Is Your Annuity a Resource for Child Support?
Before even trying to figure out what a parent can pay as child support in Montgomery County your Woodlands Divorce Attorney must establish the parent’s resources. There are many different resources that the Conroe divorce court considers when awarding child support. Today we are going to look at one specific type of asset – the structured settlement annuity.
Structured settlement annuities are used to settle personal injury claims. In many ways they behave like a normal annuity that you might buy from a bank, but is it a resource for child support?
Should the entire payment be included as a resource?
Should none of the payment be included as a resource?
Should part of the payment be included as a resource?
The appeals court recently ruled on a case where they had to decide whether payments received as part of a structured settlement annuity are considered in the calculation of “net resources” for child support. The divorce court in this case excluded payments received from an annuity created from the proceeds of a personal injury settlement by creating a distinction between an annuity and a settlement annuity. Let’s see if they were correct.
The legal definition of resources we live with in Montgomery County includes:
all other income actually being received, including … annuities….
In addition to the definition of “resources”, the following items are not included as resources:
(1) return of principal or capital….
In this case, an annuity was purchased to pay out a settlement from a lawsuit over a span of years. The issue is whether the amounts received by the father, constituted a return of principal, which is not a resource, or whether it constitutes income that would be included as a resource.
The Attorney General relied on the simple use of the word “annuity” to claim the entire amount of every payment should be included as a resource. The father claimed no part of any payment should be included because the annuity in a structured settlement case represents a return of principal.
Correctly, the appeals court identified the critical components to an annuity, including a personal injury structured settlement annuity. In an annuity such as this one, there is a portion of each payment the represents a return of principal and a portion of each payment that represents interest. Since both sides to this case did not address this issue in the original divorce court the appeals court could not make a more detailed ruling.
Don’t make the same mistake they did and end up wasting time and money on an appeal and re-litigation in divorce court. Your Woodlands Divorce Attorney can analyze the annuity in your case to determine how much may be included as a income resource and how much may be excluded as a return of principal.
The Woodlands Divorce Resource is here to help you with your divorce, child custody, or other family law issue in Montgomery County or Harris County. Many of our visitors come from the areas of The Woodlands, Conroe, Oak Ridge North, Cut and Shoot, and other communities in the Montgomery County area or Houston and North Harris County. If you need legal assistance with your family law issue speak with a divorce lawyer in The Woodlands, TX today and protect your rights.
IN THE INTEREST OF A.A.G.
I am in the same situation and need to know what part of my annuity is principal and what is resource. I will have a court date soon abs would like to present this information to the judge. Please email with your response.
If you are not working with an attorney then you can request this information from your annuity company. I would still review the situation with your attorney because sometimes financial definitions are different from legal definitions used in a divorce case.
Thanks for your response. I will contact the annuity company