Potential Earning Capacity and Imputation of Income for Purposes of Calculating Alimony

When determining an appropriate alimony award two important factors the court must consider are the income and earning capacity of each party. Although calculating a party’s income may seem straightforward, it can often become complex even for W-2 income earners, especially when one party is intentionally unemployed, underemployed, or fails to report all income.If intentional underemployment or unemployment is an issue, pursuant to Dorfman v. Dorfman, 315 N.J. Super. 511, 515 (App. Div. 1988), a court may impute income to a party. The Appellate Division in Dorfman stated “[i]nherent in a finding of ‘underemployment’ is the notion the obligor is intentionally failing to earn that, which he or she is capable of earning.” Id. at 516.  Imputing income to a party means that a rate of income is fixed for a party regardless of his or her current financial circumstances. 

The New Jersey Supreme Court confirmed the Dorfman analysis, finding that a trial judge has the discretion to impute income after finding that the party to whom income is imputed is either voluntarily unemployed or underemployed. See Caplan v. Caplan, 182 N.J. 250, 268 (2005).

To determine the amount of income that should be imputed to an underemployed or unemployed party, a court will utilize the New Jersey Department of Labor, Compendium of Wages, as well as  the party’s earning history during the marriage. Earning history can be gathered from documents such as past paychecks and Social Security earnings history statements. In some cases, an employability expert will be hired to hired to perform a detailed evaluation of the party’s ability and capability to earn. In other cases, an expert may be hired to perform a marital lifestyle analysis and derive a party’s income and earning history based upon the marital lifestyle. 

For questions regarding imputation of income, alimony or any other family law related issue please contact the attorneys of Ulrichsen Rosen & Freed LLC. Our firm is focused exclusively on the practice of family law and serves clients throughout New Jersey including clients residing in Mercer County, Somerset County, Hunterdon County, Burlington County and Middlesex County.The attorneys at Ulrichsen Rosen & Freed LLC.