What Are “Variable Costs?”

December 8, 2015 Parenting & Kids, Property, Debt, & Finances

I deal with a number of disputes over “variable costs.” It seems that a number of litigants do not understand what variable expenses are, when they come into play and how each party is to be held responsible for such costs. If there is a traditional placement arrangement of children, where one parent has primary placement, defined as 75% of the time or more (counted as overnights) and the other parent has 25%, the non-placement parent pays the full amount of child support, 17% of gross for 1 child, 25% for 2 children, 29% for 3 children. Under that circumstance, variable costs is not an issue. Where it comes into play, is arrangements where the parties have shared or equal placement of the children.

“Variable cots” is defined under DCF 150.02  (29) as “the reasonable costs above basic support costs incurred by or on behalf of a child, including, but not limited to, the cost of child care, tuition, a child’s special needs, and other activities that involve substantial cost.” Under DCF 150.04 (2) 6, “In addition to the child support obligation determined under subd. 5., the court shall assign responsibility for payment of the child’s variable costs in proportion to each parent’s share of physical placement, with due consideration to a disparity in the parent’s incomes. The court shall direct the manner of payment of a variable cost order to be either between the parents or from a parent to a third-party service provider. The court shall not direct payment of variable costs to be made to the department or the department’s designee, except as incorporated in the fixed sum or percentage expressed child support order.”

The court also has authority to dispense with ordering payment for “variable costs” where there is ongoing dissension between the parties and to avoid future litigation, Rumpff v. Rumpff. 276 Wis. 2d 606, 688 N.W. 2d 699 (court of appeals 2004).

What does all of this mean?

1. “Variable costs” does not apply if one parent has primary placement and the non-custodial parent is paying the full percentage under the law for child support.

2.”Variable costs” will be applied in shared or equal placement arrangements. This means that the other parent has the children anywhere from 26% to 50% of the time, counted as overnights.

3. When variable costs do apply, they are the costs are designed to cover expenses beyond what child support traditionally covers, and that is housing, food and clothing. Variable costs covers  such necessary items for children as child care expenses, tuition and other activities that involve substantial cost.

4. When variable costs do apply, there is specific formula for the calculation, similar to the shared-equal placement child support formula. The formula considers what each parties’ income is, the percentage of time both parents have the children, and allows a pro-rata calculation to calculate the contribution. You cannot assume it is or should always be 50/50.

5. Either the parties need to agree on a reconciliation on a periodic basis as to how those expenses get paid for, or the court will enter an order on the same, including whether payment is made between the parties, or directly to a third party provider, such as a day care center.

6. The court has authority to refrain from entering an order on variable expenses, if the parties show there is dissension between them and it is impossible to work with one another on agreeing what activities should be paid for, the amount, and how each of the parties should be reimbursed for the costs.

7. It is best to carefully spell out in your marital settlement agreement when “variable costs” do apply, as to what activities and costs are to be paid for, having both a top end payment and a low end payment and how those expenses must be agreed upon. Further, the agreement should be specific as to payment, either between the parties or to a third party provider, including providing proof of payment by receipts. I suggest to my clients that there be a quarterly reconciliation, with the understanding, that may not work for everyone.

If you have questions about child support, or variable costs, contact one of our attorneys.

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