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Imputation of Income

In a divorce, it is crucial to know what income each party earns or is capable of earning before reaching a settlement.  Knowing the income of the parties is critical to resolving issues like alimony and child support.  In some divorces, however, the income-producing spouse suddenly acquires RAIDS (Recently Acquired Income Deficiency Syndrome) and argues his/her income is below what it was during the course of the marriage and that as a result, the support obligation should be less.  Sometimes, the reason for the decline is legitimate; sometimes, it is not.  Therefore, it is vital to assess whether or not there is just cause for the voluntary unemployment or underemployment of a litigant going through a divorce.

Our law provides that the court must analyze four factors in making this assessment:

  1. The employment and earning capacity of that party had the family remained intact;
  2. The reasons and intent behind the voluntary underemployment or unemployment;
  3. The ages of the children in the parent’s household, as well as child care alternatives; and
  4. The extent other assets are available to pay support.

Once these factors are considered and applied to a particular case, a determination can be made as to whether or not a party is legitimately underemployed or unemployed.

If it is determined that there is no just cause for the voluntary underemployment or unemployment, the next step is to impute an income to that party.  Imputing an income means that a rate of income is fixed for a party, regardless of his or her current circumstance.  To impute income to an underemployed or unemployed party, the first places to look for the appropriate amount of income are the New Jersey Department of Labor, Compendium of Wages, and the party’s most recent wage history such as a paycheck or Social Security earnings’ history statement.  At the least, a minimum wage may be imputed.  In some cases, employability experts are hired to perform a detailed evaluation of the party’s ability and capability to earn and an expert opinion is offered as to the amount of income that should be imputed.

Once income is known, agreed upon, or imputed, the parties can move forward and discuss support and other financial considerations relevant to their case and, hopefully, resolve all issues in their divorce amicably and efficiently.