Child Support and Assets in Arizona
Arizona family court utilizes a standard calculation based on the income of both parties and parenting time awarded to both parties to determine child support awards and amounts. In some cases, one or both of the parties involved will experience a significant change in their financial status for a variety of reasons.
If such a change can be shown to be “substantial and continuing” the court can approve a petition requesting a child support modification that coincides with the change in financial status.
Does the Sale of Property Constitute a Substantial and Continuing Change in Finances?
In the case of Jenkins v. Jenkins (Thomas P. Jenkins, Petitioner-Appellee, v. Beverly Dawn Jenkins, Respondent-Appellant), the dissolution of marriage included an order for child support to be paid by the husband to the wife.
Within the Decree, it was noted that calculations used for child support did not include any income from potential interest in property, but also noted that if the property was to be sold and the sale price invested in interest-bearing accounts, it could be appropriate for the court to impute income to the father as a result of the investment of the funds.
Neither party appealed the original ruling. Within a month of receiving the final decree, the husband sold the property valued at approximately $7,000,000. (The property was inherited from his mother prior to the marriage and was designated in the premarital agreement as his sole and separate property).
After the sale of the property, the father entered into an agreement with a reputable financial institution to facilitate a 1031 Exchange. According to the 1031 agreement, the father received no capital gains from the transaction nor any actual income. The condition of the agreement prevented access to the funds and required that they are used to purchase “like” properties within 180 days of the sale of the original property.
Potential Earnings Denied as Basis for Child Support Modification Petition:
After the sale of the property, the mother in the case filed a petition for modification of child support requesting that the sale price of the property and its “potential” earnings be considered as income that the father is refusing.
She referenced previous decisions regarding ex-spouses who purposefully do not exercise stock options or fail to meet their own earning potential in order to minimize the “income” considered for child support calculations. The family court denied the mother’s request for a modification of child support.
The Decision of the Court of Appeals of Arizona in Regards: Jenkins v. Jenkins
The appellate court affirms the decision of the trial court, finding that the appreciation in the value of the father’s sole and separate property is not typically considered income for purposes of calculating child support.
Furthermore, the appellate court fails to see how the mother demonstrated a substantial and continuing change in circumstance in comparison to the original Decree (which neither party appealed) due to the fact that at the time of the original decree, the husband earned $74, 650 per year and at the time of the modification, evidence was submitted that the husband’s earnings were estimated at $74,305 per year.
Also at the time of the original Decree, the husband was a farmer and owned $7 million worth of land. At the time of the modification, the father was a farmer and owned $7 million worth of land. The Court of Appeals of Arizona finds that the mother failed to demonstrate how this constitutes a substantial and continuing change in circumstance such as is required to obtain a modification of child support. The appellate court affirms the ruling of the family court by denying mother a modification of child support.