Inheritance and Trust Income In Colorado Springs Child Support

Are you involved in a divorce or child custody case involving child support? (The Colorado statutory tiles for these are dissolution of marriage and allocation of parental responsibilities). An experienced Colorado Springs divorce and child custody lawyer can guide you through the legal process and assist you in exploring your options. You have one bite at the apple in the court system so make it count.

Income is broadly defined for purposes of child support. C.R.S. § 14-10-114(8)(c)(I) and C.R.S § 14-10-115(5)(a)(I). The most common type of income is W-2 income; however, many people have other sources of income or are self-employed. Examples of other types of income are:

• in-kind income from employers
• capital gains, interest, and dividends
• self-employment income
• educational grants or loans for living expenses
• retirement income
• rental income
• regular gifts and bonus income

Funds from an inheritance used to meet living expenses, increase the recipient's standard of living, or generate income can be considered income for support purposes. However, the court must evaluate the specific use of the inheritance and its potential to generate income when making this determination.

The principal of an inheritance may be included in gross income if it is used to meet living expenses or to increase the recipient's standard of living. For example, “Last, the supreme court in In re A.M.D., 78 P.3d 741, 745 (Colo. 2003), discussed whether all or only a portion of the principal of a monetary inheritance should be included in gross income for child support purposes. The A.M.D. court directed the district court to examine the recipient's use of the inheritance to determine how much should be included as income for child support.” In re Parental Responsibilities Concerning N.J.C., 467 .3d 1209, 1213, (Colo. App. 2019). Furthermore, “To the extent that the beneficiary relies on a monetary inheritance as a source of income, the inheritance should be included in the gross income in that year. To the extent, however, that the beneficiary does not expend or use the inheritance, it should be treated as an income producing asset and the interest it generates should be included in gross income. Interest may be imputed if necessary.” Casteel v. Davidson, 78 P.3d 741, 742 (Colo. 2003). Any interest or income generated from the inheritance, such as dividends or other returns, is explicitly included in gross income for support purposes. Id. at 743.

If the principal of the inheritance is not adequately invested to earn a reasonable rate of return, the court may impute income based on what the inheritance could reasonably generate. For example, “We also remand the issue of how much interest to include in gross income. The trial court erred in basing imputed interest on the $ 47,379 in the IRA. Upon remand, the trial court should include the actual income earned on the father's trust account in his 1999 gross income so long as the funds are adequately invested to yield a reasonable rate of return. If the trial court decides to impute interest instead, the amount should be based on the father's total monetary assets for that year, not just the value of the IRA. As the trial court recognized, the father's income for child support purposes is likely to fluctuate from year to year. For that reason, the court required the father to provide annual financial records to the mother. We agree with that order and direct the trial court to make future child support calculations consistent with the principles discussed in this opinion.” Id. at 746-747.

A highly knowledgeable and experienced Colorado Springs divorce and child custody lawyer can guide you through Colorado Springs divorce and child custody matters by negotiating, mediating and litigating on your behalf. You can focus on moving to a better future instead of spending your time attempting to navigate complex legal rules and procedures.

Sabra Janko from Janko Family Law has more than 20 years of legal experience and has written “the book” on Colorado divorce and family law – “Colorado Family Law With Forms”, published by LexisNexis, which you can find at https://store.lexisnexis.com/products/colorado-family-law-with-forms-skuSKU02903. Contact us at 719-344-5523 or complete our online scheduling request for a free 30-minute informational consultation. We also offer paid advice sessions for a more in-depth analysis of your case.