How Does Bonus and Overtime Income Affect Support Awards in California?
Spousal support and child support awards in California are calculated according to a statutory set of guidelines which set out the factors a court must consider in determining the amount and duration of payments. The income and assets of the paying spouse are among the factors that must be considered. It is important to accurately calculate all of a spouse’s income before arriving at an appropriate figure for periodic payments.
Often, a spouse’s annual salary is supplemented by overtime payments and annual bonuses, which may vary from year to year. Since these amounts may make up a significant portion of the payer’s income, they should be taken into account when determining the proper amount of child support and spousal support. The California Family Code requires all sources of income to be considered when determining ability to pay, including overtime and bonuses.
What is a Smith-Oslter Award?
The issue of how to treat bonus income for purposes of support awards was first addressed by the California Court of Appeal, Div. Three in 1990, in a case known as Marriage of Ostler & Smith, (1990) 223 Cal.App.3d 33. That case involved a divorce in which the husband derived a substantial income from bonuses, in addition to his regular salary. The court came up with a formula for determining how to account for bonus income in a way that would avoid future litigation. The court ruled that the husband pay ten percent of any bonus income as child support for each of the parties’ two children, plus fifteen percent as spousal support for his wife, a total of thirty-five percent of his future bonus income. These amounts would be paid in addition to the regular support payments.
Today, variable support awards based on a percentage of bonus income are called Smith-Ostler awards. The amounts of ten percent per child and fifteen percent for the dependent spouse were based on the financial circumstances of the parties to that case, and are not exact figures that can be applied to every case. The wife in that case, for example, had never worked outside the home, and was completely dependent on her husband for support. The actual percentage may vary according to the relative financial positions of the parties, the number of children, and other factors.
It is important, in any divorce case, that both parties disclose all sources of income, even those which vary from year to year, and which are not guaranteed. Failure to do so could result in expensive litigation and penalties. When choosing a California divorce attorney, make sure the person you choose is familiar with Smith-Ostler awards, and tell your attorney about any commission, bonus or overtime income that you or your spouse have received or expect to receive in the future. If you are the payer or beneficiary under a Smith-Ostler award and your financial circumstances have changed, it may be possible to amend the award. Consult a California family law attorney if you believe a previous support order or separation agreement is unfair, based on incorrect information, or needs to be modified to fit changed circumstances.