Investment Income and Colorado Child Support

If the parties to a divorce have one or more minor children, Colorado law generally requires their divorce decree or orders to include provisions for the payment of child support. If they cannot agree on child support terms, a judge must decide based on a series of factors set forth in the Colorado Revised Statutes. From time to time, disputes arise over whether certain types of income, particularly investment income, should be included in child support calculations. While the general rule is that investment income should be included in child support calculations, the Colorado Supreme Court has identified some situations in which this may not be the case.

“Investment income,” broadly speaking, refers to income received from something other than employment. Most investment income is “passive,” as opposed to wages, salaries, commissions, and other forms of “active” income. The legal definition of “gross income” for child support purposes, found in C.R.S. 14-10-115(5)(a), includes many forms of income ordinarily considered investment income, such as interest, trust income, annuities, royalty payments, capital gains, dividends, and certain types of pension or retirement payments.

Courts must take these types of investment income into account when determining child support. The Colorado Supreme Court reversed a lower court order in In re Marriage of Klein, 671 P.2d 1345 (Col. 1983), finding that the court failed to consider the father’s investment income when calculating child support. The mother had considerably fewer resources available to her than the father, and although the father’s “active” income was relatively low, he had regular income from passive sources.

Inheritance presents an interesting question: is it a form of income itself, or is it an asset that produces income? The Colorado Supreme Court considered the question of whether an inheritance should be counted towards a parent’s gross income for the purpose of modifying child support in In re Marriage of Armstrong, 831 P.22 501 (Col. 1992). After the father received an inheritance of $395,000, the mother sought to increase his child support obligation based on both the children’s increased needs and his increased ability to pay. The court ruled that the “one-time post-decree inheritance” should be counted as “gross income” for child support purposes, and that the trial court correctly included the amount of “income which the inheritance could be expected to generate” in its child support modification.

A decade later, the court’s ruling in In re A.M.D., 78 P.3d 741 (Col. 2003) modified this rule somewhat. The court held that the portion of an inheritance relied upon by a beneficiary for income during the year the inheritance was received counts as “gross income.” Any amount remaining the following year, however, becomes an income-generating asset, and that income should be included in child support calculations.

If you are currently involved in a divorce, or are considering filing for divorce, a knowledgeable and skilled Colorado child support attorney at Plog & Stein, P.C. can help you prepare the best possible case. Divorce is a complicated and difficult process, and we are committed to protecting our clients’ rights and helping them meet their obligations. To schedule an initial consultation with to discuss your case, contact us today online or at 303-781-0322.

More Blog Posts:

Denver Divorce and Hidden Assets, Denver Divorce Attorney Blog, December 8, 2014
Motion to Modify Child Support Asks for a Reduction in the Support Obligation, but Results in an Increase, Denver Divorce Attorney Blog, November 5, 2014
Colorado Child Support and Self-Employed Individuals, Denver Divorce Attorney Blog, October 17, 2014