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Divorce Rich with Jacki Roessler, CDFA
Welcome to the Divorce Rich Podcast! Join your host, highly sought-after speaker and experienced Certified Divorce Financial Analyst, Jacki Roessler, CDFA in this engaging and down to earth show. Along with her guests, Jacki offers clear and detailed advice to improve your financial decisions before, during and after divorce so you can survive divorce rich! New episodes are posted every Thursday! You can reach Jacki through her Michigan-based firm, Roessler Divorce Consulting, located at 600 S. Adams, Suite 300, Birmingham, MI 48009 or by email at jacqueline@roesslerdivorce.com.
Divorce Rich with Jacki Roessler, CDFA
From Pay Cuts to Job Changes: Adjusting Child Support with Attorney Jorin Rubin
The economic landscape is shifting. With potential downturns and job insecurity looming, knowing exactly when and how to modify child support becomes more than just useful information—it's financial protection. This candid conversation with family law attorney Jorin Rubin of https://rubinframpton.com/jorin-g-rubin/ reveals the hidden mechanisms behind child support modifications that every divorced or separating parent should understand.
What makes this discussion particularly valuable is the exploration of complex scenarios rarely addressed in standard divorce guidance. For self-employed parents, those standard business deductions that keep the IRS satisfied won't shield your income from support calculations. Regular financial gifts from family members might count toward your support obligation. Even that inheritance you received after divorce could impact calculations if you're drawing income from it.
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https://calendly.com/roessler-jacki/30min?month=2024-03
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Visit us at https://www.roesslerdivorce.com/ to learn more about Jacki's practice and to find valuable resources for your case.
The Divorce Rich podcast is proudly sponsored by Center for Financial Planning: Striving to Improve Lives through Financial Planning Done Right! https://www.centerfinplan.com/
Welcome to the Divorce Rich Podcast. I'm your host, jackie Ressler. I've been a certified divorce financial analyst for 28 years, helping clients and their attorneys navigate the often complex and confusing financial issues in divorce. If you're in the process of, or considering, divorce, now is the time for you to take a deep breath and give yourself permission to find clarity on the financial issues you're facing. Rich means many things to many people. I believe the best definition of being rich is someone who has access to many resources. Along with my guests on this podcast, I will be bringing you a wide variety of information so that you can make sound and informed financial decisions for your financial future.
Speaker 1:Hey, if you're recently divorced or still in the middle of it, you already know that life can feel like it's been turned upside down and, let's be honest, the financial part it's overwhelming, confusing and often the last thing you want to deal with. That's why I want to tell you about the Independent Wealth Management Team at Center for Financial Planning. Their team of certified you want to deal with. That's why I want to tell you about the independent wealth management team at Center for Financial Planning. Their team of certified financial planners specializes in helping people just like you navigate life changes with confidence. Whether it's assessing your new financial circumstances, creating or updating your retirement plan or helping you adjust to the new normal, they'll work with you to get a clear, customized plan to feel in control and move forward with confidence. So if you're interested in working with a financial planner who you can trust to have your best interests in mind and you're ready to take the next step, visit centerfinplancom that's centerfinplancom and schedule a conversation.
Speaker 1:Center for Financial Planning Live your plan. Securities offered through Raymond James Financial Services Inc. Member FINRA. Sipc. Investment advisory services offered through Center for Financial Planning Inc. Center for Financial Planning Inc. Is not a registered broker-dealer and is independent of Raymond James Financial Services. Hi everyone, welcome back to the Divorce Rich Podcast. Today I am lucky to have the expertise of a fantastic family law attorney in Michigan. Joran Rubin is in Southeast Michigan, where I am, and she is a family law attorney in Michigan. Joran Rubin is in Southeast Michigan, where I am, and she is a family law attorney. If you want to check out some of her specialized advice for clients, you can also find her at Jay Attorney on TikTok that's J-A-Y Attorney and Tips Divorce Attorney on Instagram, and I know she's got quite a following on there, so I'm really excited to have you on here today.
Speaker 2:Thanks, jackie, happy to be here.
Speaker 1:So what we're going to talk about is a topic that comes up for so many people, especially right now. We're heading into what may be an economic downturn. A lot of people in Michigan are worried about losing their jobs, and we are going to be discussing child support modification, which, again, although we're in Michigan, applies in all states. This topic and really excited to get your input on it, so let's dive right in and can you give us just a general idea? What is a child support modification and why is it not automatic?
Speaker 2:Okay, good question. So the only thing that's automatic is if you are paying child support for two children and it goes, then now you have only one child that's a minor. That is automatic. And, as you know, our paperwork, when we enter it with the judgment of divorce, as you know, our paperwork when we enter it with the judgment of divorce, provides for the step down in the amount that that person pays.
Speaker 2:That's not what people litigate. What people litigate and have anxiety about is what happens when you lose your job, or your spouse wins the lottery or your ex-spouse excuse me wins the lottery. Spouse wins the lottery, or your ex-spouse excuse me wins the lottery, or you know what, how, what triggers a child support modification? You know, with the we use a friend of the court here in Michigan, as you know. So there's basically two ways in Michigan that things can change.
Speaker 2:One is when you have a change in circumstance, which can be a bunch of different things. Right, it can be your income goes down, your ex-spouse goes, or the other parent's income goes up, the parenting time schedule changes, someone who used to be in daycare no longer is in daycare, so that comes off of your child support. Those are changes that are called change of circumstance. So and it has to be that that change in circumstance creates a 10% swing in your support. So usually you're going to hit that. The other thing that we have in Michigan is, after three years, you automatically are entitled to a review of your support, your child's support, through the friend of the court, and that's without a change of circumstances, and the friend of the court will send you a letter and you have to check off. Yes, I want you to do the investigation.
Speaker 1:And that's true in every county in Michigan. Yes, I know you don't work in every single county.
Speaker 2:No, no, no, it's a state law, it's a state law.
Speaker 1:So people will get something in the mail that says do you want to have a review and then a friend of the court will do the review, or does the client, does the person, have to have an attorney?
Speaker 2:No, they send you a specific form you fill out which says send us your last two years of income tax, your last five pay stubs, and then you fill out a questionnaire which you indicate who's paying health insurance, how many overnights you have, and then they get that information from both parents and then they produce a recommendation for a child.
Speaker 1:Okay, so one is almost semi-automatic recommendation for a child. Okay, so one is almost semi-automatic, right. Then if the court is reaching out to parents every three years, that is a trigger from the court, whereas a change in circumstance has got to be something that the person has to take the initiative to go and request. Is that right?
Speaker 2:Yeah, that's right. But even on the three-year they send you the notice and then you have to say, yes, I want you to do it. So what happens sometimes? Right, you're the parent Now you're making way more than you made three years ago. So you're just like no, I don't need to.
Speaker 1:No, thanks, I don't need a review, but it goes to both parents, right? Yes, okay, so I want to go back and clarify. So you said that a change in circumstance would have to result in a 10% swing. Tell me more about that. What does that logistically look like?
Speaker 2:Okay, Well, let me start with the very basics Child support is. It's a law how we calculate child support here in Michigan there's a formula and everyone uses the same formula and it's basically a. If you think of a graph, on one side is one parent's income, on the bottom of the graph is the other parent's income and then the number of overnights is what varies and that's how child support's determined. So if you're paying $1,000 a month and you're doing 50-50, but then you lose your job and now instead of making $100,000, you're making zero, or your next job you're making 70, it would shift the amount of child support and if it went down $100 or more, it would be a quote change of circumstance.
Speaker 1:I gotcha. Okay, so you have to show that there's been a 10% swing Either way, okay, so that would be. That was another question I was going to ask you is is there a threshold? And so the threshold is it's got to be 10%, okay, the other. Now I have to tell you, jordan, I've heard from a lot of people that they don't hear anything from the court. So maybe they get something from the court and they don't notice that or they don't see it.
Speaker 2:Or maybe the court's overwhelmed and they don't send it out timely?
Speaker 1:I don't know.
Speaker 2:Maybe, but you could file your own motion and say it's been three years. I want a review if you didn't get something from the friend of the court.
Speaker 1:Okay, and do you have to wait three years? Is there a minimum three-year timeframe that you have to wait to ask for a modification? If you don't have a change of circumstances, yes, I see so, but if you think that there's a change in circumstances, you could go back a year later, right?
Speaker 2:Absolutely, absolutely yeah.
Speaker 1:So it's really easy if somebody is a W-2 employee, right, because they have to produce their payroll stubs, their W-2s from the previous year. What are the challenges if someone is self-employed?
Speaker 2:So some things that are perfectly legal for the IRS, like you can deduct your cell phone, your car payments, your car insurance, your gasoline totally legal, no one's going to bug you from the IRS, anything like that. Any monthly expenses that you're able to pay for through your business adds back to your income, gets added. That gets added back into your income. So if your company pays for your car, then that payment, if it's say like $600 a month, right, then that amount of money goes back and is added to your income for child support purposes. So I guess people think well, the IRS isn't after me, which is absolutely true, you're not doing anything wrong but for purposes of support it gets added back in.
Speaker 2:So when you have a self-employed person, they can run a lot through their business. I mean, I've seen cases. I mean they run their mortgage through even though they don't work out of their home. They do all kinds of things. And so it requires looking at the tax returns of the companies, maybe even the general ledgers, to really try to find the line items that are being paid for for the other parents' expenses, that are being paid for for the other parent's expenses, and the same goes, by the way, I'm just before. Well, this is in my head. If they get regular gifts from someone, same idea. Conceptually it's like if the other parent, they're married to someone and every month that person pays all their bills, that could be interpreted as a monthly gift and could be their income.
Speaker 1:Oh, so if somebody gets remarried, their spouse's contribution, their new spouse's contribution to the family could count as additional income for them.
Speaker 2:For child support purposes If they're not working.
Speaker 1:yeah, Okay, but their new spouse's income wouldn't be factored into the equation, correct, correct, okay, yeah, that is definitely tricky. So, and there are plenty of people that get regular gifts from their family where they might get a $10,000 or $20,000 gift every year from family, and that could also count.
Speaker 2:No, not a gift like that. It's more, let's say, your parents paid your mortgage every month A regular monthly gift from a third party, okay. And so if you're very lucky and live off of a trust same idea If your trust pays your expenses and maybe when you got divorced you didn't. If your trust pays your expenses and maybe when you got divorced you didn't have that trust, and now you do because of some inheritance or something that would then towards your income.
Speaker 1:Okay, all right. Here's a trickier question. Would it be a change in circumstance if someone did receive an inheritance, even if they're not taking any income off of the inheritance? So you get divorced, there's no inheritance money. A family member dies after the divorce and now they inherit, let's say, a million dollars. Is that a reason to go and talk to an attorney to see if that's a change in circumstance on the other side?
Speaker 2:an attorney to see if that's a change in circumstance on the other side. Yeah, it's complicated so that million dollars if it's just sitting in a bank account and it's not being used, then it's not income. So child support really focuses on income. But most likely you took that million dollars and you invested it and so you're getting some kind of interest income or you're having some kind of distribution. Or you're taking money out, you're taking a trip, you're buying a new car with it. Those kinds of uses of the money kind of make it leak into an income consideration. But the absolute asset, no.
Speaker 1:Okay. So it sounds to me like this is pretty complicated and if someone does have a question it would be best for them to reach out to an attorney. A lot of people think that they can do it on their own. I always call it kind of the dangerous DIY divorce, because there's so many things that you don't know that one word here or there can make a huge difference. But this type of a modification it sounds like really there would be so much at stake if you didn't go and talk with an attorney.
Speaker 2:Definitely. I mean, like you said, you're just a straight up W-2 and now you see that the other parent is now driving a Rolls Royce or some expensive car and moved to an expensive place. You're pretty sure they got a raise and they're still at the same job. You could go out on a limb with that. It just gets very complicated. Also, if someone loses a job, then what income do we use for them? If they were working and now they're not, they lost their job. Do you impute income which is a whole other topic, which is also something that the friend of the court will do an analysis to determine whether or not there should be some income that's imputed to you if you're not working?
Speaker 1:Okay, again, very complicated. So, and what would be the norm if someone does lose their job? Would their child support? Would that be significant enough that the child support would pretty much automatically be reduced if they went for the? They went in for a change in circumstance, or do they have to prove that their income has gone down and they're not going to get? They don't have another job on the horizon.
Speaker 2:Okay, again, it's a little bit. Two questions. So one yes, when you lose your job, you have to immediately file something so that your child support will go down, if not to zero, but to something lower than what it was when you were earning $100,000. You know, if you were an engineer at Ford and now you just lost your job, you know it's going to go down, You're going to get some relief, but conceptually you've got to get another job.
Speaker 2:I mean, if you have a child, the friend of the court will not allow you not to work. I mean, I can't tell you how many clients are like, well, if I have to pay that, then I'm just going to quit my job. And I'm like, well, you can quit your job, but they're going to impute income to you. So you might as well keep your job, so you have the money. But so that's the issue. Is that someone who truly loses their job, you know they might be on unemployment, which is something it's not zero. And then there's an expectation that one will try to get a new job, because you can't go without a job if you have children especially, Right, Right.
Speaker 1:I heard of a situation where someone lost their job, tried to continue paying the support at the higher level, tried to be the stand-up parent and unfortunately took them a long time to find another job. By the time they did, it was a much lower paying position and when they filed to make a change with the court it wasn't retroactive to the date they actually lost their job. So this is a really good reminder for someone. If you do end up in a situation where you lose your job, let the friend of the court know immediately Correct.
Speaker 2:And so in Michigan, the way we say it, it's not retroactive to when you lost your job, it's retroactive to when you file to ask the court for relief. In that case, if the person receiving the other parent receiving the child support was sympathetic to him, maybe they would enter into a stipulated order to try to give him credit, and then that way you're going around the court. But if that person is not apt to do that, then he, by doing the right thing, he pretty much screwed himself, and now he's in a bigger rearage because he never filed any.
Speaker 1:Right, yes, so it's not something that you want to trifle with. If you, if you, lose your job, is there anything that we haven't talked about that you think would be important to cover?
Speaker 2:It's very. I just would say every case has its own set of facts and circumstances and, like you had said, it's important maybe to talk to a lawyer and sometimes you suspect that something's going on in the other household and that's a tough one. And sometimes you have to wait out the three years before you can just say, hey, it's been three years because you do have to meet that threshold. When they get very complicated it can get expensive to litigate, because it's almost as bad as when you had your divorce to figure out the income, because you have to look at, you know, tax returns. You might have to look at business tax returns. So it's just you have to weigh out the cost-benefit analysis, whether or not it's worth it to go to the court and try to get a modification.
Speaker 1:Doran, how is someone supposed to know what income was used during their divorce process? Is there something in writing that they can look back to so they can say, oh okay, my income was this and my spouse's income was that. There's been a change, so now I should ask for it to be redone. How do they verify what incomes were used at the time of the divorce?
Speaker 2:Yeah, great question, because you need to know.
Speaker 2:In order to prove the change, you have to say what changed.
Speaker 2:And so it's important that when you are doing your the initial judgment of divorce and setting the initial child support amount, you have a clear picture of why, and that would include your income, the other parent's income, the number of overnights, the child care and the health insurance premium that's paid, and so all of those factors, any of them can change for any reason.
Speaker 2:So it's nice if you have the formula worksheet that you use to create the uniform in our state, the uniform child support order. So you have the order and then it allows you to put into that any details you want to say this was based on, you know, this parent's base salary of X and this parent's base salary of Y and equal overnights and the health insurance of this and daycare of that, because daycare is also when daycare comes down after a child enters kindergarten and then they're in latchkey and they're not in full-time daycare. That's another piece that automatically again, it's not automatic you have to file a motion to say, hey, I've been paying the daycare and now my kid's like in eighth grade, I think that's a mistake, and so again. You've got to file that when they go into kindergarten if the other parent is not agreeable.
Speaker 1:Okay, and, like you and you mentioned that that would not be retroactive to the date the change occurred. It would be retroactive to when you filed the claim. Exactly that's how it works here. If someone doesn't, if someone can't locate that worksheet, how would they go about finding it?
Speaker 2:Well, there is a free website here in Michigan where you can kind of retrofit your child support. I mean, you know your number, you can try to guess what incomes you guys put in, to try to get you know your number of overnights and you can try to figure out. If you don't have any records from your divorce that calculated the initial child support, you could try to retrofit it. But hopefully you're not too traumatized and are keeping good records of the process and are able to, you know, just keep your records in a place where you can find them later. I mean, and you know that would that's the best way to do it.
Speaker 1:Can you go back to the court and find a copy of that?
Speaker 2:The uniform orders are filed with the court? Yes, but if you don't specify her income, was this, his income, was that, or what the parent's income were or what I mean you know, the number of overnights, that's another thing. Like sometimes you go into your judgment and it's 50-50. And then, like two years later it turns out really it's not, really, it's really 30-70%, but your child support is based on 50-50. You need to go back to court to make that modification. If your parenting, your overnight's changed, even if incomes are the same, that would change your child support. Okay.
Speaker 1:So that again another really good reason why people need to keep their records. I find that a lot of people that come to me post-judgment they can't find anything. They shove their divorce decree into a drawer. They don't know what happened to all of the documents that they had. They just want to be done with it. I think when the divorce is over and they're overwhelmed, I get it.
Speaker 1:I get it, it's really smart, though, to keep it, especially if your kids are young, when child support is set, because most likely at some point you're going to have some sort of modification as time goes on.
Speaker 2:I mean, the best practice is, if you know, if you can remember, or your lawyer should remember, to put into the actual judgment this child support is based on these two incomes and this number of overnights, and that obviously, then it's right there and you don't have to keep anything.
Speaker 1:You can just look at your child. Well, that's why people need to have a great attorney like you, because a lot of attorneys don't do that. They don't put that in there.
Speaker 2:I don't always do it, but I try, I try yeah.
Speaker 1:But so that I don't always do it, but I try, I try, yeah, but so that, and especially if someone is self-employed too.
Speaker 2:That's going to make it even more complicated. That is the most complicated. Another complication is when you base child support on the other parent's job, which could be, let's say, they're commission-based and their salary is $75,000, and then their commission is X, and the judgment would be clear you would get this amount every month, based on the base salary, and then a percent of the bonus. Well, now what happens when your spouse changes jobs? Or and now it's not commission-based, now it's pure salary. And we do have a law that if you change your job you have to notify the friend of the court, and if you don't and you change your job, then that's the only time that the other parent can say it should be retroactive because they purposely didn't say they got a new job. That's the only way to get around the not going back. That makes sense.
Speaker 1:Is there any downside when you get that, if you got a letter every three years, any downside to checking? Yes, I want to review if you're the recipient of support.
Speaker 2:I mean only if it goes down. You don't want to do that. So what I would suggest is to find online the calculator, do your best guesstimate of what you think your other parents making and just plug it in. I mean, I get plenty of calls from old clients. I'll go oh, I think my client you know my ex is, you know, making a lot more money. I'll go okay, what do you think they're making? I'll just do a quick plug and chug into the formula and if there's like no change, it like gives them peace and they know it's okay. Right.
Speaker 1:Or even if what they might forget is that their income might've gone up from when they first negotiated it. So, yes, sometimes it doesn't make sense. Actually, I have a friend that I ran it for her. She thought there was going to be a big differential and when we actually ran through the numbers, it was the same situation you're talking about, where there was a base income and a bonus, and the income switched to a higher base and a lower bonus, and before it was a lower base and a higher bonus, and when we ran the numbers, it was going to be less for her to do it the other way. And so, yeah, I think that a phone call to an attorney, to your attorney, is a great idea, especially if you work with the attorney before, and that worked out well. They already have all your information, so that's an easier touch point. Exactly, exactly Well, thank you so much, doren.
Speaker 1:This was fantastic information, and I get again. I get so many questions about this, so I am happy that I have something now that I can send out to people when they call and they ask a question about support modification. So thank you so much for joining us. Okay, my pleasure, of course, of course. Thank you so much for taking time out of your day to listen to Divorce Rich Podcast. If you like this podcast, please follow us on Apple or anywhere that you download podcasts and share this link with any friends or family that you think might benefit from this information.
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