How Does the Stock Market Affect Child Support Payments?
As part of her recent divorce, Chanel Thierry reportedly wants over $80,000 in monthly child support from DJ Mustard. Tristan Thompson will pay approximately $9,500 per month in child support. Obviously, those big-name celebrities, with equally high income levels, will have greater potential for long, drawn-out child support battles as they determine who should really have to pay out child support and how much they will likely need to spend. However, many couples find themselves fighting aggressively to determine how much child support the primary custodial parent should receive each month, including how shifts in the stock market may impact child support payments.
How the Stock Market Impacts Child Support Payments
In general, child support payments are calculated based on the parents’ income. Child support payments are intended to help the child or children enjoy the same standard of living they did prior to the divorce. For that reason, a parent who has considerable income from the stock market will often end up paying more in child support. However, changes to the stock market, including issues like a sharp decline in the stock market throughout 2022, may impact the support a parent has to pay.
Changes in Income and Assets
Changes in the stock market can have a substantial impact on both an individual’s income and their assets. Assets are items you hold that have value, including the stocks themselves. Those assets can appreciate or depreciate in value over time as the stock market changes.
Some people will also receive regular dividends from their stock market investments. Those dividend checks can vary depending on how well the stock performs, which means that the child support expected of the individual holding those stocks may vary.
Different Approaches to Modifying Awards
Under California law, you have two options for modifying child support awards. Either parent can request a review every three years, often due to circumstances that change naturally over time. However, parents may also have the right to request a review when either parent’s economic circumstances have changed substantially.
By Agreement
Sometimes, parents may reach an agreement regarding how child support will be calculated based on changing stock market dividends each year. For example, the parent receiving those dividends might simply issue an additional support payment amounting to a percentage of the dividend when it comes in, which can make it much easier to manage the changing income from stock dividends. Parents might also reach an agreement that the parent responsible for paying for child support payments will pay the same amount each year without taking the changes into stock dividends into account, which means that the parent receiving payments would receive consistent income each year.
Changes in stock dividends may change the parents’ agreement. For example, a dip in the stock market might cause a substantial decrease in the income of the parent who has to issue those payments. The parents might agree that child support payments can decrease as a result.
Any time parents change the agreement related to child support, it must be submitted to the court. A judge will need to approve the payment to ensure that it remains in the best interests of the child. Furthermore, failure to follow the original child support agreement, as laid out by the court, might make it difficult for either parent to enforce a change.
By Review
In some cases, parents may want to request that child support enforcement agencies review the terms of the child support agreement to determine whether the agreement is still fair and reasonable. That may take place as part of a regular review, which can occur up to every three years, or it may occur because of a significant change in a parent’s economic circumstances. For example, the stock market challenges of recent years may have led to a significant decrease in assets for some individuals. That parent would then have the right to request a modification to the child support agreement in order to decrease their obligations.
On the other hand, sometimes, stock market changes can lead to an increase in the paying parent’s income and assets. When the stock market performs well, it may mean much larger dividend checks. In that case, the parent receiving child support might want to request a review of those child support payments. Sometimes, that may result in court proceedings.
Strategies to Protect Your Rights in Economic Hardship Situations
For many people, changes in the stock market are primarily a challenge to retirement savings or long-term planning. For others, however, significant changes in the stock market can lead to equally substantial changes in their income. Parents suffering from economic hardship because of changes in the stock market may need to act quickly to protect themselves.
Let the Court Know Immediately
As soon as economic hardship occurs, parents who have child support payments they can no longer meet should let the court know about those economic changes. The court will not automatically review child support payments in light of stock market changes. However, for parents who suffer significant economic hardship because of stock market losses, the court may temporarily pause or decrease payments.
File a Motion to Review
Sometimes, one parent may need to modify child support arrangements due to economic challenges related to changes in the stock market, but the other parent might not agree. Filing a motion to review child support payments can offer a legal option that may make it easier to manage child support payments despite economic difficulty.
For parents who expect that change in financial status to be temporary, a payment schedule can help keep up with child support payments, spousal support payments, or other necessary arrangements. The court can help assign that amount.
Contact a Lawyer
In many cases, the parent receiving child support payments will fight hard to prevent modifications that may decrease that amount. Having a lawyer can help protect the paying parent’s economic rights.
When the stock market creates unexpected economic challenges, parents may want to carefully review their existing child support arrangements to ensure that they meet the new income threshold. Parents may also want to review child support when they have significant increases in income. Get started today by contacting us online or calling 949-438-3886.