Definition of Earning Capacity
Earning capacity is the ability of each spouse to generate income and money in the future. Earning capacity is generally affected by a spouse's previous work experience, talents, education, and transferrable job skills. In a divorce settlement a spouse's earning capacity can affect the amount of spousal support they may have to pay or they are likely to receive. It can also affect the amount of child support payments they may have to pay.
For example, before determining child support payments the court will review the parent's earning capacity. In many cases the court will review their earning history, education level and their work skills. If the spouse is not paying child support and the court determines they have a high earning capacity, the court will evaluate if they are looking for work, if they are making money "under the table" or if they have tried to diligently find work. In some cases the amount of child support can be imputed if the court believes one parent is deliberately unemployed or underemployed in an effort to lower their support payments but has the capacity to earn more money.
In other cases if one spouse stayed home to care for the children or worked two jobs to help the other spouse attend medical school, for instance, then the court may decide the benefited spouse's earning capacity is a marital asset. Under these conditions the court might decide that the spouse who contributed to the advancement of the other spouse should receive more property or income for their support.
« Back to Glossary