Learn How Enhanced Earning Capacity Works in Divorce
If you possess an impressive degree or professional license, you may have heard of enhanced earning capacity. This is a complex divorce issue that is not always understood. You should learn the basics of it in case your spouse’s divorce lawyer introduces this into your case.
What Is Enhanced Earning Capacity?
This refers to your advanced degree or license, and it attempts to monetize it for the purposes of fairly dividing assets. Theoretically, if you have an advanced degree, you have a higher earning capacity than someone who does not have one. For this reason, your spouse may believe he or she is entitled to more than the assets you are currently splitting, provided you got the degree during the marriage. This is because it is often assumed that your spouse somehow helped you achieve the degree while you were married, similar to how you and your spouse have to equally split your income.
How Is It Determined?
Clearly, it can be difficult to put a dollar amount on your degree, but many lawyers will try. In most cases, a specialist will figure out how many years you will likely be working in your lifetime. Your earning capacity will then be estimated. That number will be compared to the earning capacity of someone in your position, but without the advanced degree or license you possess. Since that amount will likely be smaller than your earning capacity, it will be subtracted from your number. The resulting amount will be the value of your enhanced earning capacity, and you may have to split that with your spouse during divorce.
In most cases, though, your spouse has to show that he or she made some contribution to the degree. For example, if he or she paid for some of your schooling, drove you to class, or took care of the family while you studied, you will likely have to share the money from your enhanced earning capacity. However, if you can show that you had no support while you earned your degree, your spouse will likely get little, if anything, from your enhanced earning capacity.
How Will You Pay?
Since the amount you have to pay your spouse is based on estimates for your future, you will not have to share the money with your spouse just yet. It is likely that a payment plan will be set up so you can gradually pay what you owe. Note that even if you do not use your license or degree in your future job, you will likely still have to pay your spouse’s share of your enhanced earning capacity.
It may be clear by now that this divorce law is not always fair to people who earn an advanced degree, especially when they end up never using it. Fortunately, many agree that it is unfair and not very accurate in most cases, so it may not be a permanent law. If you are worried about this law, which is relatively unknown by many, you should contact a divorce lawyer to find out how best to protect yourself.