Is inherited money considered in child support calculation?

[gaser]

What is the name of your state? Tennessee
I have a 50/50 parenting time agreement with the parent of my child, with no child support to pay
However the past year she took a few months out of state to settle the estate of her father who died and left her a lot of money.

We are supposed to redo the parenting plan to reflect a change in the parenting time since she's not keeping up her 50%, however she said I wont be able to get any child support from her because she hardly earned any money this year. But of course it was because she took a break from her job to settle the estate of her father, from which she inherited a ton of money.

Is that money she inherited subject to consideration for child support, considering she dropped her normal paycheck in order to secure that?

 

[stealth2]

Slightly off-topic, but I'm asking for a reason... How old is the child and is she working now?

ETA: It seems (from a very cursory glance at *Google* results) that TN will consider inheritance as gross income.

 

[gaser]

Slightly off-topic, but I'm asking for a reason... How old is the child and is she working now?

child is 9 and yes she is working now after a long break

 

[stealth2]

child is 9 and yes she is working now after a long break

I added a more specific response in my earlier reply, but will carry on with my previous train of thought... Given the above, and having been in the situation of losing first one parent and then the other, to *me* it feels like a bit of a pile-on to change the parenting time-share. Perhaps slowly building back up to the 50/50 time-share you previously followed would be more appropriate? Your child is certainly old enough to remember such an arrangement and be able to resume it reasonably quickly. Or were did the child have issues with the arrangement prior to the Mom having to be out of town?

 

[AlmostThere]

We should also ask how the money has been inherited. Is the money in a trust? Is it in a 401k? Is it a lump sum?

 

[LdiJ]

What is the name of your state? Tennessee
I have a 50/50 parenting time agreement with the parent of my child, with no child support to pay
However the past year she took a few months out of state to settle the estate of her father who died and left her a lot of money.

We are supposed to redo the parenting plan to reflect a change in the parenting time since she's not keeping up her 50%, however she said I wont be able to get any child support from her because she hardly earned any money this year. But of course it was because she took a break from her job to settle the estate of her father, from which she inherited a ton of money.

Is that money she inherited subject to consideration for child support, considering she dropped her normal paycheck in order to secure that?

Under normal circumstances, a one time economic event (such as an inheritance, lottery win, etc) would not be part of the calculation for child support. Ongoing income from that economic event (ie investment income) can be part of the child support calculation. Arguments can be made for an exception to the normal calculation, but those don't always fly with a judge. If you want to argue that her income should be imputed at a higher level because she was voluntarily underemployed you can make that argument.

I echo Stealth about the timeshare. Mom is dealing with the death of a parent, if that is the main reason for her not exercising her full parenting time you might want to reconsider your actions.

 

[AlmostThere]

Sometimes an executor is paid a fee for settling an estate. Your ex may have had this type of income.

 

[Mark_A]

Sometimes an executor is paid a fee for settling an estate. Your ex may have had this type of income.

If she were the only heir, that would be foolish to take such a fee, because such fees are taxable income, and an inheritance is not taxable (unless there is an estate tax on a very large inheritance).

 

[AlmostThere]

If she were the only heir, that would be foolish to take such a fee, because such fees are taxable income, and an inheritance is not taxable (unless there is an estate tax on a very large inheritance).

Unless I missed it, you had not specified that she was the only heir. How do you know that? Perhaps her father left the entire estate in trust to your mutual child for their future use? Perhaps it was left in trust to your ex-wife and can't be distributed immediately.

Without knowing the details of the estate, it is impossible to say who inherits how much money, when, and how.

 

[stealth2]

Unless I missed it, you had not specified that she was the only heir. How do you know that? Perhaps her father left the entire estate in trust to your mutual child for their future use? Perhaps it was left in trust to your ex-wife and can't be distributed immediately.

Without knowing the details of the estate, it is impossible to say who inherits how much money, when, and how.

@Mark_A is not the OP - @gaser is.

 

[quincy]

Unless I missed it, you had not specified that she was the only heir. How do you know that? Perhaps her father left the entire estate in trust to your mutual child for their future use? Perhaps it was left in trust to your ex-wife and can't be distributed immediately.

Without knowing the details of the estate, it is impossible to say who inherits how much money, when, and how.

Mark_A likes to play with hypotheticals.

 

[Mark_A]

Unless I missed it, you had not specified that she was the only heir. How do you know that? Perhaps her father left the entire estate in trust to your mutual child for their future use? Perhaps it was left in trust to your ex-wife and can't be distributed immediately.

Without knowing the details of the estate, it is impossible to say who inherits how much money, when, and how.

I clearly said "if" so as to inform people that an executor fee is taxable income, whereas an inheritance is tax free (unless it exceeds the lifetime gift tax limit). Obviously, I cannot provide a definite answer for every possible scenario.

 

[Mark_A]

Mark_A likes to play with hypotheticals.

I clearly said "if" so as to inform people that an executor fee is taxable income. The post I responded to was also hypothetical, so I can't tell anyone which way would be best.

 

[LdiJ]

I clearly said "if" so as to inform people that an executor fee is taxable income, whereas an inheritance is tax free (unless it exceeds the lifetime gift tax limit). Obviously, I cannot provide a definite answer for every possible scenario.

Not all inherited money is tax free. Inherited retirement accounts (other than Roths) are taxable income, for example. In addition, there are some states that still have inheritance taxes as well.

However, just because income is taxable does not mean that it automatically is considered in a child support calculation. Generally, a one-time economic event is NOT taken into consideration in a child support calculation. Any income produced from that one time economic event (ie interest and dividends from inherited investments) is likely to be included, but not the one time event itself.

 

[Mark_A]

Not all inherited money is tax free. Inherited retirement accounts (other than Roths) are taxable income, for example. In addition, there are some states that still have inheritance taxes as well.

Usually (but not always) people inherit an IRA via a Beneficiary Designation Form that can filled out by the account holder with the administrator of the IRA, so that the IRA account inheritance does not get settled in probate, but is directly settled by the IRA administrator. If anyone has an IRA, they should definitely fill out one of these forms (often can be done online). If one is designating someone other than their spouse, the spouse must approve it. and the form usually allows for contingent beneficiaries if the case of the spouse preceding the person who owns the account, without having to change the beneficiaries.

However, just because income is taxable does not mean that it automatically is considered in a child support calculation. Generally, a one-time economic event is NOT taken into consideration in a child support calculation. Any income produced from that one time economic event (ie interest and dividends from inherited investments) is likely to be included, but not the one time event itself.

As you obviously know (but just for the benefit of others) an inherited IRA can be rolled over into an IRA account of the recipient so the taxes can be deferred until withdrawn at a later time from the new IRA. Different rules apply based on the type of IRA (traditional vs. Roth) and beneficiary status (spouse vs. non-spouse), with spouses having more flexible distribution options.

• A non-spousal IRA inheritance, if rolled over and not taken as income in the year received, must be placed in a separate "Inherited IRA" account (separate from their personal IRA account). The SECURE Act of 2019 requires most non-spouse beneficiaries to empty inherited IRAs within 10 years. Additionally, under IRS rules issued in July 2024, non-spouse beneficiaries inheriting from someone who was already in RMD payout status (due to their age) must take annual distributions rather than having the flexibility to distribute the funds as they choose within the 10-year period.
  
  
• The tax rules are more lenient for spouse beneficiaries of an IRA. Spouses can roll over the inherited IRA into their personal IRA or put the money into a new, inherited IRA account. Either way, spouse beneficiaries are exempt from the 10-year rule. They can take the RMDs and pay the taxes gradually over their lifetimes instead of over 10 years.

So given the above, a person who inherits an IRA may chose to roll it over and not withdraw the money immediately, which is one reason why it might not be considered as income when calculating child support.