What are imputed earnings?
To impute income means to attribute value to a person’s fair contribution to the overall finances of a household. If one spouse was not working during the marriage, or worked in a job that paid less than their earning potential, the court may impute income based on what that spouse could be expected to earn: What if that spouse was earning an income, or higher income, from a job that would utilize their skills, experience, and education?
For example, an individual may have a college degree in a high-demand field, but the couple had decided years before that it was best for that spouse to be a stay-at-home parent while they still had school-aged children at home. Or perhaps that spouse worked part-time just to earn some extra discretionary income. If the marriage ends in a divorce, the court could determine the individual’s earning potential and decide that imputation of income is reasonable and fair in that instance.
It’s important to understand imputation of income in New Jersey and how it can work either for or against individuals in a divorce, depending on their employment status and earning capacity during the marriage. So it depends on your point of view:
My spouse has been the primary wage earner. What do I need to know about imputed income in divorce?
At some point in your marriage, you and your spouse decided that one income was sufficient for your family budget. Over time, however, your relationship deteriorated and now one or both of you has filed for divorce. If you have been a stay-at-home parent for several years, perhaps you are now hoping to receive alimony so you can continue to do so. Can laws about imputed income in divorce in NJ throw a wrench into your plans?
There are two issues you need to acknowledge so you can have reasonable expectations for your divorce settlement:
- You have an obligation to contribute to the support of yourself and your children; and
- In most cases, it is not realistic to expect one partner to financially support two households on one income.
Unless you have a valid reason to convince the court of some necessity for your voluntary unemployment, child support and spousal support obligations and your capacity to earn will weigh on the court ‘s decision to impute income as part of the settlement. Your attorney should discuss with you the likelihood that you will have to work in some capacity or will likely be imputed an income if you choose not to work.
The opposing perspective: How to get a judge to impute income
If you have been the primary wage earner for most of the marriage, imputation of income can relieve some of the financial stress of a divorce. The court may impute income if it finds that your partner has been voluntarily unemployed or underemployed as a way to reduce or avoid child support payment. If, for example, your spouse has left a well-paying job and taken one in which they are overqualified and under-paid, the court could establish an imputed income amount to make up for the shortfall. The law defining imputation of income in New Jersey gives the court latitude to calculate imputed income using a variety of factors.
How does the court assess the earning potential of an individual? There are several factors to consider, including:
- Work history and experience
- Level of education
- Amount of income earned in the most recent previous job
- Availability of suitable jobs in the local area (or remote employment opportunities)
- Average salary in the career field, or the current minimum wage
- Whether the individual is involuntarily or voluntarily earning less than their potential.
Imputing income for child support and spousal support are methods to ensure that both parties are making equitable contributions. Imputation of income in New Jersey encourages fair division of both assets and debts during divorce. Here at DeTorres & DeGeorge, New Jersey divorce attorneys can answer your questions about imputed income in divorce. Contact us today to schedule a consultation with one of our divorce lawyers.
Frequently Asked Questions
Are there exceptions the court will consider before imputing income?
When considering imputation of income in New Jersey, the court may make an exception if the individual is actively seeking employment, pursuing more education or training to improve job marketability, or has been consistently a stay-at-home parent who still has caretaker responsibilities. Also, evidence of a documented disability would generally exempt an individual from imputed income.
If I’ve been imputed income in a divorce, can I dispute the amount?
Yes, although the court has the final say, you may be able to argue that you are involuntarily unemployed or underemployed, based on reasons beyond your control, such as a high unemployment rate in your region or career field. It’s reasonable to assume that at any point in time, a geographic region or industry can be vulnerable to disruptions because of catastrophic weather events, unexpected financial stressors, or sudden downturns in consumer demand, and employers respond accordingly with reductions in their workforces.
Can inheritance be protected from divorce?
In some divorce cases, one or both spouses have assets that resulted from an inheritance. Are inherited assets protected from divorce? The short answer is yes, as long as it has been kept separate from marital assets, such as an existing bank account or investment. In other words, if you have inherited funds and you then proceed to open a bank account in your name only and deposit just those funds into that account, those funds are protected. That account and the funds in it are yours alone.
However, if you commingle the inherited funds by depositing into an account that already existed, even if the account is in your name only, those funds are subject to equitable distribution in the divorce. Before investing any part of an inheritance, it’s best to consult an attorney who can advise you on the best course of action to protect your assets.