FAMILY LAW
Supreme Court of Alaska (2025)
Michael Ash
In Chapman v. Chapman, 563 P.3d 1155 (Alaska 2025), the Supreme Court of Alaska held that the Superior Court did not err when it ordered undistributed trust income to be used in calculating a child support obligation from a parent who exercised control over the trust. (Id. at 1157). Peter and Julia Chapman divorced in 2020 agreeing to shared custody of their one child and a child support payment from Peter to Julia which, based off Peter’s 2020 income of $45,000, was set at $31.35 by a modification. (Id. at 1157–58). After the divorce, Peter acquired additional businesses and transferred them, along with the parties’ former rental car business, into the Cephas Trust. (Id.). Although he never withdrew money from the trust and only paid himself a salary of roughly $55,000 in 2021, Peter’s federal tax return reflected an adjusted gross income of $861,382 because the trust’s business income flowed through to him for tax purposes. (Id. at 1158–59). Julia moved to modify child support, arguing that Peter’s accessible income had materially increased. (Id.). The Superior Court found that Peter controlled the trust, had the ability to request distributions at any time, and chose to reinvest substantial earnings rather than withdraw them. (Id. at 1160). Imputing income up to Civil Rule 90.3’s $126,000 cap, the Court increased his monthly obligation to $1,167.35. (Id.). Peter appealed and the Supreme Court of Alaska rejected his argument that no material change in circumstances existed, holding that the creation of the trust and the dramatic increase in available income after the earlier order constituted a change beyond Rule 90.3’s 15% threshold. (Id. at 1160–61). The Supreme Court of Alaska also rejected Peter’s argument that the lower Court abused its discretion when imputing income from the trust, since the Superior Court found Peter exercised control over the trust and its “independent” trustee and could have accessed the trust’s income to improve his financial situation. (Id. at 1162–65). The Supreme Court of Alaska found the trust could be analogized to an underperforming asset and excluding this asset from calculating his child support obligation unreasonably decreased available funds. (Id.). The method used for assessing the trust’s income, Peter’s federal tax return, was also found to be sufficient considering his control and the assets pass-through taxation status, although a fact-specific inquiry into each business return would be ideal. (Id. at 1165–67). Affirming the order, the Supreme Court of Alaska held that the Superior Court did not err or abuse its discretion in imputing trust income and modifying child support for a parent who had substantial business income listed on his federal tax return from a trust that he solely owned and controlled, even though he did not withdraw its earnings. (Id. at 1160–67).
