Family support is a hybrid of child support and maintenance combined together. It allows the person who is paying to deduct the payments, assuming all the requirements of sec. IRC 71 and 215 are met, and requires the payee to report the payments as taxable income.
Child support is non taxable-non deductible. Maintenance (spousal support payments), again, if all the IRC 71 and 215 section requirements are met, are taxable income, and tax deductible to the payer. Family support combines the two into a hybrid and can be a useful tool where the payer is in high income tax bracket and can use the tax break and the recipient of the payments is in a much lower tax bracket, where reporting the support payments as income will not create a financial hardship on the person.
It must meet all the I.R.S. code requirements; (a) it must be in writing and pursuant to a court order (b) the parties cannot be members of the same household (c) payments must terminate upon the death of the payee spouse (d) the payments cannot terminate or be modified upon an event dealing with the children (e) payments must be in cash (includes check or money orders), (f) payments cannot be designated as non taxable (self evident),
The statutory provision in Wisconsin for family support payments under the family code is sec. 767.531 and reads as follows:
767.531 Family support. “The court may make a financial order designated ‘family support’ as a substitute for child support orders under s. 767.511 and maintenance payment orders under s. 767.56. Subject to s. 767.511 (6m), a party ordered to pay family support under this section shall pay simple interest at the rate of 1% per month on any amount in arrears that is equal to or greater than the amount of child support due in one month. Subject to s. 767.511 (6m), if the party no longer has a current obligation to pay child support, interest at the rate of 1% per month shall accrue on the total amount of child support in arrears, if any. Interest under this section in lieu of interest computed under s. 807.01 (4), 814.04, or 815.05 (8) and is paid to the department or its designee under s. 767.57. Except as provided in s. 767.57 (1m), the department or its designee shall apply all payments received for family support as follows:
(1) First, to payment of family support due within the calendar month during which the payment is received.
(2) Second, to payment of unpaid family support due before the payment is received.
(3) Third, to payment of interest accruing on unpaid family support.”
In the case of Vlies v. Brookman, 2005 WI App 158, 258 Wis. 2d 411, the court had this to say, when trial judges wish to enter a family support order:
“The circuit court must separately calculate child support and maintenance as a condition precedent to calculating family support. If the court applies the percentage guidelines when setting child support, it must set family support at an amount that results in a net payment, after state and federal taxes are paid, of no less than the child support as calculated under the guidelines. Even if a court makes detailed findings as to all of the factors for family support, the court erroneously exercises its discretion if it neglects to provide a rational explanation of how its findings lead to the support award.”
If you think family support is a viable option in your divorce case, and you have additional questions about how it works, please feel to contact one of our experienced family attorneys at Karp & Iancu,S.C.
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Milwaukee, WI 53226
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