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Appeals Court Emphasizes Importance of Accurate Income Reporting in Probate and Family Court

In many Family Law matters, there is a calculation of alimony and/or child support. A major component of such calculations is the respective income of each party. Therefore, it is imperative that one's income be accurately determined and reported to the Court. It is important that litigants in Family and Probate cases, through their counsel, engage in appropriate discovery to authenticate or discredit income of an opposing party.

The Appeals Court recently held that a corporate loan to a shareholder shall be considered as income, and not a loan, for the purposes of calculating income. In McNamara v. McNamara, the Appeals Court attributed loans to the husband from his corporation as income to the Husband. The Husband asserted that the approximately $500,000.00 loan was to be repaid to the corporation with one percent interest, and therefore should not be included in his annual income. The evidence at trial, however, suggested that the Husband had "very significant control" over the corporation, as he was the sole officer and majority shareholder. It was also established at trial the Husband used this corporate loan for personal expenses. The amount of this loan essentially doubled the Husband's income, thus creating a "substantial discrepancy" between the lifestyles of the parties.

The Husband's income allowed him to provide the children with cars, trips, expensive clothing and accessories, vacations, jewelry, football tickets and any other things that the children desired. The trial Judge found that this was a result of the $80,000.00 per month in "gross economic benefit that he receives from [the corporation]." The Judge further found that the Husband used his corporation income to pay for "substantial luxuries." Meanwhile, the Wife endured a tremendous amount of difficulty in maintaining the family home. She demonstrated her efforts to mitigate such financial difficulties including obtaining employment, and downsizing to maintain a stable home for the children.

The Child Support Guidelines define income as "gross income from whatever source." Such sources are to include income derived from businesses/partnerships and prerequires or in-kind compensation to the extent that they represent a regular source of income. The Guidelines and the relevant caselaw give a great deal of flexibility and judicial discretion to the manner in which "income" is determined.

In McNamara, it appears that because the Husband used the corporate loan for lavish personal expenses, and had primary control over the corporation, such funds were attributed to the calculation of his income. Further, the Judge found that the Husband's financial statements were misleading, false and incomplete, and deemed his credibility as unreliable with respect to his finances. As a result, the Court ordered a modification to the parties' separation agreement, ordering the Husband to pay the Wife $5,000.00 per month in child support (in addition to the $6,000.00 he was ordered to pay in alimony as part of the parties' original judgment of divorce). The Appeals Court affirmed this order.

In matters relating to alimony and/or child support, the accurate calculation of one's income and a true statement of one's finances are of the utmost importance. Income calculations are a predominant factor upon which orders of alimony and child support are based. Challenges to income and expenses, as in McNamara, have the potential to either boost or undermine one's credibility with the Court and, in turn, affect the overall outcome of a case. If you or someone you know is facing such income-related issues in the Probate and Family Court, it is important to have an experienced Massachusetts family law attorney who understands the complexities of this area of law and can assist in navigating through the process. The attorneys at Roncone Law Offices, P.C. have extensive experience representing parties with in the Probate and Family Court in Worcester County and throughout Massachusetts.

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