Inevitably the most frequently asked question in a case involving child support is: What if the payor doesn’t make a payment? Non-payment may result from any number of reasons ranging from loss of employment to apathy to malicious non-compliance. More often than not, child support is paid and paid in a timely manner. The state has an agency that is set up to collect and monitor child support and if a payor doesn’t pay, that agency will initiate an enforcement action.
There are other options if there is a reason to believe that child support may not be paid in the future. In a divorce “the court may make such order as to the alimony or maintenance of the parties, and also as to the care, custody, education and maintenance of the children, …. as the circumstances of the parties and the nature of the case shall render fit, reasonable and just, and require reasonable security for the due observance of such orders, including, but not limited to, the creation of trusts or other security devices, to assure payment of reasonably foreseeable medical and educational expenses. Upon neglect or refusal to give such reasonable security, as shall be required, or upon default in complying with any such order, the court may award and issue process for the immediate sequestration of the personal estate, …. N.J.S.A. 2A:34-23.
What all that legalese says is that the court has the power to order money to be set aside to pay for the future support of children.
When you couple that authority with the court’s broad authority to distribute assets in a divorce, the result may be setting aside assets for the benefit of the children, rather than simply handing them over to the parents. The family courts have broad discretionary authority to equitably distribute marital property. This involves a process where the court identifies the property that each spouse is entitled to receive, fixes the value of the property, and then allocates the amount due between the spouses. There are 16 factors that the court must consider. The court can order property to be transferred from one spouse to the other or liquidate assets into cash. The power of the court is quite broad. Plus, the parties can agree to do basically whatever they want and the court will allow it.
If a case is presented to a judge at trial, the judge may order the creation of a trust for the children to pay for future expenses, including but not limited to: child support; unreimbursed medical expenses; college or other educational expenses; extracurricular activities. In the case of Jacobitti v. Jacobitti, 135 N.J. 571 (1994), the court recognized that Family Part judges have the authority to create trusts to secure and obligor’s future support payments. In Sauro v. Sauro, 425 N.J.Super. 555 (App.Div.2012) the court ordered the creation of an education trust fund for the parties’ children noting the parties’ dire financial situation and the extreme penchant for litigation that resulted in hundreds of thousands of dollars being spent on divorce litigation.
In addition to the statutory authority, the establishment of a trust is also support by and consistent with the family court’s parens patriae obligation, which authorizes the court to intervene when necessary to prevent harm to the child. The courts must be guided exclusively by the best interest of the children. The court’s power must be used to moderate the financial disruption caused by the dissolution of a marriage and division of marital assets. When the adults in the controversy are unable or unwilling to act in the best interests of their own children, the court must be free to act. The establishment of a judicially crafted trust is simply another creative remedy in the court’s equitable arsenal.
In reality, most cases do not proceed to a trial where the judge is going to be making this determination. You can still create a child support trust by way of agreement. More often than not, extreme circumstances will apply to cases where a child support trust is contemplated. A few examples are warranted:
- During the divorce Parent 1 is obligated to pay child support. Parent 1 does not make any payments after the order is entered. There are substantial arrears at the end of the case. There is a house jointly owned by Parent 1 and Parent 2. Parent 1’s proceeds would be used to pay arrears and the balance placed in trust to secure future payments.
- Parent 1 is at or near retirement age and plans to stop working. Parent 1 has health issues and it is unlikely that Parent 1 can obtain life insurance. Parties agree to place funds in trust to secure future support obligations.
- Parent 1 has engaged in bad conduct during the divorce, such as kidnapping a child, depleting or dissipating assets, moving assets outside of the United States, or abuse of spouse or children resulting in criminal charges.
As you can see these are extreme situations and not merely a passing threat by the payor that he or she isn’t going to pay.
On the other end of the spectrum, in high asset or high-income cases, placing funds in trust to secure future expenses for children is not only common, but may better facilitate the continuation of the marital lifestyle for the children.
If you believe that a child support trust may be needed in your divorce, contact the attorneys at Baker Legal Group. Our attorneys are experienced in guiding you through the process to obtain this by agreement or by court order.