “shirking,” ... To conclude that a parent is shirking, a circuit court is not required to find that a former spouse deliberately reduced earnings to avoid support obligations or to gain some advantage over the other party. A circuit court need find only that a party’s employment decision to reduce or forgo income is voluntary and unreasonable under the circumstances.47

    The court listed over 15 factors to consider in making the reasonableness determination. The factors included, inter alia: the number of children at home and their needs, the availability of child care, any detrimental effect on the child’s support, the earnings history and potential earnings of the parent who wishes to retire, the job market status and the hardship or burden on the payer.48

    The court found Chen’s initial decision to terminate her employment reasonable because of the thought and research she put into her decision, so the issue became whether it was reasonable for Chen not to take full- or part-time employment when the income from her investments fell.49 While the court considered many different factors, it focused on the benefit to the children of having their mother at home full time and their father’s ability to pay the additional child support.50 There was no dispute that Warner, who earned more than $500,000 annually, had the ability to pay increased monthly child support of $2,800 per month. In fact, the court found that the effect on his monthly financial picture was “negligible” as he had about $12,000 of monthly discretionary income.51 The court stated that it “would not require the mother to liquidate her assets before requiring the father to increase child support obligations that he can easily meet from his annual income.”52

    The court also distinguished the facts in Chen from the facts of Sellers v. Sellers and Van Offeren v. Van Offeren. In Sellers, the husband was a laborer at a paper mill, earning between $25,000 and $30,000 per year.53 Several years before the divorce he took a job that paid $13,000 to $17,000 per year, and the court found this decision to be unreasonable.54 The Chen court distinguished Sellers because in Sellers the wife did not have sufficient income to provide an appropriate standard of living for the family without the husband’s child support; therefore, the husband’s decision to reduce his income was unreasonable.55

    In Van Offeren, the husband left his job to start a business at which he would earn nothing in the first year, but would, he hoped, earn greater income in five to six years.56 The court found this decision to be unreasonable because the children would be adults before the business brought in sufficient income for child support.57 The court in Chen distinguished Van Offeren because in Van Offeren, the husband was reducing his income to zero and his child support payments were essential to support the children.58 Without his child support, his ex-wife would have had to rely on help from others to support the children.59 However, in Chen, Chen still had income from investments and Warner was able to support the children on his own, without any child support from Chen.60

    The court’s analysis in Chen gives further indication that courts will apply the same legal theories to set support in high-income cases, but the result may differ because the court may rely more heavily on the payer’s ability to pay in determining the amount and term of support. Similarly, where the payer’s high income is greatly disparate from the payee’s ability to earn and become self-supporting at the marital standard of living, the lower court may be justified in ordering longer support where the payer can clearly afford it without adverse affect on the ability to support himself or herself.

    Conclusion

    Family law practitioners know the danger of applying a “rule of thumb” for when a court will deviate from the child support percentage standards or how much maintenance a court will set in a given case. The cases discussed here reinforce what we may have already known, but may need to be reminded of: first, courts must apply the child support percentage standards to all cases, even those involving high income, and, second, only when the party who wants the deviation successfully persuades the court that the child support amount under the standards is unfair to a party or the children will a reduction be upheld on appeal. Finally, when a court determines the amount and term of maintenance, the ability of the payee to become self-supporting at the standard of living enjoyed during the marriage (without harming the standard of living of the payer) remains a paramount consideration.

    About the authors

    Margaret W. Hickey practices in the areas of divorce, family law, and elder law including trusts for the disabled, title 19, and guardianship. She is a shareholder at Becker & Hickey, S.C., Milwaukee.

    Megann M. Senfleben is an associate at Becker & Hickey, S.C., and practices family law, estate planning, and elder law.

    Endnotes

    12007 American Community Survey, U.S. Census Bureau (full-time male median $44,105; full-time median female income $32,265).

    2Wisconsin Department of Revenue Individual Income Tax Statistics Report for Tax Year 2008, Table 2A, (August 3, 2010).

    3Wis. Admin Code § DCF 150.04(5).

    4Author Hickey sat on as a public member of the Child Support Advisory Committee, State of Wisconsin Department of Workforce Development (2001-2002) appointed to evaluate the revisions to then DWD 40 and to make recommendations to the legislature in creating the high income reduction formula.

    5Ladwig, 2010 WI App 78 ¶ 3, ___ N.W.2d ___, 2010 WL 1980237.

    6Id.

    7Id.

    8Id.

    9Id.

    10Id. at ¶ 4.

    11Id.

    12Id. at ¶¶ 4, 9.

    13Id. at ¶¶ 4, 5 (quoting Ladwig v. Ladwig, Nos. 2006AP2237, 2006AP2726, unpublished slip op. at ¶ 10 (Ct. App. Nov. 14, 2007) (per curiam)).

    14Id. at ¶ 7.

    15Id. at ¶ 5.

    16Id. at ¶ 8.

    17Id.

    18Id. at ¶ 23.

    19Id. at ¶ 24.

    20Id.

    21Id. at ¶ 25.

    22Parrett v. Parrett, 146 Wis. 2d 830, 841, 432 N.W.2d 644, 668 (Ct. App. 1988).

    23Ladwig, 2010 WI App 78 ¶ 25.

    24Hubert v. Hubert, 159 Wis. 2d 803, 815, 465 N.W.2d 252, 256 (Ct. App. 1990).

    25Nelsen v. Candee, 205 Wis. 2d 632, 642-43, 556 N.W.2d 784, 788 (Ct. App. 1996).

    26Id. at 643, 788.

    27Ladwig, 2010 WI App 78 ¶ 27.

    28Id.

    29Id. at ¶ 20. Daniel also argued that the remand court was not authorized to make credibility determinations and new findings of fact because the judge on remand was not involved in the original trial and, therefore, should have been treated as a successor judge. Ladwig, 2010 WI App 78 ¶ 10-11. Because the parties stipulated that “no additional evidence was necessary to address the questions on remand” and waived a retrial on the issues remanded, the court held that the successor judge could properly review the record and render findings of fact, including credibility determinations. Ladwig, 2010 WI App 78 ¶ 11.

    30Id.

    31Id. at ¶ 21.

    32Id.

    33Id.

    34Id.

    35Id.

    36Id. at ¶ 22.

    372005 WI 55, 280 Wis. 2d 344, 695 N.W.2d 758.

    38Id. at ¶ 12.

    39Id. at ¶ 7.

    40Id. at ¶ 6.

    41Id. at ¶ 10.

    42Id. at ¶ 11.

    43Id. at ¶ 19.

    44Id. at ¶ 56.

    45Id. at ¶ 19.

    46Id. at ¶ 20.

    47Id.

    48Id. at ¶ 50.

    49Id. at ¶¶ 52, 53.

    50Id. at ¶¶ 57, 60.

    51Id. at ¶ 62.

    52Id.

    53201 Wis. 2d 578, 584-85, 549 N.W.2d 481, 483-84 (Ct. App. 1996).

    54Id. at 588, 485

    55Chen v. Warner, 2005 WI 55 ¶ 65.

    56173 Wis. 2d 482, 489, 469 N.W.2d 660, 662 (Ct. App. 1992).

    57Id. at 499, 666.

    58Chen, 2005 WI 55 ¶ 68.

    59Id.

    60See id.

    The State Bar offers its members the opportunity to network with other lawyers who share a common interest through its 26 sections. Section membership includes access to newsletters, email lists to facilitate information sharing, and other resources.




To view or add comment, Login