Imputing the Income of An Underemployed Ex-Spouse After Divorce

After a divorce, parties have an obligation to pay child support, which is the right of the child. The parties must fully and accurately disclose their income to determine the correct amount of child support. However, what can happen if a spouse is deliberately underemployed to reduce their income and child support obligations? In these cases, the court can impute an income towards the underemployed spouse, meaning that based on the evidence presented, the court can decide that the spouse has a higher income than they have alleged. This imputed income will be used to determine child support.

This post will discuss the factors a court will consider in determining whether to impute a spouse’s income if they are deliberately underemployed to avoid support obligations. To illustrate these factors, we will discuss the case Angelova v. Castellanos, 2023 ABKB 694, in which the court imputed an income to the father, who appeared to report less income to avoid his child support obligations. We will also provide key takeaways for parties in a family law case that involves income issues, including situations where a party is underemployed.

Importance of Disclosing Income in a Family Law Proceeding

Parties must disclose their income fully and accurately in a family law proceeding. In particular, parties must provide copies of their tax returns and further corporate documents if their income is primarily from a corporation in which they are the primary or sole shareholder. The court also has the discretion to include income outside of what has been reported on a party’s income if evidence suggests that they are underemployed and should be attributed a higher income.

The courts have emphasized the importance of full disclosure in family law proceedings, as it will affect the amount of child support to be paid, which is the child’s right. The court does not take this obligation lightly. It will carefully consider the extent of disclosure when deciding whether to impute a higher income for a party.

What if a spouse is underemployed?

There may be situations where a court can impute income to a party, including if they are found to be underemployed to avoid support obligations. Under s. 19 of the Federal Child Support Guidelines, the court can impute an income to a parent that it considers appropriate in the circumstances, including where: 

1. The party is intentionally underemployed or unemployed unless this is required due to the child’s needs or the parent’s reasonable educational or health needs; 
2. The party did not provide full and accurate income information despite an obligation to do so.

Factors for Imputing Income if Spouse Underemployed

There are several steps for a court to find that a party’s income should be imputed. 

First, the court will determine if the parent was intentionally underemployed or unemployed. For instance, a party’s income will not be imputed for underemployment if it occurs due to circumstances outside of their control, such as a layoff, reduced hours, or termination without cause. However, it is possible, even in these situations, that prolonged unemployment or underemployment may be unreasonable and will require the court to impute their income. Also, even if a party voluntarily decides to make less money than before, it may not be considered underemployment if other factors are at play, such as the party’s age.

Second, the court will consider if there are any accepted reasons for why the party is earning less. For instance, they may need to give up some income opportunities to care for the child or their employment may be limited by educational or health needs.

Lastly, the court will consider if they should exercise the discretion to impute a party’s income. The court will consider all the circumstances to determine if underemployment was reasonable.

The court will consider the party’s age, education, experience, skills, and health to assess earning capacity. The court will also consider other factors, such as whether work was available, a relocation choice, and whether the party had other obligations to fulfill. It is up to the trial judge to weigh these different factors. 

There must be credible, convincing, and objective evidence for every stage. In particular, bare assertions are not sufficient. For instance, if the underemployment is due to health issues, the party must provide medical evidence covering the entire time period at issue. If a party alleges they are underemployed due to circumstances outside their control, they must show they made reasonable efforts to find other employment. They must provide evidence of their age, work history, education, technical skills, health, and labour market conditions to show that they should be subject to the lower earning capacity. Also, the evidence should be for all periods at issue.

Parents Obligated to Pay Child Support On Actual Income, Regardless of Lifestyle They Choose 

In the Angelova case, the father was found to be underemployed, and the court imputed his income to be higher than the amount reported on his tax returns. 

The father was the payor of child support for two matters from his first and second marriages. In both, he did not provide complete financial disclosure. In particular, he did not provide his full income tax returns for the three most recent years. He also did not provide much information on his work history, including when he travelled out of the country in 2018, which may have affected his income. He was also found to have not reported the rental income he received from a condominium that he owned since 2017. While the two mothers alleged that he may have kept some additional funds from the rental income, there was no evidence to support this. On the rental income, the court did not attribute additional funds towards the father’s income, which was left for trial.

The father was 51, with a commerce degree. He obtained a realtor license in 2015 and has worked on building up his career since then. He also worked in sales before becoming a realtor. Despite this, he appeared not to work very much after the first child of his marriage was born. The court found a case for imputing the father’s income, as he appeared to be underemployed and reported less income than what he could earn.

While the father claimed that he stayed home to care for the children, there was no evidence to explain why this would have prevented him from obtaining full-time employment over the past seven years. After separation, the children from his first marriage were in the mother’s care, and he had limited parenting time with the children.

Even with the child from his second marriage, there was no evidence to suggest that he could not work to take care of the child, especially because the child could attend daycare during the mother’s parenting time while she worked. 

There was also no evidence that the father was pursuing additional education that would prevent him from working full-time.

While he alleged that he faced mental health issues preventing him from working, such as PTSD from being falsely detained in Venezuela, there was insufficient evidence to support his claim.

Overall, he was imputed an additional $23,000 towards his income, based on what he would have likely earned in sales, based on his work history.

Mincher Koeman Lawyers Can Assist with Your Child Support Claims

Child support is the child’s right, and parents are obligated to provide full and accurate disclosure of their income to determine the appropriate amount. Suppose you suspect a party is deliberately underemployed to avoid these support obligations. In that case, you should speak with one of our family law lawyers at Mincher Koeman, who are experienced in assisting with child support and disclosure issues in family law proceedings. Our Calgary family law lawyers are dedicated to finding the best resolution for you after your divorce.

To book a consultation, please contact us online or by phone at 403-910-3000.