Originally Posted by gsherw1215
In 1990 the California Court of Appeal in Marriage of Ostler and Smith1 upheld a trial
court that, rather than setting a fixed monthly amount of child support, ordered a base monthly amount of child support plus a flat percentage of the payor's bonus income. In the years following Ostler and Smith, ordering a percentage of future variable income as additional support became a commonly used tool for family law attorneys and judges to deal with cash bonuses and other types of compensation including stock options, restricted stock and Employee Stock Ownership Plans.
It is easy to see why --- “Ostler/Smith orders” eliminate the risk that a payor will be
ordered to pay child support on income the payor may never receive. Such orders also insure that the children receive a share of the variable income if it is, in fact, received by the payor.
The method also reduces the need to have successive modification proceedings due to fluctuations in a payor's income.
The California Court of Appeal decided Ostler and Smith under the then existing discretionary child support guidelines, not the mandatory formula now codified in Family Code section 4055, et seq. Only recently has a case addressed the Ostler/Smith issue in conjunction with the current mandatory child support guideline. In June 2000, the Court of Appeal in In Marriage of Hall held that flat percentage orders of “bonus” income could never be consistent with the child support guidelines. The Hall court observed that the child support formula set forth in Family Code section 4055 does not allow for inconsistent considerations of the parties'income:
The child support guideline does not] admit one parent's income to be a fluctuating variable while the other parent's income is assumed to be static. The formula is always predicated on knowing what both parent's income is in nominal static dollars at the time the order is made. The formula is incompatible with simple flat percentage figures, if
only because the percentage of the combined parental income allocated to support varies with nominal dollar amount of the total net disposable income per month... In a word, the order made by the trial judge here, in which the order fluctuates as a percentage of only one parent's income, is a result that differs from the formula guidelines on its face.
The Hall Decision Is Not the End of Percentage Orders as Additional Child Support.
1) A calculation as to what the guideline support should be. The court may use past income history based on pay-stubs, tax returns , etc. to calculate the child support. The computer-generated printout of the guideline calculation should be part of the court's findings.
2) A finding that the support differs from the guideline formula because the guideline amount would be unjust or inappropriate. It is advisable to suggest the following language: “Because of the compensation scheme of the payor, past income history may not be indicative of future income and would therefore be unjust or inappropriate. Accordingly, a deviation from the guidelines pursuant to Family Code section 4064 for 'seasonal or fluctuating income' is appropriate.”
3) An explanation of how this “deviation” is consistent with the best interest of the child. A reference to the principles behind the child support guidelines is helpful in this regard because, ironically, by deviating from the guideline for the Oster/Smith order, the court is actually upholding the principles set forth in Family Code section 4053. One of the principles is that “the guideline seeks to encourage fair and efficient settlements of conflicts between parents and seeks to minimize the need for litigation.” None of the principles set forth in section 4053 are violated by making an Ostler/Smith order. '' Source:Joseph P. Crawford , certified as a Family Law Specialist by the State Bar of California Stacey Jones , a litigation consultant, specializing in Family Law and General Litigation matters.