When we last saw Derek and Stacey, in Part VII of “Up Close and Personal” they were wrapping up their third mediation session. They had made great progress working out their property division and deciding how to handle child custody, but they still needed to deal with child support, and possibly alimony.
As they begin their fourth mediation session, their mediator, Ms. Smith reviews their income and expense information and suggests working line by line through the New Jersey Shared Parenting Child Support Worksheet.
“This might get a little tedious,” she warns, “but it’s the best way for you to see what is involved with the child support calculations. It’s a formula that takes into account the different types of costs (fixed, variable and controlled) that we talked about at the end of our last session. It also includes supplemental expenses like child care costs and health insurance premiums for children.”
“Just to review, we are going to use an annual salary for Stacey of $85,000 and an annual salary for Derek of $48,000. We’re also assuming that Stacey will continue paying an average of $220 per week for child care, and that health insurance for the children will continue to be provided through Stacey’s employment at a cost to her of about $30 per week. You’ve agreed to a 50/50 time share, with Stacey designated as the Parent of Primary Residence. Is all that still accurate?”
Derek and Stacey both nod assent, and Ms. Smith walks them through the worksheet as follows:
L.1-3: Parent of Primary Residence (PPR/Stacey) has weekly gross taxable income (L.1) of $1,635 in wages minus $250 income tax withholding (simplified-L.2a.), leaving her a net taxable income (L.3) of $1,385.
L.1-3: Parent of Alternate Residence (PAR/Derek) has weekly gross taxable income (L.1) of $923 minus $150 income tax withholding (simplified-L.2a.), leaving him a net taxable income (L.3) of $773.
L.6: Total weekly net income for both parents is $2,158.
L.7: Stacey has approximately 64% of the available income and Derek has approximately 36%.
L.8: The basic child support amount for two children from the Appendix IX-F Schedule is $388 per week.
L.9-10: Stacey and Derek have a 50/50 time share (L.10), or 182.5 overnights each (L.9).
L.11: The PAR shared parenting fixed expenses are equal to the basic child support amount ($388) x Derek’s percentage share of overnights (50%) x 38%, x 2, or $147.
L.12: The PAR share of fixed expenses increases the shared parenting basic child support amount by $147, to $535.
L.13: Derek’s share of the shared parenting basic child support amount is 36% of $535, or $192. Stacey’s share is 64%, or $342.
L.14: The PAR share of variable expenses is Derek’s percentage of overnights (50%) x the basic child support amount of $388 x 37%, or $72.
L.15: The PAR adjusted shared parenting basic child support amount is Derek’s share ($192) minus the L.11 PAR share of fixed expenses ($147) minus the L.14 PAR share of variable expenses ($72), or -$27.
L.16: The parties’ weekly net work-related child care (adjusted for tax credit according to the Appendix IX-E Worksheet) is $197.
L.17: The cost of the children’s health insurance premiums is $30 per week.
L.20: Total supplemental expenses are $227 per week.
L.21: The PAR (Derek’s) share of the supplemental expenses is $227 x 36%, or $82.
L.28: All supplemental expenses are currently being paid by Stacey, so Derek’s net supplemental expenses are also $82.
L.29: Derek’s net child support obligation is $-27 (L.15) plus $82 (L.21), or $55.
There are no other applicable adjustments, so a court would order Derek to pay Stacey $55 per week.
“Wait a minute!” says Derek. “I have to pay Stacey, even though she earns way more than I do?”
“Because she is paying the child care costs, as well as the net cost of the children’s health insurance.” Ms. Smith clarifies.
“That’s $227 per week,” says Stacey. “So even if you give me $55 a week, I still end up paying much more than you.”
“And this doesn’t include any spousal support,” adds Ms. Smith. “If we end up with a spousal support payment then we’ll need to recalculate the child support amount also, because that would raise Derek’s income and decrease Stacey’s income.”
“Why are we paying so much for child care anyway?” Derek asks Stacey. “Rachel is going to be 12 when the new school year starts. Isn’t that old enough to stay home alone after school? And she can watch Ethan for a couple of hours can’t she?
Stacey shakes her head. “Maybe Rachel could stay by herself for a couple of hours, but I don’t want to make her responsible for Ethan. And we still have summers to deal with. She needs to go to camp. I don’t want her staying alone all day long.”
Ms. Smith does a quick calculation. “It looks like it would save you about $70 a week on average if you were to take Rachel out of the after-school program. It would only amount to a difference of $47 a week on the worksheet though, because of the tax credit adjustment.”
Stacey sighs. “Well that does add up, so I suppose it makes sense. I just hope she’s ready for it.”
“She’s very mature,” Derek answers, “and I can work at home on the days she’s with me anyway. What does that do to the rest of the numbers?”
“It would drop the supplemental expenses for child care and health insurance to $180 per week. Your 36% would go down to $65, so you would pay $38 per week instead of $55.”
Derek shakes his head, but Stacey looks like she’s had an idea.
“I’ll tell you what, Derek. You don’t have to pay me anything, as long as you don’t ask me for any alimony.”
“I wasn’t planning to ask you for alimony anyway,” Derek answers. “My attorney told me I might have a claim, but I just don’t think I can do it.”
“Let’s take a look at your budgets,” Ms. Smith suggests. “Derek your rent is $1,700 per month?”
“$1750 actually,” answers Derek. That was the cheapest 3 bedroom I could find that was in the same neighborhood as the kid’s schools.”
“That does sound quite inexpensive for this area, but it’s still going to take a high percentage of your income. It also looks like it’s about $400 per month more than Stacey’s mortgage and real estate tax payments.”
“I don’t care!” Stacey interjects. “It isn’t like I’m going to have a lot to spare, and it isn’t my fault that Derek has chosen to have such an easy work schedule. He can get more clients!”
“I don’t want any alimony,” repeats Derek. “I know it’s going to be tough, but I wouldn’t feel right about taking money from Stacey unless it’s for the kids.”
“Well then can we just skip all of this?” asks Stacey. “No child support and no alimony? It sure would be a lot simpler.
“You still have to include terms in your settlement agreement that address these issues,” answers Ms. Smith, “and whatever you decide to do, you also need to be aware that if things change, either of you can go to court and request a new child support order. The children always have a right to share in the income of their parents.”
“What about the alimony claim—can he come back and change his mind about that later?”
“That depends on how you write your agreement. You should both talk to your attorneys about that.”
“Well, okay,” says Derek, “but I do like the idea of no money going back and forth—it keeps things nice and clean.”
Ms. Smith nods. “Shall I write up everything we’ve talked about so far as a Memorandum of Understanding? That way you can have your attorneys review everything all at once, including the plan for your property division. Then if everything looks good, you can decide which attorney will write up your Marital Settlement Agreement and the other attorney can review it.”
Derek and Stacey agree to this plan and schedule one more mediation session to review the Memorandum of Understanding and make sure that any loose ends are wrapped up.
To read more about Derek and Stacey’s experience with mediation, find the beginning of the series here: Divorce Mediation up Close and Personal – Derek and Stacey, Part I.
Are you interested in mediating your divorce or your child custody and support issues? Please contact us to schedule your initial mediation consultation with one of our experienced divorce and family law mediators.