Is Income from a Trust Fund Used in Calculating Spousal or Child Support?

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Under New York law, spousal support and child support are determined based on a statutory formula that looks at the income of both parties. When one party has a trust fund, an issue that can arise is whether the income from the trust can be used in calculating spousal or child support. The answer to this question depends on various factors.

Generally, when determining support, income is defined as gross total income as reported in the spouse’s Federal income tax return. However, trust income may not be included in the calculation of support in certain situations such as when the trust itself pays the tax liability arising from the income that flows to the beneficiary. 

For spousal support, if the trust income was used during the marriage to pay marital expenses or deposited into a joint account, then it is likely to be included when calculating spousal support. However, if the trust income was always put into a separate account and not used to support the marriage, then a court may very well decide not to include such income when calculating spousal support. 

One also needs to consider the language contained in the spousal support statute. Under  these guidelines, where the payor’s income is $192,000 or less (2021 income cap) as reported on his or her last filed Federal tax return, the amount of support is, as a matter of law, a set percentage of that income. However, for income over the income cap, the court has the discretion to award additional spousal support based on various factors. When trust income was kept separate during the marriage, the court may very well not include it as part of the income calculation in determining spousal support. The rationale for this is that the recipient spouse never benefitted from the trust income during the marriage, so it is difficult to argue that the recipient should now be entitled to a share of that money after the marriage has ended. 

For child support, the rules are similar but with a twist. As with spousal support, if the trust income was used during the marriage to support the child, then it is used in calculating child support. However, where the trust income was always deposited in a separate account and not used to benefit the child, the court considers the child support income cap in how it treats trust income.

Under child support guidelines, a strict formula is used to calculate support where the payor’s income is $154,000 or less (2021 income cap). Thus, if trust income is part of the $154,000cap, as reported on his or her last filed Federal tax return, it will be included in the child support calculation. For trust income to be included over that amount, the court will look to keep the child(ren) to the same standard of living they would have been in but for the parties’ decision to live separate and apart. As a result, the court may count the trust income as part of the child support calculation if it is necessary to maintain the child’s current standard of living. That is true even though the trust income may not have been used to provide for the child during the marriage.

If you or your spouse have trust income, make sure your attorney understands how it has been used during the marriage. Financial issues are often complicated and contentious but an experienced attorney can help achieve a favorable result. Contact Jewell Law for assistance with your divorce.  

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