Financial declarations with an eye toward the future

Just the past week I have closed a support modification case in which a party’s financial declaration understates that party’s projected future income and taken over another support modification case in which my client did not have the financial declarations the court used to approve his previous support agreement.  These are not uncommon experiences but they reflect a failure to comprehend the importance of old financial declarations to support modification cases.

In analyzing whether there has been a change of circumstance to give rise to support modification the family court needs to know what the circumstances were at the time of the previous final order.  The court will first look to the previous final order–which includes any court-approved agreement–to see if that order set the parties’ incomes and expenses for support purposes. If the order is silent the court will next look to the last financial declaration filed prior to the previous final order.  Absent any such financial declaration, it will be up to the plaintiff in any support modification action to try to reconstruct, and prove, what the circumstances were at the time of the previous final order.

When one resolves a support case one needs to be mindful of the financial declaration that is being used to resolve support.  If that financial declaration is inaccurate the court will still rely upon it in any subsequent modification case in deciding whether there has been a changed circumstance.  If that financial declaration is accurate, but the parties resolved support with reliance upon different income or expense figures, one needs to make sure that the order or agreement reflects the figures being used in coming up with the agreed-upon support figure.  For example, I have occasionally agreed to child support based upon a client’s imputed income that is higher than the client’s actual income.  Even though my client’s financial declaration is accurate, the agreement or order needs to reflect the income figure being used to set support.  Fail to do this and the court will look to the client’s old financial declaration when determining whether a change of circumstance exists and, if the client merely matches the income that was imputed when support was set, that client may find his or her support obligation increasing–even though the “changed circumstance” wasn’t really a change.

With clients seeking support modification, it is vital to review the previously filed financial declarations if the previous final order is silent on the income and expense figures that were used to justify support.  If a client’s then-contemporaneous income figures do not match the income listed in the client’s financial declaration, the court will look to the financial declaration and not the then-contemporaneous income figures to determine whether a change of circumstance has occurred.  I have seen many support modification cases fail or become inordinately difficult because the financial declarations that were filed at the time of an agreement’s approval were not accurate.

Finally, given this understanding, it is important to carefully review the financial declarations that a party presents to the court at the final hearing to approve an agreement.  Counsel needs to ensure that the new financial declaration accurately reflects the figures used in negotiating the agreement.  Otherwise in any subsequent modification case the court will look to that newly filed financial declaration, rather than previous financial declarations, in determining whether a change of circumstance has occurred.

On one occasion in my career the opposing party came to court with a financial declaration that listed a much lower day care expense than that party had claimed when we reached an agreement on child support.  In hindsight, it was a mistake to go forward with the approval of the agreement and I should have either recessed the hearing to recalculate child support or reached an agreement that the final order approving that agreement would reflect the day care figure that was used to set child support.  In allowing this agreement to be approved without either of these changes, I made it unjustly harder for my client to reduce child support if the day care expense dropped further.

When counseling a client on bringing a support modification case, it is not enough to have the previous final order.  Without the previous financial declarations one cannot competently advise one’s client on whether circumstances have changed.  Further, when one prepares for a final hearing to approve an agreement, one should make sure that the client’s financial declaration does not need updating to ensure that if a modification case is brought–by either party–the court will be able to accurately determine what circumstances have changed.

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