Passive income is income that requires little to no ongoing effort to obtain. Examples include dividends from stocks, rent payments from rental real estate or royalty payments from intellectual property. In a divorce, passive income may impact spousal support and child support payments. Indirectly, it may also play a role in how property is divided.
Is Passive Income Subject To Property Division?
No, passive income is not subject to property division in a divorce. However, all or a portion of the assets that are generating the passive income may be considered marital property and thus may be subject to division. For example, dividend-paying stocks may need to be divided if they are classified as marital property.
Depending on the method with which a passive income-generating asset is divided, it may have a similar effect as dividing the passive income itself. For example, if a rental property portfolio is divided between the spouses, each spouse will benefit from the ongoing passive income their share of the rental property generates following the divorce.
Is Passive Income Considered In Spousal Support And Child Support Calculations?
Yes, passive income is considered income when calculating support. Because passive income can fluctuate from month to month, as opposed to a salary that stays relatively stable, extra care needs to be used when making these calculations. The disposition of the assets that generate the passive income also needs to be taken account. For example, if the assets are going to be sold off as part of the division of property, including them in support calculations may not make sense.