On January 26, 2023, the Michigan Court of Appeals issued its opinion in Keessen v. Keessen, a highly contentious divorce case involving rental properties and management fees. At issue was the income generated from management fees and rental income from the properties. Ms. Keesen argued on appeal that the trial court erred by not imputing an appropriate income to her husband arising from the properties and management fees. In rendering its decision, the Court addressed the issue of Imputation of income in a Michigan divorce.
When a parent is voluntarily unemployed or underemployed, or has an unexercised ability to earn, the Michigan Child Support Formula Manual allows a court to include the potential income that parent could earn as income for support purposes (MCSFM 2.01(G)).
The amount of potential income imputed should be sufficient to bring that parent’s income up to the level it would have been if the parent had not reduced or waived income. The Michigan Child Support Formula Manual provides guidance on imputing income:
(a) The amount of potential income imputed:
(1) should not exceed the level it would have been if there was no reduction in income,
(2) not be based on more than a 40 hour work week, and (3) not include potential overtime or shift premiums.
Michigan Child Support Formula Manual 2.01(G)
(b) Imputation is not appropriate where an individual is employed full time (35 hours per week or more, but has chosen to cease working additional hours (such as leaving a second job or refusing overtime). Actual earnings for overtime, second job, and shift premiums are considered income.
(3) Use relevant factors both to determine whether the parent in question has an actual ability to earn and a reasonable likelihood of earning the potential income. To figure the amount of potential income that parent could earn, consider the
following when imputing an income:
(a) Prior employment experience and history, including earnings history, and reasons for any termination or changes in employment.
(b) Educational level, literacy, and any special skills or training.
(c) Physical and mental disabilities that may affect a parent’s ability to work, or to obtain or maintain gainful employment.
(d) Availability for work (exclude periods when a parent could not work or seek work, e.g., hospitalization, incarceration, debilitating illness, etc.).
(e) Availability of opportunities to work in the local geographical area.
(f) The prevailing wage rates and number of hours of available work in the local geographical area.
(g) Diligence exercised in seeking appropriate employment.
(h) Evidence that the parent in question is able to earn the imputed income.
(i) Personal history, including present marital status, age, health, residence, means of support, criminal record, ability to drive, and access to transportation, etc.
(j) The presence of the parties’ children in the parent’s home and its impact on that parent’s earnings.
(k) Whether there has been a significant reduction in income compared to the period that preceded the filing of the initial complaint or the motion for modification.
If a party argues that they are unemployed or underemployed, an imputation of income argument can be made to use potential income (instead of actual income) when calculating child support. As for the Keessen family, the Court of Appeals ruled that the methodology utilized to determined husband’s potential income was appropriate.
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