In any number of cases, the issue of imputation of income can and will arise with regard to one or both parties when issues of alimony or child support arise. Generally speaking, in matrimonial cases an issue over imputation of income often arises when, say one party has been unemployed for some time, or where a party is not earning or reporting income consistent with that person’s ability to do so. The case law in the State of New Jersey is fairly straightforward when it comes to when and how income should be imputed to an individual, however, there have been some recent developments that highlight some nuances.
A trial court can impute income to a party for child support and/or spousal purposes when the part is, without just cause, intentionally and voluntarily underemployed or unemployed. Caplan v. Caplan, 182 N.J. 250, 268 (2005); Golian v. Golian, 344 N.J. Super. 337, 341 (App. Div. 2001). Stated in another way, when a spouse is not earning his or her true potential income, “an imputation of income based on that potential is appropriate.” Stiffler v. Stiffler, 304 N.J. Super. 96, 101 (Ch. Div. 1999); Halliwell v. Halliwell, 326 N.J. Super. 442, 448 (App. Div. 1999) (potential earning capacity of party, not his or her actual income, should be considered). The imputed income figure is one the party is capable of earning. Dorfman v. Dorfman, 315 N.J. Super. 511, 516 (App. Div. 1998). “Imputation of income is a discretionary matter not capable of precise or exact determination but rather requiring a trial judge to realistically appraise capacity to earn and job availability.” Storey v. Storey, 373 N.J. Super. 464, 474 (App. Div. 2004). Before imputing income, however, a trial court judge must first find that the spouse was voluntarily underemployed or unemployed without just cause. Caplan, supra, 182 N.J. at 268. “In treating the matter of support, our courts have always looked beyond the [parent’s] claims of limited resources and economic opportunity. They have gone far to compel a parent to do what in equity and good conscience should be done for [the] children.” Lynn v. Lynn, 165 N.J. Super. 328, 341 (App. Div. 1979).
This authority is incorporated into the New Jersey Child Support Guidelines. See R. 5:6A (adopting Guidelines set forth in Appendix IX-A to the Court Rules). The Guidelines state:
[i]f the court finds that either parent is, without just cause, voluntarily underemployed or unemployed, it shall impute income to that parent according to the following priorities:
a. impute income based on potential employment and earning capacity using the parent’s work history, occupational qualifications, educational background, and prevailing job opportunities in the region. The court may impute income based on the parent’s former income at that person’s usual or former occupation or the average earnings for that occupation as reported by the New Jersey Department of Labor (NJDOL);
b. if potential earnings cannot be determined, impute income based on the parent’s most recent wage or benefit record….
[Child Support Guidelines, Pressler & Verniero, Current N.J. Court Rules, comment 12 on Appendix IX–A to R. 5:6A at 2635 (2015).]
These legal concepts are equally applicable to the determination and establishment of spousal support obligations, in addition to child support obligations. Tannen v. Tannen, 416 N.J. Super. 248, 261 (App. Div. 2010). “[O]ne cannot find himself in, and choose to remain in, a position where he has diminished or no earning capacity and expect to be relieved of or to be able to ignore the obligations of support to one’s family.” Arribi v. Arribi, 186 N.J. Super. 116, 118 (Ch. Div. 1982). Imputation of income must be based upon actual earning capacity and not employment desires of the individual. Gnall v. Gnall, 432 N.J. Super. 129, 159 (App. Div. 2013)(reversed on other grounds). “Imputation may also be justified when examining income reported by self-employed obligors, who control the means and method of their earnings.” Donnelly v. Donnelly, 405 N.J. Super. 117, 128-29 (App. Div. 2009)(noting a self employed individual is in a “better position to present an unrealistic picture of his or her actual income than a W-2 wage earner”).
Pursuant to the Appellate Division decision in Gnall, supra, 432 N.J. Super. at 129 (which was reversed on other grounds by the Supreme Court of New Jersey in Gnall v. Gnall, 222 N.J. 414 (2014)), there is no mandate that a dependent spouse, absent from the workforce, by agreement, for a significant period of time, must immediately prepare for and return to work pendente lite, absent notice of this expectation presented by motion or court directive. Accordingly, while the Appellate Division upheld the trial court’s imputation of income in the amount of $65,000 per year to the dependent spouse, there was a remand with regards to the immediate effective date of that imputation as ordered by the trial court. This was based primarily on the fact that both employability experts testified that the dependent spouse would require a period of retraining before she would be able to secure employment, as she had not worked in ten (10) years and her job skills were stale. Based upon the time and cost associated with that retraining, the Appellate Division instructed the trial court to determine an effective date of imputation at a plenary hearing. This issue was not challenged by the dependent spouse in the Supreme Court of New Jersey.
As always, the attorneys at James P. Yudes, P.C., are willing and able to assist any and all matters related to support obligations, including issues surrounding imputation of income where support is an issue.