Understanding the difference between income and earning potential in a California divorce

Understanding the difference between income and earning potential in a California divorce

California courts consider a number of factors when determining the amount of spousal support (alimony) one spouse may be ordered to pay the other as they divorce. Among them is not just the income of each person, but their earning potential (or earning capacity). This is also sometimes called “imputed income.” That means not only how much they currently earn, but how much they reasonably have the potential to earn. This calculation is determined based on their profession, experience, skills, education and the job market.

A spouse seeking support may need time to increase their earning potential enough to be self-sufficient. That may be particularly true if they’ve put their career on the back burner over the years to raise kids or move with their spouse who needed to relocate for a promotion or job opportunity they couldn’t turn down, etc.

What if someone intentionally remains underemployed?

Earning potential is something that isn’t just considered when spousal support is first being ordered. It may come under scrutiny if one party appears to be intentionally remaining below their earning potential – or underemployed. This is also referred to as “sandbagging.”

Sometimes it is a person who’s receiving support who remains underemployed so they can continue to get alimony. In many cases, however, it’s a paying former spouse who may choose underemployment just so they can lower or end their alimony payments. This is too often done simply out of spite to hurt their ex. An offender may have assets hidden somewhere that can allow them to live a comfortable lifestyle despite decreasing their income.

An obvious example might be a successful doctor who leaves their practice or hospital position to become a biology teacher or work at a free clinic. While these are both respectable jobs, if they have an ex-spouse relying on a certain amount of alimony, such a move can and should be cause for court intervention.

Note that people have been known to intentionally remain underemployed to lessen their child support payments as well. That’s looked on particularly harshly by California family courts. If someone believes that their support payments are too high, they should make that case to the court rather than take a passive-aggressive action like intentionally lowering their income.

Whichever side of the support equation someone is on, if the other party seems to be intentionally remaining underemployed or unemployed and far below their earning potential, the other can and should get legal guidance to help ensure that their financial well-being is protected.