Home‎ > ‎

Recent publication by Israel Wahrman on Utilizing 'Perks" in Calculating Spousal and Child Support

In Calculating Alimony and Child

Support—Don’t Forget the ‘Perks’

by Israel S. Wahrman

Everyone knows that a party’s

income is used when calculating

alimony and child support,

but what is sometimes

overlooked when applying a party’s

income is the ‘perks’ such as the

company car, the employer’s contribution

to the party’s health insurance,

cell phone contribution by

the company, free meals, gas/tolls/

mileage, sports/theater tickets, gym

membership, and car service, just to

name a few. When determining how

much the obligor must pay to the

obligee in calculating child support

and/or alimony, the definition of

“income” must be expanded

beyond the party’s base salary. New

Jersey law requires that income

include fringe benefits, or

perquisites (perks). In many cases,

fringe benefits are overlooked or

ignored by attorneys, even though

they may represent a substantial

percentage of the obligor’s or obligee’s

remuneration. Perquisites,

therefore, are important in determining

both alimony and child support,

and these perks are relevant

not just for determining the income

of the obligor, but for determining

the income of the obligee as well.

In determining the appropriate

amount of alimony to be applied,

N.J.S.A. 2A:34-23 lists 13 factors to

be considered. Among these factors

is “the actual need and ability of the

parties to pay” (factor 1). In determining

the appropriate amount of

child support to be applied, the

New Jersey Court Rules1 list many

sources of income, including “the

value of in-kind benefits.” The rule

defines “in-kind income” as the “fair

market value of goods, services, or

benefits received in lieu of

wages...if they reduce personal living

expenses of the recipient

regardless of whether they are

derived from an employer, selfemployment,

or the operation of a

business.” The rule provides the following

examples: “vehicles, automobile

insurance, free housing, meals,

benefits selected under a cafeteria

plan, memberships, or vacations.”

Case law in New Jersey, and in

other states, has supported the use

of fringe benefits in calculating

alimony and child support. In fact,

the official Child Support Guidelines

computer program, used by all

law clerks in the family part

throughout New Jersey, includes a

space to enter the value of in-kind

income, a space generally left blank

by attorneys.

The Appellate Division, in Monte

v. Monte,2 has concluded that the

“general considerations in determining

alimony and support are the

dependent spouse’s needs, the

dependent spouse’s ability to contribute

fulfillment of those needs,

and the supporting spouse’s ability

to maintain the dependent spouse

at the former standard.”

In Grayer v. Grayer,3 the court

considered fringe benefits relevant

to both the alimony and child support

determination. The trial court

in Grayer4 considered the following

fringe benefits: “use of an automobile

and the total cost of maintaining

and operating it, substantial

entertainment paid by the corporation,

including season tickets for

professional football team, and payment

by the corporation of all medical

expenses and life insurance

protection.” In addition, the trial

court considered expensive vacations

paid by the employer, as well

as “the availability to the parties

during the time they lived together

of substantial amounts of additional

cash...[beyond which the] income

tax figures would suggest.” The

Appellate Division made no determination

regarding whether the

fringe benefits reviewed by the trial

court, and ultimately added back to

that party’s “income,” were appropriate.

Instead, the Appellate Division

simply remanded the case

back to the trial judge, instructing

the judge to “express findings as to

the parties’ respective needs and

reasonable financial expectations.”

 

In determining what fringe benefits

should appropriately be considered

as an add-back to a party’s

income, Gary N. Skoloff and Laurence

J. Cutler, in New Jersey Family

Law and Practice, state that

fringe benefits “may to some degree

be considered as part of the payor’s

disposable income.”5 They give as

examples the use and maintenance

of an automobile, travel and entertainment

expenses. Nevertheless,

Skoloff and Cutler state that “the

replacement value of the more

usual benefits such as medical or

life insurance, are not usually imputed

to the payor’s income.”6 However,

they do not provide case law,

statutes or other evidence to support

this statement. Some cases

have stated that the employer’s contribution

toward a party’s medical

and life insurance is a relevant

fringe benefit to be added back to

one’s income when determining

support.

Fringe benefits can make a significant

difference in determining

the marital lifestyle. In Steneken v.

Steneken,7 the Appellate Division

stated that actual income plus

perquisites “funded the upper middle-

class lifestyle enjoyed by the

parties throughout their marriage.”

The Steneken court cited Crews v.

Crews,8 in which the New Jersey

Supreme Court stated that “the marital

standard of living is the measure

for assessing the initial awards of

alimony, as well as for reviewing any

motion to modify such awards.”

In Kulakowski v. Kulakowski,9

the wife sought alimony from her

husband. The husband’s base

income was $49,500 gross when

the complaint for divorce was filed,

and his annual salary was increased

to $52,000 during the litigation.

However, after adding back the husband’s

‘perks’ to his income, such as

guaranteed minimum annual bonus;

his company vehicle, which was

maintained by the company; and a

monthly expense account, the court

concluded the husband’s total

income exceeded $90,000 for determining

alimony and child support.

The Appellate Division court

looked at “reported or unreported”

additional income earned by a medical

doctor for treating certain

patients, and “perquisites received

from his medical practice” in

Christopher v. Christopher..10 In

Valente v. Valente,111 business

perquisites, including membership

in a country club and tennis club,

were considered in determining the

nature of the “high end and enviable

marital lifestyle.” In Casole v.

Casole,12 the court noted that “if

necessary, a hearing should be conducted

concerning defendant’s

actual income [and] the value of

perquisites and benefits...” In

Casole, adding business reimbursements

to the party’s income had the

effect of raising income from

$150,000 to $200,000.13 In Jones v.

Duch,14 perquisites added $23,592

back to a party’s income.

The Appellate Division included

“a Jeep, gasoline expenses for the

Jeep and plaintiff’s Honda, a clothing

allowance, cell phones, and insurance

for the Jeep” as business

perquisites in Stille v. Stille.15 Interestingly,

the court also factored in

money provided to the parties by

family members. The Appellate Division

stated, “given the family’s history

of providing financial assistance

to the parties, the judge could reasonably

conclude that the family

continued to make additional

monies available to defendant to

meet the parties’ marital expenses.”16

In Horowitz v. Horowitz,17 the

Appellate Division relied upon the

view of the lower court that distinguished

between that which is

deductible for income tax purposes

and that which is available for the

purpose of calculating alimony

obligations. With regard to alimony,

the court opined:

It is a general rule that income and

expense from the operation of a business

should be carefully reviewed to

determine adjusted gross earned

income to pay alimony. Specifically

excluded from ordinary and necessary

expenses for support purposes

would be (1) home office; (2) travel;

(3) automobile; and (4) any other

business expenses the court finds to

be inappropriate for determining

gross income for support purposes.18

In a 2005 case, the Appellate Division

also included severance pay in

calculating income, and stated that

severance pay “may not be distributable,

but can be used to measure a

parent’s ability to pay support...”19

Case law in other states similarly

allow for including fringe benefits in

calculating income to determine

alimony and child support.20

As set forth in Horowitz,21 it is

not enough to say that a specific

perk must be added back to determine

the family’s income. Rather, an

inquiry is needed to determine

whether, in each case, the perquisite

contributes to the available income

and affects the family’s lifestyle, as

opposed to an alleged perk that is

really just a part of the business

activity, and therefore should not be

included in calculating the family

income.

As Skoloff and Cutler22 noted,

automobile travel and entertainment

expenses would appear to

qualify. It would appear that club

memberships, clothing allowances,

cell phones, support from one’s

family, as well as many other

perquisites that can contribute to

the overall family lifestyle qualify as

perks to be added back to one’s

income for determining support.

In Re the Marriage of

Churchill,23 the Iowa appellate court

utilized the Black’s Law Dictionary

definition of fringe benefits, which

included insurance. The court therefore

reasoned that the employer’s

contribution to health insurance did

constitute a fringe benefit. With

regard to the cost of medical insurance

and life insurance, and whether

they should be considered perks in

New Jersey, although the court in

Grayor considered them perks, the

Appellate Division did not make a

bright-line determination that they

should be considered automatic

perks that are added back to

31 NJFL 56

56

increase one’s income.

On the other hand, Appendix IXB

of the New Jersey Court Rules24

provides that “in-kind income”

should be included as gross

income. Appendix IX-B does not

specifically list the employer’s contribution

to medical or life insurance.

However, one can reasonably

argue that this cost should be considered

in-kind income, and thus

should be added back as a perk. It

remains to be seen if New Jersey

courts will uphold the employer’s

payment of health insurance premiums

on behalf of an employee as a

perk to be added back to income

when calculating alimony and child

support.

Many attorneys ignore fringe

benefits when calculating a party’s

income for the purpose of determining

alimony and/or child support.

Whether at attorney represents

the party seeking support or

the party from whom funds are

sought, he or she should not overlook

fringe benefits. Statutes, rules

and case law are consistent, in New

Jersey and around the country, that

fringe benefits are fair game when

determining a party’s income. While

in some cases the effect of the

fringe benefits may minimally affect

that party’s income, there is no

doubt that in some cases the value

of fringe benefits may be quite substantial.

It is possible that, as attorneys

pay greater attention to adding

fringe benefits to a party’s income

for support purposes, this may

become yet another area of potential

contention among the family

law attorneys and judges. There may

be disputes regarding the value of a

particular fringe benefit and

whether a particular expense

should even be considered a fringe

benefit at all. Nevertheless, as advocates

for our clients, attorneys must

examine and utilize fringe benefits

in calculating income for determining

support, as their inclusion could

make a meaningful and significant

difference in the amount of alimony

and child support owed. Fringe

benefits should, therefore, not be

ignored. 􀀀

ENDNOTES

1. Pressler, Current N.J. Court

Rules, Appendix IX-B (2010).

2. Monte v. Monte, 212 N.J. Super.

557 (App. Div. 1986).

3. Grayer v. Grayer, 147 N.J.

Super. 513, 517-518 (App. Div.

1977).

4. Id.

5. Gary N. Skoloff and Laurence J.

Cutler, New Jersey Family Law

and Practice (13th ed. 2008),

5:103.

6. Id.

7. Steneken v. Steneken, 367 N.J.

Super. 427, 421 (App. Div.

2004).

8. Crews v. Crews, 164 N.J. 11

(2000).

9. Kulakowski v. Kulakowski,

191 N.J. Super. 609, 612 (Ch.

Div. 1982).

10. Christopher v. Christopher,

2009 N.J. Super. Unpub. LEXIS

1761 (App. Div. 2009).

11. Valente v. Valente, 2009 N.J.

Super. Unpub. LEXIS 331 (App.

Div. 2009).

12. Casole v. Casole, 2008 N.J.

Super. Unpub. LEXIS 2585, 1.

13. See Id.

14. Jones v. Duch, 2007 N.J. Super.

Unpub. LEXIS 204 (App. Div.

2007).

15. Stille v. Stille, 2007 N.J. Super.

Unpub. LEXIS 641, 6-7 (App.

Div. 2007).

16. Id.

17. Horowitz v. Horowitz, 2005

N.J. Super. Unpub. LEXIS 242

(App. Div. 2005).

18. Id.

19. Robertson v. Robertson, 381

N.J. Super. 199, 209 (App. Div.

2005).

20. See Curtis v. Curtis, 1998 Conn.

Super. LEXIS 3019, 1-2 (Conn.

Super. Ct. 1998) (the court

included certain fringe benefits

when determining income for

the purpose of calculating

child support and alimony); see

Bassett v. Bassett, 459 So.2d

473, 475 (Fla. 2ND ca 1984) (in

determining alimony, the court

considered the fact that the

husband’s employer provided

him with an automobile,

expense account, and other

fringe benefits); see Re Marriage

of Patterson, 2007 Iowa.

App. LEXIS 98, 23-24 (Iowa Ct.

App. 2007) (the district court’s

reduction of wife’s alimony

was upheld, noting that the

wife received income plus “substantial

fringe benefits”).

21. See Horowitz, 2005 N.J. Super.

Unpub. LEXIS 242.

22. See Gary N. Skoloff and Laurence

J. Cutler, New Jersey Family

Law and Practice (13th ed.

2008), 5:103.

23. Re the Marriage of Churchill,

2002 Iowa. App. LEXIS 7, 8-9

(Iowa. Ct. App. 2002).

24. Pressler, Current N.J. Court

Rules, Appendix IX-B at page

2409 (2010).

 

Israel S. Wahrman is of counsel

in the Law Offices of Dale Krouse,

in Hackensack.

 

Comments