Rhode Island Supreme Court Finds Corporate Distributions Must Be Included as Income for Child Support Calculation

The Rhode Island Supreme Court recently issued a decision in a family law case discussing the calculation of child support. According to the court’s opinion, the couple in the case married in 1990 and began divorce proceedings in 2014. The mother subsequently petitioned the court for child support. After a hearing, the family court ordered the father to pay $1,796 per month in child support for his minor child. The mother appealed, claiming that the family court failed to properly calculate and order child support while the divorce proceeding was pending and on the day the marital settlement agreement had been entered.

The appellate court found that the lower court did not err in declining to award child support while the divorce proceeding was pending because the mother was using funds from a joint marital account to support herself at the time, which had been divided equally between the parties, and amounted to about $505,000. In addition, shortly thereafter, the husband voluntarily agreed to pay, and the mother accepted, $2,444 per month in interim child support while the divorce proceeding was pending. The mother also argued that the court incorrectly calculated the child support obligation, in part because the court excluded income that the father received related to an S-corporation he owned.

Section 15-5-16.2 states that a child support obligation shall be calculated based upon the family court’s formula and guidelines. If, after doing so, the court finds that it would be inequitable to the child or to either parent, the court shall make findings of fact and shall order a child support obligation “reasonable or necessary for the child’s support after considering all relevant factors,” including but not limited to, certain enumerated factors. Those factors include the standard of living established for the child before the divorce, the child’s emotional and educational needs, the financial resources of the child, and of the parents. Gross income, as defined by the child support guidelines, includes income from sources such as salaries, wages, bonuses, gifts, prizes, social security benefits, and “all other forms of earned/unearned income,” excluding means-tested public assistance benefits. It also includes business income defined as gross receipts minus ordinary and necessary expenses.

The mother argued that the trial court failed to include certain sources of income in calculating the father’s child support obligation. The court agreed that distributions from the S-corporation used by the father to pay personal debts in acquiring sole ownership of his company should have been considered as part of the father’s gross income under the child support guidelines. The court also agreed that a $61,375 distribution from his company to pay a life insurance premium should have been included as income in the child support obligation. Therefore, the court vacated the child support obligation judgment, and ordered that it be recalculated considering the additional income.

Contact an Experienced Rhode Island Divorce Law Firm

Bilodeau Capalbo, LLC represents individuals in Rhode Island family law cases to ensure that they receive the excellent service that they need. Our Rhode Island divorce attorneys can help make sure that your voice is heard in pursuing a settlement agreement and custody arrangement that is favorable for you and in the best interest of your child. We have offices in West Warwick and South Kingstown, Rhode Island, as well as in Connecticut. Call Bilodeau Capalbo, LLC at 401-300-4055 or contact us online set up an appointment.