Withdrawals of Principal from Trust Count as Income for Purposes of TN Child Support

Tennessee child support case summary on income determination with trust income and underemployment.

Lee Stack, III, v. Joann Valerie Stack

The mother and father in this case were divorced in Montana in 2012, and had one son who had been born in 2011.   The Montana court named the mother as the primary residential parent, and the order indicated that the father was not seeking any parenting time.  The father agreed to pay $2600 per month in child support.

In 2013, the mother moved to Tennessee with the child, and registered the Montana divorce decree in Williamson County.  In 2014, the father filed a petition in Tennessee to modify the parenting plan and child support.

Neither parent had worked during the marriage, since the father’s investments generated sufficient income.  The father’s investment portfolio was valued at about $2.4 million, and he and his sister were beneficiaries of generation-skipping trusts valued at about $4 million.

The father testified that distributions from the trusts were discretionary with the trustee, who had the option of withdrawing the funds.  The father testified that he had no control over the trustee’s choice.

The lower court first found that there had been a change of circumstances because of the father’s desire to have a relationship with the son.  It awarded him 90 days per year of visitation.

Because the father was not working, the court also imputed income to him, and set child support at $2200 per month.  After the final order, the father appealed to the Tennessee Court of Appeals.  The first issue on appeal was whether the Tennessee court had subject matter jurisdiction to modify the Montana parenting plan.  The appeals court found that none of the provisions of the Uniform Child Custody Jurisdiction Act (UCCJA) applied, and that the Tennessee court therefore had no jurisdiction to modify the original parenting plan.  Therefore, it reversed that portion of the order, but remanded the case for the lower court to set a temporary visitation schedule until the Montana court could act.  The appeals court did find, however, that the Tennessee court had jurisdiction under the UCCJA to modify the child support obligation.  Therefore, it went on to review that award.

The key issue in reviewing that award was a computation of the father’s income, and whether the lower court had appropriately included the father’s trust income.  The appeals court noted that under the guidelines, gross income includes all income from any source, earned or unearned, and that trust income is specifically included.

In this case, some of the income was actually withdrawals of principal.  The appeals court held that this still constituted income, and the fact that the withdrawals were discretionary rather than mandatory was not important.  It also noted that the fact that this was not taxable income was irrelevant.  It was still proper for the lower court to include these amounts in the father’s income calculation.

The appeals court also found that the lower court’s determination of voluntary unemployment was correct.  After reviewing all of the evidence, it concluded that the lower court’s overall income determination was not an abuse of discretion.  It did, however, find a miscalculation of the mother’s income, and remanded for a correction of this amount.

Finally, the appeals court affirmed the lower court’s award of attorney fees to the mother.

For these reasons, the Court of Appeals affirmed in part, reversed in part, and remandecd the case.

No. M2014-02439-COA-R3-CV (Tenn. Ct. App. Aug. 4, 2016).

See original opinion for exact language.  Legal citations omitted.

To learn more, see Child Support Laws in Tennessee.

See also Tennessee Parenting Plans and Child Support Worksheets: Building a Constructive Future for Your Family featuring actual examples of parenting plans and child support worksheets from real cases available on Amazon.com.