Q. Before we got married, my wife and I signed a prenuptial agreement.  She had inherited some money and I had gotten into renovating homes until the year before we got married.  By that point I had 10 rental homes that I designated as separate property. I still have those homes and $100,000 per year in rental income from my real estate investments.

My wife’s inheritance generates about $75,000 in dividend income each year which she reinvests.

Our agreement is pretty clear about dividing assets, but my wife quit her job to stay home when our daughter was born (she is now 10) and refuses to go back to work which is a huge issue in our marriage.  I earn enough to make ends meet, especially with my real estate income, but I do not earn enough to support the family forever with no contribution from her and her increased spending habits.

We disagree on how to calculate child support and alimony.  She says because her dividends are just reinvested, its not really income to her but my rental income is and needs to be counted toward support.  What is the right approach?

A. Generally, when people have income from separate property, that income is also considered separate property and can be excluded from income considered when calculating future alimony obligations.  To the extent your wife is reinvesting dividend income, she is growing her separate property, and you will not be able to claim any of the dividend income was part of the marital estate.

You can each exclude income derived from your separate property from consideration for alimony calculation purposes assuming you have the typical language on point in your prenuptial agreement.  As for child support, your real estate income will be included in the calculation as will her dividend income even though it is reinvested.

You should be prepared to show the judge a cash flow analysis calculating child support first then alimony and the after tax cash flow to each of you.  You also need to calculate alimony first, adding the alimony to your wife’s income and reducing your income by that amount to then calculate child support and again prepare an after tax cash flow for the judge.

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