Divorcing spouses will need to address many different legal and financial concerns when ending their marriage, and in many cases, a divorce case will become more complex when a couple has children. In addition to determining how they will share child custody, parents should also understand their child support obligations. In cases where a couple has a high net worth, parents may need to address additional financial issues when determining the amount of child support that will be paid.

Texas Child Support Guidelines

The state of Texas uses a straightforward “percentage of income” method to calculate a parent’s child support obligations. The parent who has the majority of the time with the children and is granted the right to decide where children will live is known as the custodial parent. The non-custodial parent will typically pay child support to the custodial parent. The amount of child support is calculated by taking a percentage of the non-custodial parent’s “net resources,” as follows:

• One child: 20% of the non-custodial parent’s net resources
• Two children: 25% of the non-custodial parent’s net resources
• Three children: 30% of the non-custodial parent’s net resources
• Four children: 35% of the non-custodial parent’s net resources
• Five children: 40% of the non-custodial parent’s net resources
• Six or more children: At least the amount that would be paid for five children

A non-custodial parent’s net resources are determined by taking the income they earn and subtracting federal and state income taxes, Social Security taxes, union dues, and amounts paid toward their children’s health insurance, dental insurance, and other medical expenses. In high net worth divorce cases, a parent’s income may not only include the wages they earn, but also interest and dividends on investments, income earned from rental properties, capital gains, income earned from trusts, annuities, pensions, retirement benefits, and gifts.

When parents in Austin decide to file for divorce and they have minor children together, the divorce process often gets more complicated. These complications tend to be even more amplified in high net worth divorces in Texas where the children attend expensive private schools and participate in high-priced extracurricular activities. For example, in and around Austin, many parents pay for their children to participate in a variety of sports, and kids may participate on travel sports teams that require additional expenses. Other kinds of extracurricular activities and hobbies can also be extremely expensive, from classical music lessons to equestrian sports.

Texas child support laws are streamlined based on a noncustodial parent’s average monthly net income, and they do not take into account the costly extracurricular activities and sports that are common for kids in high asset families, nor does Texas law allow a court to add onto a child support obligation for private school expenses. We will tell you more about how child support laws do work in Texas, and we will say more about how parents ultimately can ensure that their kids can remain in their current school and extracurricular activities despite the divorce.

Texas Courts Calculate Child Support Based on Income and Number of Children

Regardless of the income or assets of either parent in a Texas high net worth divorce case, the court will use the formula for calculating child support set by Texas law. Under the Texas Family Code, the following is the calculation that the court will use to determine the noncustodial parent’s child support obligation:

If you are planning for a high net worth divorce in Texas and have children from your marriage, you are probably worrying about how they will fare emotionally. Generally speaking, children from higher-income households tend to do better in school and tend to have more educational opportunities. However, according to a recent study, a family’s income level might not be a deciding factor when a child’s parents get divorced. To be sure, parental divorce, often regardless of the parents’ income level, leads kids to have a lower grade point average and to struggle, at least in the short term, in school.

Whether you have questions about high net worth divorce in Austin, TX generally or specific questions about kids in an Austin divorce, a Texas high asset divorce lawyer at our firm can help.

Your Child’s Education May Suffer Temporarily Due to Divorce

According to the recent study, children and adolescents with divorced or separated parents do less well in school than adolescents with non-divorced parents. Indeed, at least in the short term, teens with recently divorced parents had a GPA that was lower by 0.3 points, on average, than kids with non-divorced parents. Yet it is important to remember that these effects usually are limited, and as long as parents commit to their child’s education, a GPA can bounce back.

Child support in a high asset divorce can work a bit differently than child support for a low-income family or a middle-class family. While Texas’s child support law still applies, the calculation for and amount of child support will likely be quite different. If you are anticipating a high net worth divorce in Austin, Texas, it is important to discuss all aspects of the divorce process with an aggressive Texas high asset divorce lawyer. In the meantime, we want to say more about child support in Texas and how high net worth parents should be thinking about child support in relation to their divorce.

General Information About Texas Child Support Laws

Before we explain how a high asset couple should be thinking about child support in their divorce, it is essential to understand how child support works under Texas law. First, Texas is one of only a handful of states that still uses a “percentage of income” model. While a number of states have shifted to an “income shares” model in which both parents’ incomes are used to calculate a total child support obligation, Texas only uses the income of the obligor parent’s income (the parent ordered to pay child support) to calculate the child support obligation.

In Texas, courts take a flat percentage of the obligor parent’s income as the child support amount. That flat percentage is based on the total number of children for which the obligor parent is providing support. The guidelines look like this:

One issue that often comes up in a high asset divorce is how to properly value the “net resources” of a spouse for purposes of calculating child support payments. Texas law requires a court to take into account a wide range of resources, including such things as retirement benefits or annuities payable to the parent required to provide support. That said, there are some forms of income, such as “return of principal or capital” that are not considered part of the parent's net resources.

Texas Appeals Courts Reach Different Conclusions on Scope of Annuities Definition

With respect to annuities, there is some disagreement among Texas appeals courts as to whether certain types of annuities may be excluded from a net resources calculation. This issue came up in an October 9 decision from the Fourth District Court of Appeals in San Antonio. In that case, the Fourth District declined to follow a 2009 holding from the 10th District Court of Appeals in Waco, which raised a similar issue.

Here is a brief explanation of the San Antonio court's decision. A husband and wife received a divorce. Prior to the marriage, the husband was injured in a work-related accident. This led to a settlement agreement with the husband's employer. The settlement itself was structured as an annuity that will pay the husband $6,970 per month until his death or June 2044, whichever occurs first.