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Who pays for deductibles and co-pays and how do we deal with extraordinary medical expenses not covered by the insurance?

5/27/2015

15. Welcome back! Who pays for deductibles and co-pays and how do we deal with extraordinary medical expenses not covered by the insurance?

            KRS 403.211(9) covers this one. The cost of “extraordinary medical expenses” is to be allocated between the parents according to their respective gross income.

            According to the definition in the statute, “Extraordinary medical expenses” means uninsured expenses in excess of one hundred dollars ($100) per child per calendar year. "Extraordinary medical expenses" includes but is not limited to the costs that are reasonably necessary for medical, surgical, dental, orthodontal, optometric, nursing, and hospital services; for professional counseling or psychiatric therapy for diagnosed medical disorders; and for drugs and medical supplies, appliances, laboratory, diagnostic, and therapeutic services.

            So, I am confused here – Extraordinary medical expenses “includes but is not limited to“ certain described costs. Does it include costs that are not reasonably necessary? Does it include other costs not specifically listed? The list is pretty inclusive, so it seems.

            Parents frequently disagree as to whether there should be an allocation of these expenses. The most troublesome area seems to be orthodontics, where one party contends the treatment is not necessary for treatment of a condition, but merely cosmetic in nature. Those questions should be resolved, in my humble opinion, based on expert opinions as opposed to a judge trying to look at x-rays and decide.

            Well, in any event, now you know something more about allocation of extraordinary medical expenses.

Do parents have to maintain private health insurance for their child, and if so, who pays for it?

5/27/2015

14. Welcome back! We talked about childcare expense in Lesson 13. Let’s move on to health care. Do parents have to maintain private health insurance for their child, and if so, who pays for it?

            As of April 15, 2015, the effective date of these Lessons, it is too early to ascertain every impact of the comprehensive and highly controversial Affordable Care Act, but for the time being, we know that every child in Kentucky should have health insurance, whether through a parent’s employment, Kynect, the Marketplace or CHIP (Children’s Health Insurance Program.)

            Before passage of the Affordable Care Act, KRS 403.211(7) already established the circumstances related to parents’ responsibility for obtaining private health insurance for their children. If private coverage is “reasonable in cost and accessible” to either parent, the court shall require it to be provided, and it shall allocate the cost between the parents in addition to child support. "Reasonable in cost” is defined to be coverage which does not cost more than 5 % of that parent’s gross income. “Accessible” is defined to mean that there are providers who meet the child’s health care needs who are located no more than 60 miles from the child’s primary residence.

            KRS 403.211 law requires that if the private health coverage provides for covered services for dependent children beyond the age of majority, then any unmarried children up to age 25 who are full-time students enrolled in and attending an accredited educational institution and who are primarily dependent on the insured parent for maintenance and support shall be covered. The cost for coverage of children under who qualify under this provision is presumably to be allocated according to the parents’ respective incomes as long as the coverage is maintained.

            The Affordable Care Act requires an insurance provider to make coverage available for adult children until they turn 26 regardless of whether they are married, regardless of whether they are attending school, and regardless of whether they are financially dependent on their parents.

            What if a parent provides coverage for an adult child even though it is not required under KRS 403.211? Is the other parent required to pay his or her share of the cost? We won’t know until this is addressed by the appellate courts.

            Often both parents have available coverage and sometimes they disagree about which policy should be used. Imagine that! In that case, the custodian will decide which policy to use, but if they have joint custody, they will have to present their argument to the judge who must decide the issue. Once it is resolved which parent will provide coverage, the cost is allocated according to their respective incomes and, much like the allocation of childcare expense on Exhibit 13, the worksheet will give the parties appropriate credit for the cost of health insurance for the child or children only.

            In any event, now you know a whole lot more than you did before about private health insurance coverage for children in Kentucky. Enjoy your day!

How does Kentucky law deal with the big-ticket item of childcare expense?

5/27/2015

13. Welcome back! This seems like a good time to go back to our worksheet. How does Kentucky law deal with the big-ticket item of childcare expense?

            KRS 403.211(6) says:

            The court shall allocate between the parents, in proportion to their combined monthly adjusted parental gross income, reasonable and necessary child care costs incurred due to employment, job search, or education leading to employment, in addition to the amount ordered under the child support guidelines.

            This appears to be fairly straight-forward, but as always, there are potential issues. Who decides what provider to use?  What is a reasonable cost? And necessary? When the parties cannot agree on these issues, they present evidence and the judge decides. Keep in mind the statute calls for allocation of childcare costs actually incurred, so a judge will be looking for receipts or canceled checks as evidence.

            Let’s go back to the original scenario where both child live with Mother with no maintenance payments and no prior-born children. The new worksheet that would be used if Sissy required childcare is Exhibit 13. I have now filled in the amount of childcare expense actually paid for Sissy, $400 per month. The worksheet automatically allocates the childcare according to percentage of income. Then, if the payor (here Father) is actually paying the childcare provider (as shown on Exhibit 13,) the amount of his obligation is reduced accordingly.

            Easy enough? Have a great day!

When the parents' combined monthly adjusted gross income exceeds $15,000 per month, how is child support to be calculated?

5/20/2015

12. Welcome back! As we saw in Lesson 11, a court can deviate from the child support guidelines if the combined monthly gross income exceeds the maximum on the child support guidelines table found in KRS 403.212. When the parents' combined monthly adjusted gross income exceeds $15,000 per month, how is child support to be calculated?

            The chart found in KRS 403.212 has not been changed in over 25 years, so yes, it is outdated. Subsection 5 of that statute gives the court discretion in determining child support in circumstances where combined monthly gross income exceeds $15,000.00.   That basically means the judge gets to decide the appropriate amount of child support to award as long as the decision is not arbitrary or capricious.

            In 2001, the Kentucky Court of Appeals tells us in the famous case of Downing v. Downing, 45 SW3d 449, that “beyond a certain point, additional child support serves no purpose but to provide extravagance and unwarranted transfer of wealth. While to some degree children have a right to share in each parent’s standard of living, child support must be set in an amount which is reasonably and rationally related to the realistic needs of the children.” This is sometimes referred to as the Three Pony Rule – no child, no matter how wealthy the parents, needs to be provided with more than three ponies.

            Many Kentucky cases since 2001 have given us more guidance. One approach is to somehow extrapolate the guidelines, but there will be significant differences in the result depending on whether the method of extrapolation employed is linear, parabolic or otherwise.

            For what it’s worth, I cannot remember hearing many cases involving parents with income of more than $15,000 per month who chose to proceed without counsel.

            Now you know enough about child support where the combined monthly parental income exceeds $15,000 to be dangerous, so proceed with due caution!

When can a judge deviate from the child support “guidelines”?

5/20/2015

11.   When can a judge deviate from the child support “guidelines”?

            KRS 403.211 tells us the guideline amount creates a “rebuttable presumption” as to child support. It goes on to say that a judge can deviate from the guideline amount where their application would be unjust or inappropriate. The language of the statute seems to contemplate deviation in "extraordinary" situations, and the statute says that the judge gets to decide what is “extraordinary” in his or her discretion.

            Specific findings are required for any deviation, and it has to be based on one of the following criteria:

            (a) A child's extraordinary medical or dental needs;

            (b) A child's extraordinary educational, job training, or special needs;

            (c) Either parent's own extraordinary needs, such as medical expenses;

            (d) The independent financial resources, if any, of the child or children;

            (e) Combined monthly adjusted parental gross income in excess of the Kentucky child support guidelines;

            (f) The parents of the child, having demonstrated knowledge of the amount of child support established by the Kentucky child support guidelines, have agreed to child support different from the guideline amount. However, no such agreement shall be the basis of any deviation if public assistance is being paid on behalf of a child under the provisions of Part D of Title IV of the Federal Social Security Act; and

            (g) Any similar factor of an extraordinary nature specifically identified by the court which would make application of the guidelines inappropriate.

            The most common deviation I saw as a judge was when the parties had agreed to an amount of child support different from the guideline amount. It is important to note that the parties must acknowledge an understanding of the guideline amount in order to qualify for this deviation, so a worksheet, with accurate information as to the parties' gross income, will still be required.

            We will talk specifically in Lesson 12 about the deviation when the parties have combined monthly gross income that exceeds $15,000 per month.

            I can tell you from experience that unless the parties have combined monthly gross income of more than $15,000 per month, deviation from the guidelines is pretty rare unless the parties can demonstrate an understanding of what the guidelines would call for and they have agreed to a deviation.

            Now you know a little bit about deviation from the child support guidelines – have a great day!

Welcome back! The last lesson about prior-born children showed us how complicated child support questions can get, didn’t it?

5/20/2015

10. Welcome back! The last lesson about prior-born children showed us how complicated child support questions can get, didn’t it?

            Let’s get back to an easy one now. What happens in a split custody arrangement where Sissy lives with Mother and Jr. lives with Father?

            KRS 403.212(6) gives us the simple answer of how to determine split custody child support. Prepare 2 worksheets, one for each home with Jr. being the only child in Father’s home and Sissy being the only child in Mother’s home. (See Exhibits 10 and 10A.) Then, they basically pay child support to each other.

            In this case, Father would owe $642 to Mother for Sissy, and Mother would owe $320 to Father for Jr. The net result is Father pays Mother $322, the difference in the two amounts.

            Not to complicate things, but if they had 3 children and 2 of them live with Father and 1 with Mother, his worksheet would be calculated based on 2 children, and hers based on 1.

            I told you it was easier than Lesson 9.

            Did you need to know how to determine child support with split custody? Now you know!

Is there an adjustment to a parent's "gross income" if he or she is supporting a prior-born child?

5/13/2015

9. Welcome back! In the last Lesson, we talked about how to treat maintenance or alimony on the worksheet. Now, let’s tackle the next thorny question:  Is there an adjustment to a parent's "gross income" if he or she is supporting a prior-born child?

KRS 403.212(2)(g)(2) and (3) gives us the answer:

            "Combined monthly adjusted parental gross income" means the combined monthly gross incomes of both parents, less any of the following payments made by the parent:

            2. The amount of pre-existing orders of current child support for prior-born children to the extent payment is actually made under those orders; and

            3. A deduction for the support to the extent payment is made, if a parent is legally responsible for and is actually providing support for other prior-born children who are not the subject of a particular proceeding. If the prior-born children reside with that parent, an "imputed child support obligation" shall be allowed in the amount which would result from application of the guidelines for the support of the prior-born children.

            So, we deduct from “gross income” on the worksheet any amounts of pre-existing orders of child support for prior-born children to the extent payment is actually made under the order.

            For example, if Father had a child with his old wife or girlfriend before Jr. and Sissy were born, and he is actually paying child support of $400 per month to that mother based a pre-existing court order in that case, we deduct that amount from his side of the worksheet. (Exhibit 9)

BUT, if he gets his NEW girlfriend pregnant and is ordered to pay child support to HER after the child support order is entered IN THIS CASE, he does not get to deduct it on THIS worksheet. He can deduct it on the worksheet in the new Baby-Mama case if the Order in this case is entered before the Order is entered in that case, once he begins paying child support pursuant to a court order in this case. Talk about an awkward race to the courthouse!

            What if Mother had a baby before she hooked up with Father?

            If she is getting child support from the first guy, that amount is not included as income to her on this worksheet. BUT, let’s look at subsection 3 – what if there is a prior-born child but there is no existing child support order for that child? Now what?

            I think this sentence should apply regardless of whether the child is living with the parent, but I am not aware of any appellate court decisions that provide guidance as to that issue. Remember our first Lesson? KRS 405.020 says she has a legal responsibility to provide for the nurture and education of that child. Is she actually providing support for that child, even though there is no court order requiring her to do so? If she can prove she is actually making payments for support, she should get to deduct it from her income.

            Finally, what if the prior-born child DOES live with her?

            The second sentence of subsection 3 does give us some guidance on this one. We are somehow to impute the amount of support that she would get if she did receive child support from the father of the prior-born child. How in the world do we figure out how much that would be? He may be dead, for all we know! Or if not, she may not know where he is! And if he is alive, how do we apply the guidelines if we don’t know how much the father of that child earns?

            Now you know a little bit more about how to treat support of a prior-born child, and probably have more questions than you had before you worked through this statute. Don't despair, many a lawyer and at least a few judges have struggled, and will continue to struggle, with this aspect of the law.

What if one parent is paying maintenance?

5/13/2015

8. Welcome back! We talked a little bit in an earlier Lesson about maintenance. Let’s take a closer look. The question for this Lesson is:

            What if one parent is paying maintenance?

            KRS 403.212(2)(B) tells us that maintenance is to be considered “gross income” for purposes of child support calculations. So, in this case, let’s say the judge has ordered Father to pay Mother $500 maintenance per month. Exhibit 8 is the new worksheet that takes into account the maintenance award. We add $500 to Mother’s side of the ledger as it is "gross income" attributed to her.

            KRS 403.212(2)(G)(1) then tells us that “the amount of pre-existing orders for current maintenance for prior spouses to the extent payment is actually made AND the amount of current maintenance, if any, ordered paid in the proceeding before the court” is to be deducted from the payor’s “monthly gross income”. So, we know we deduct $500 from Father’s income on this worksheet as Mother will soon be a prior spouse. If he is ALSO paying maintenance to another PRIOR spouse under another court order, we know he is looking at a REAL NIGHTMARE, and we would also deduct the amounts he is paying her from his income on the worksheet. However, if he gets married and divorced again (don't laugh - it happens) and is ordered to pay maintenance to Spouse No. 3, that amount would not be deducted from his income with regard to Spouse No. 2.

            Do you like to talk about income tax? Me neither, but any basic lesson on child support and maintenance must include a few words about taxes. Maintenance is deductible to the payor, and taxable to the payee. Child support is not.

            And, in THIS case, Mother and Father are going to be in different income tax brackets, right? So, let's talk about how they can use this differential to save their family a considerable amount of money. To do so, they would re-allocate the amounts Father pays Mother in child support and maintenance. For example as in Exhibit 8A, they could agree to increase his maintenance to $1,000 per month, and reduce his child support to $450. Mother would then get a total of $1,450 from him, and $1,000 of it would be taxed at her tax bracket, which we will assume to be 15 %. Father would pay a total of $1,450 (instead of $1,386), but instead of deducting the $500 per month the judge ordered as maintenance, he would be able to deduct $1,000 per month at his higher tax bracket of let’s say 25%.

            So, here is the impact over the course of the year:

Mother's Net at $500 per month maintenance and $866 child support

  Maintenance:                                              $   500 X 12 months = $6,000

Child Support:                                             $   886 X 12 months = $11,518
TOTAL $17,518

Taxes: 15 % of $6,000 = $900
Net Payments to Mother (after taxes) $17,518 - $900 = $16,618

Mother's Net at $1,000 per month maintenance and $500 child support

Maintenance:                                              $ 1,000 X 12 months = $12,000 Child Support:                                           $    500 X 12 months = $6,000
TOTAL $18,000

Taxes Payable on Maintenance Received: 15 % of $12,000 = $1,800
Net Payments to Mother (after taxes) $18,000 - $1,800 = $17,200

Father's Net at $500 per month maintenance and $866 child support

Maintenance:                                              $   500 X 12 months = $ 6,000
Child Support:                                             $   886 X 12 months = $11,518
TOTAL                                                                                                      $17,518

Tax Deduction on Maintenance Paid: 25 % of $6,000 = $1,500
Net Obligation of Father (after taxes) $17,518 - $1,500 = $16,018

Father's Net at $1,000 per month maintenance and $500 child support

Maintenance: $1,000 X 12 months = $12,000           Child Support: $500 X 12 months = $6,000
TOTAL $18,000

Tax Deduction on Maintenance Paid: 25 % of $12,000 = $ 3,000
Net Payments to Mother (after taxes) $18,000 - $3,000 = $15,000

            Compare the charts. If the parties agree to re-allocate such that Father pays $1,000 maintenance and $500 child support, Mother gets $582 more after taxes, and Father pays $1,018 less after taxes. There is room for further negotiation, but with their different tax brackets, it is apparent these parties can find a creative way to save money by working together on an advantageous allocation of maintenance and child support.

            Now you know a little more about what happens when one parent is paying maintenance to the other.

<<Previous

Who pays for deductibles and co-pays and how do we deal with extraordinary medical expenses not covered by the insurance?

Do parents have to maintain private health insurance for their child, and if so, who pays for it?

How does Kentucky law deal with the big-ticket item of childcare expense?

When the parents' combined monthly adjusted gross income exceeds $15,000 per month, how is child support to be calculated?

When can a judge deviate from the child support “guidelines”?

Welcome back! The last lesson about prior-born children showed us how complicated child support questions can get, didn’t it?

Is there an adjustment to a parent's "gross income" if he or she is supporting a prior-born child?

What if one parent is paying maintenance?

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