What Does Child Support Cover?

People frequently ask the question, “What does child support cover?”  The answer depends, at least in part, on who you ask.  Note: Although the principles in this article may be relevant in other states, this article only applies to child support in Oregon.  The topics discussed are not “rules” per se, but rather observations based on practicing family law for 10 years and having mediated hundreds of cases.

The General Rule.  Generally speaking, if you go to trial a judge will tell you that child support covers a parent’s entire contribution to a child’s expenses in the other parent’s household, except for unreimbursed medical expenses which are their own separate category.  (It’s important to note that contributions for childcare and health insurance premiums are factored into the child support calculation.)  In other words, parents are generally not required to split various costs related to their childrenWith that in mind, one common reason for choosing mediation is so that people can reach their own agreements without having someone tell them what they are going to do. 

The Parenting Time Credit.  The Oregon Child Support Guidelines factor in something called a ‘parenting time credit.’  The parenting time credit is a reduction in child support based on the total amount of time a parent spends with the children (usually based on overnights).  The idea is that if someone has more time with the children, they are spending more money on the children during their time than if they did not have as much time (and the other parent is spending less).  It’s pretty easy to imagine that a parent who has a ‘week on/week off’ parenting plan will spend a lot more money on things related to the children then a parent who only sees the children every other weekend.  The parenting time credit accounts for this.

The concept of the parenting credit makes sense, but it can also make the “normal” child support rules a bit confusing in certain situations.  If one parent has very limited parenting time, then it makes sense that that parent pays child support and the other parent pays for most expenses.  But who is supposed to pay for the various expenses if parents have equal parenting time, particularly if they have similar incomes?  This is one example of why people often split certain expenses.

What Percentage To Use?  When it comes to “splitting” expenses, you need to identify what percentage each parent will pay.  If parents have similar incomes – particularly after transfer of child support and/or spousal support – then parents will often (although not always) agree to split these expenses 50/50.  One of the benefits of splitting expenses 50/50 is that the accounting and reimbursing for expenses is more straightforward.

Alternatively, people sometimes split expenses proportionate to their incomes.  This means, for example, that if one parent has 70% of the income and other parent has 30% of the income, then they would split expenses 70/30.  Parents will often split things proportionate to incomes in situations where they have very disparate incomes.

There is not a ‘right’ answer to how expenses will be split – or if they will be split.  Further, people will sometimes split one category 50/50 while splitting other categories proportionate to their incomes.  It all depends on what makes the most sense to both of you.

No Child Support.  In situations where child support is low anyway, e.g. less than $100, parents will sometimes agree that they will reduce child support to $0 and instead split some or all of the categories of expenses described below.  It’s important to know that child support is inherently modifiable, which means that even if there is no child support now, there could be child support in the future.  (Here is an article about modification.)  In any event, child support will only be reduced to $0 if both parents agree to it.  If there is no agreement, then the Oregon Child Support Guideline calculation will apply.

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Here are categories of expenditures that people will sometimes include in addition to (or in lieu of) child support:

Irregular Expenditures.  The Oregon Child Support Guidelines don’t necessarily factor in larger irregular or “one off” expenditures.  For example, if a child has a junior trip to Washington D.C. how should that be paid for?  What if a child has to have an iPad for school?  What about a $300 bike?  People often include a provision that says that they will split the cost of these irregular expenditures as long as both parents agree.  This provision isn’t a “risk” to either parent because it only requires parents to pay for something if they both agree.

Extracurricular Activities.  Does your child have a specific activity that he or she has always participated in?  In that case, parents will sometimes agree that they will split anything related to that particular activity, regardless of cost.  For example, if your child has always played club soccer, you might agree that you will split the cost of anything soccer-related without the need to discuss it first (although as a practical matter, you should run these sorts of things by the other parent).  With this type of provision, it still makes sense to say that, notwithstanding the agreement to split everything soccer-related, you will discuss anything over a certain amount before incurring the cost ($e.g., $200).  Additionally, parents will sometimes agree to split all extra-curricular fees even if their child does not have a “preferred” activity.

Sometimes parents paying child support do not want to include this provision because the Oregon Child Support Guidelines assume that these expenses are covered by child support.  This is a perfectly reasonably position for the parent to take.  If parents disagree about splitting extracurricular activities, the presumption is that the provision would not be included.

School Related Expenses.  Back-to-school shopping can be a very significant expense.  New clothes and school supplies can easily cost a few hundred dollars or more.  Parents will sometimes agree to split back-to-school shopping.  They may also agree to split other school related expenses such as misc. school fees, school pictures, field trip fees, etc.  As with extracurricular costs, if parents disagree about splitting these costs, the presumption is that the provision would not be included.

Private School Tuition.  Private school tuition is typically something a court will not order parents to split unless they agree.  With that said, if it is important to both parents that a child continues to attend a particular school, parents will sometimes agree to split the cost of private school tuition.

Childcare.  Work or school-related childcare is a factor in the child support calculation.  The child support calculator splits the expense proportionate to each parent’s income.  What ends up happening is that if one parent pays all of the childcare expenses, then child support will go up if that person is receiving child support or child support will go down if that parent is paying child support.

One of the challenges of factoring childcare costs into the child support calculation is that childcare costs fluctuate regularly.  As children get older costs typically change.  Also, when there are breaks from school costs typically change.  If you factor childcare into the child support calculation and then there is a significant change in childcare cost, then you will probably have to run a new childcare calculation.

One way that people avoid having to constantly rerun child support calculations is by excluding childcare from the child support calculation.  Instead, people will split childcare proportionate to their incomes (usually) when it is incurred.  That way if childcare costs fluctuate, your contributions to childcare will fluctuate but child support will stay the same.  The reason childcare is split proportionate to incomes instead of 50/50 is because the child support calculator splits the cost proportionate to incomes.

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It’s important to understand that parents are generally not required to split the above expenses.  However, many parents often agree to split at least some of these expenses.  In the absence of an agreement, it is important to know that the presumption is that these expenses will not be split.

The topic of splitting expenses is a good example of why people pick mediation in the first place – so they can create agreements that make sense to them rather than having someone else make their decisions for them.

So what does child support cover?  The answer, at least in mediation and Collaborative Law, is that child support covers whatever you both agree it should cover.

Notifying the Life Insurance Company

Judgments that contain child support, spousal support or property settlements that will be paid over time typically contain a requirement that the person who owes the money has to maintain life insurance to “insure” the support award.  Once the divorce or custody judgment has been signed by the court it will be time to notify the life insurance company.  Here is what you need to know:

Disclaimer – Use and review of this article is subject to the Disclaimer at the end of the article.

Copy of the Life Insurance Policy

First, the insured party (the party who owes the money) has to provide a copy of the applicable life insurance policy to the person who is the beneficiary (or trustee beneficiary) of the policy.  The policy document provides the beneficiary with the address and other policy information that they need.

Notification Letter

Next, the beneficiary needs to send a notification letter as well as a certified copy of the judgment to the applicable life insurance company.  A certified judgment is one that contains the court’s official seal on it.  You will need to obtain a certified copy directly from the courthouse (your lawyer or mediator can assist you with obtaining a certified copy).  You can learn more about obtaining certified copies here.

The notification letter is the part that is confusing to most people.  Here is a sample life insurance notification letter.  This resource is provided only as a sample only and cannot be used as-is.  You will need draft your own letter and tailor it to your own specific circumstances and terms of your judgment.

Do not attempt this notification process if you are represented by an attorney.  Your attorney should take care of this for you.  If you are unsure if your attorney has taken this step, be sure to ask.

Confirmation from the Life Insurance Company

The life insurance notification process is not complete until you receive a notification from the life insurance company acknowledging receipt of the judgment and that they will comply with the terms of it.  If you do not receive confirmation from the company be sure that you follow up with them until you do.

Disclaimer

  • The information in this article is provided only as a general informational resource for unrepresented parties. Nothing contained herein letter constitutes legal advice and nothing contained herein should be construed as legal advice.
  • If you are represented by an attorney, you should not attempt the life insurance notification process yourself.
  • The sample letter above is not to be used “as-is”. This is a sample only which must be modified based on the circumstances of your situation.  It is your responsibility to draft your own letter.  This sample is specifically provided as a .pdf file so that you cannot use this document.
  • The life insurance requirement is very important and there can be significant consequences if it is not done correctly. If you have any questions about the life insurance notification process you should contact an attorney.
  • Use of, or reliance upon, the sample letter is done so at your own risk. Forrest Collins accepts no liability or responsibility for your use of or reliance upon the sample letter, whether used in whole or in part.
  • This article only applies to judgments entered in the State of Oregon.

Life Insurance and Divorce

Life insurance is not something that most of us like to think about or discuss.  However, in the context of divorce it is very important and something that needs to be addressed.  While this article talks about life insurance related to divorce, the concepts also apply to unmarried parents or unmarried persons where one may owe money to the other.

The basic idea behind life insurance in a divorce is that if someone owes money to someone else – whether for spousal support, child support or a property settlement – and the person who owes the money (the payor) dies, the person who was relying on that money is out of luck.  If the payor has life insurance, the recipient is still provided for.

There are three main considerations in life insurance: How much, how long and beneficiary designation.

How much life insurance is needed?

The amount of life insurance that is needed is usually the amount of money owed to someone.  For example, if someone owed a $50,000 property settlement, then $50,000 in life insurance coverage would be needed.  One generally accepted exception to this rule is that you don’t necessarily need dollar-for-dollar coverage to insure a spousal support award.  The reason for this is that spousal support is taxable to the recipient but life insurance is not.  This means, for example, that if someone was supposed to receive $100,000 in life insurance over a period of several years, they would pay taxes on that support and so they really wouldn’t receive $100,000 – they might actually receive $75,000 after paying taxes.  In this example, then, $75,000 would be an appropriate amount of life insurance to insure the $100,000 spousal support award.  This is only an example which is offered for the purpose of better explaining the concept.  You should do your own analysis on how much insurance is appropriate in your particular situation.

When it comes to child support, the easy answer is that you should maintain the same amount as you would pay in child support over time.  However, this does not take into account the fact that if one parent passes away the other parent will have substantially increased expenses for increased childcare, now having to pay all of the expenses, etc.  For this reason, people will often “round up” and maintain more life insurance to benefit the children than you would otherwise think necessary.

How long do I have to maintain life insurance?

This answer is fairly straightforward – you need to maintain life insurance for as long as you owe money to someone, including any arrearage.  An “arrearage” means past-owed money, i.e., payments that you owed but haven’t paid.  If you owe back payments, you need to maintain life insurance until you are completely paid up.

Who is the beneficiary?

In spousal support and property settlement situations, the recipient of the money is going to be direct beneficiary of the life insurance.  The reason is fairly obvious – if someone was owed money, they should receive the life insurance.

What about for child support?

People sometimes think that their children should be the beneficiary of the parent’s life insurance policy.  They shouldn’t!  The idea is well-intentioned but a non-starter.  Consider this – what if you passed away and your 5-year-old received $250,000 and has a Hot Wheels fascination?  Do you get the idea?  The money should either go to the other parent to use for the children or should go into a trust for the benefit of the children.

People very frequently name the other parent as the direct beneficiary of life insurance when there are children involved.  The basic idea is that the other parent is now responsible for all of the children’s care and expenses and therefore should have access to the money to make necessary purchases.

If someone is not comfortable naming the other parent as direct beneficiary, then the next most common approach is to set up a trust to hold the money.  The life insurance policy will name the trust as the beneficiary.  The other parent is typically named the trustee of the trust.  One benefit of establishing a trust is that there will be specific parameters for using the money.  One of the downsides is that the person maintain the insurance has to do some estate planning to make sure this is set up properly.  (This isn’t necessarily a bad thing – you should always update your estate plan post-divorce anyways.)

Other considerations.  There are a number of other considerations in addition to those mentioned above.

What if it is too expensive?

Sometimes life insurance is cost prohibitive or not available at all.  If someone has previously had a serious health issue they may simply not be able to obtain coverage.  One way of dealing with this is to have that person leave the other person assets in their estate plan which are sufficient to “pay off” the amount owed to the recipient.

Who pays for the policy?

The generally accepted rule is that it is the responsibility of the person owing the money to maintain and pay for the life insurance.  A person who is owed money also has the right to purchase additional coverage on the payor at his or her own cost (i.e., at the cost of the person who is owed the money).

Can I change policies?

A person is typically allowed to change life insurance policies as long as the same amount of coverage is maintained and the beneficiary is notified.  A new judgment will need to be obtained which specifies the new policy information.

Conclusion.

This article covers the main considerations in life insurance, but it is not exhaustive.  You should speak with your mediator or attorney if you have additional questions regarding life insurance in the divorce context.  Once you have a signed judgment, the next step will be to submit the judgment to the applicable life insurance company.

Modifying Your Oregon Divorce Judgment

A divorce (or custody case) is a major life event which is based on the circumstances that exist at the time your judgment is finalized. What happens if things change several months or even several years after your judgment has been signed? Here is a basic guide to modifying your divorce or custody judgment in Oregon. This is only an overview and is not intended to be legal advice – you should discuss the specifics of your situation with your mediator or attorney.

Overview. Generally speaking, child related issues and spousal support are subject to modification. Property division, on the other hand, is final. A property division can only be reopened if you discover that an asset or liability was omitted (either accidentally or intentionally) from your original judgment. ORS 107.452 is the statute that applies if an asset was overlooked in the original divorce.

Child Support. Child support can be modified when 1) there has been a substantial change of financial circumstances; 2) every three years even if there is no change of circumstances; or 3) if both parents agree to the change. It is important to note that a change to child support must be put into a new judgment which gets signed by a judge. It is not sufficient to have a “handshake” deal regarding child support.

In Oregon child support can be paid up until age 21 if the child qualifies as a “child attending school” under ORS 107.108. What this means (oddly enough) is that your child is a party to your divorce between the ages of 18 and 21 and that he or she can file a motion to modify your divorce judgment to seek child support from either or both parents.
Parenting Plan. The legal standard for modifying a parenting plan is simply a “best interest of the child” standard. In other words, if someone thinks it is in the child’s best interest to change the plan, they can make a formal request to change it either by filing a motion with the court or proposing to go through the mediation process.

Like child support, a parenting plan can be modified anytime both parents agree. One-time change do not need to be put into a new parenting plan. However, if you are going to make a permanent change to the parenting plan then you should submit a new parenting plan to the court (using a Stipulated Supplemental Judgment) and get it signed by a judge. You should be aware that a new parenting plan is not enforceable unless it is in a new judgment that is signed by a judge.

There is a common misconception in Oregon that there is a certain age at which children are allowed to pick where they live. That is not true. However, based on the circumstances of your situation (e.g., child’s age, maturity level, etc.), a child’s preference may be taken into account in developing the parenting plan. In certain situations parents will sometimes include their teenage children in the mediation process when developing a parenting plan so that the children’s preference can be considered.

Decision Making (Custody). The decision-making provision of your judgment (i.e., legal custody) is subject to modification as long as your children are under 18. Joint custody can essentially be modified whenever one parent decides that joint custody is no longer working well and files a motion to sever joint custody. At that point the court has to award sole custody to one parent or the other since there can be no joint custody in Oregon unless both parents agree. Sole custody can only be modified when there has been a substantial and unanticipated change of circumstances that goes to the ability of one parent or the other to care for the children.

Spousal Support. Spousal support (alimony) can be modified any time that both parties agree to it. If there is no agreement, then applicable legal standard is that there must be an “unanticipated and substantial change of circumstances” to change support, i.e., a major life event. Just because there has been a major life change does not necessarily mean that support will be modified; it only means that someone can request a modification. Whether or not there is a modification will depend on the facts and circumstances at the time that the request is made.

Common reasons for modifying spousal support include retirement of the payor, the payor losing his or her job, the recipient getting remarried or the recipient changing careers and significant increasing his or her own earnings. Again, just because one of these things happens does not automatically mean that a spousal support modification will be granted.

As with child support, a new spousal support agreement must be put into a new judgment which gets signed by a judge. Failure to put the modified support arrangement into new judgment will make the agreement ineffective and can lead to some very serious negative consequences for one or both parties.

Spousal support can only be modified as long as there is a spousal support order in place. Additionally, spousal support cannot be ordered later on if there was never a spousal support order in the first place. Lastly, if your spousal support order has ended it cannot be reinstated. There is an exception to this rule which is that if spousal support had been terminated early and the reason for termination has ended the spousal support can be reinstated if you are still within the timeframe of the original support award.

Misc. Issues. There are a number of other smaller issues that are subject to modification, although they are typically only addressed if one of the major issues above is also being modified.

Some of those smaller issues include:
• Who will provide health insurance for the children;
• How the children’s unreimbursed medical expenses will be paid;
• How non-medical expenses for the children will be paid;
• The amount of life insurance that needs to be maintained; and
• Who will claim the children on their taxes.

Mediation tends to be a very efficient process for dealing with modifications. Usually a modification can be mediated in just one or two mediation appointments. Once an agreement is reached, Forrest can prepare all of the necessary documents and file them on your behalf. There is a $150 filing fee that gets paid directly to the court each time you file a modification.