Children’s Direct Expenses as Part of Support

When considering child support in divorce, there is often the need to determine how children's direct expenses will be covered. While child support is a general payment from one household to another to cover the inherent financial burden of parenting the child(ren) in a household, there are often also direct expenses to be considered. Such expenses may include clothes, childcare, healthcare, education, extracurricular activities, cell phones, auto expenses, college costs, and many others. Children’s direct expenses are often the type that are clearly for a child.  For example, when you buy groceries, you don’t typically separate out what is for you and what is for the child.  Alternatively, when you sign a child up for an extra-curricular activity or if you pay a medical bill, the expense is clearly for the child.  These clear and direct expenses for the children are often handled separately from child support.

Preliminary Considerations

From a legal perspective, agreements on sharing kids’ expenses may be particular to your situation. Some jurisdictions have calculators and agreements that kids’ expenses are shared in a certain way – they may be built into a monthly child support payment or may be shared pursuant to a percentage based on each parent’s proportion of income.  

Ultimately you will likely end up with a clear outline on what expenses will be shared directly, meaning not built into other regular payments, and how they are to be shared – meaning by what percentage. Often medical insurance premiums and childcare expenses are built into a child support payment.  These direct expenses might be things like extra-curricular activities, school expenses, cell phones, or items related to driving (auto insurance, care expenses, etc.).

Legally you should also understand how durable this arrangement is. What if your incomes change?  What if the kids’ expenses change? One thing we know about kids’ expenses is what you pay for when they are in elementary school is likely to be very different when they are in high school and driving. You want to have a written, agreed upon plan for how to adapt this agreement based upon changed circumstances.  Reviewing the kids’ budget annually is often a good idea or whenever there is a large change in their expenses.  And then regularly looking at parents’ incomes and considering if things should be adjusted is also helpful to include. And, finally, you want to think about and have a binding agreement on when you will stop paying direct expenses for the children.  Legally, you are usually only obligated to support your children until they emancipate (usually around age 18 and/or when they graduate from high school).  But many parents want binding agreements on additional support for the kids after this point.  You should think through these agreements and include them in the paperwork if you and your spouse can agree.  At a minimum, many parents like to have agreements for how they are going to share medical insurance premiums for their adult children, as well as auto insurance.  College expenses are another category of expenses that you may want to be a part of your agreement.

Courts often do not dictate a process for sharing these expenses or, if they do, the agreement may only discuss reimbursement without articulating the details of this arrangement. So whether you are negotiating an agreement on your own or working on implementing Court ordered agreements on sharing kids’ expenses, you will want to think through the actual process of sharing these expenses.

While working through cash flow, you should start by outlining and defining these direct expenses for the children. Once the expenses are determined, then there are three main processes for addressing children’s direct expenses:

• Reimbursement method
• Joint checking account
• Mom pays/Dad pays

Option 1: Reimbursement Method for Children’s Direct Expenses

The reimbursement method is a common approach used by divorced parents to share direct expenses for their children. Under this method, one parent initially incurs the expense on behalf of the children, and the other parent reimburses their share of the expense afterward. Specifically, the parent who incurred the expense notifies the other parent of the cost and their share of the expense. This notification typically includes documentation of the expense, such as receipts, invoices, or statements, to support the reimbursement request. The reimbursement amount, timing and payment method for the incurred expense is typically agreed upon in the decree or ordered by the Court.  The parent who owes reimbursement makes payment to the parent who initially incurred the expense. Both parents maintain records of expenses incurred and reimbursements made to ensure accountability and transparency. Keeping accurate records helps track expenses over time and facilitates resolution of any disputes or discrepancies that may arise. There are a number of apps that can be used to ease the logistics of this method.

Managing reimbursement requests and payments requires time and effort from both parents, potentially adding to the administrative burden of co-parenting. Disagreements may arise over the allocation of expenses, the reimbursement amount, or the timeliness of payments, leading to disputes between the parents. This method may also create cash flow challenges for one or both parents, particularly if they are unable to cover expenses upfront or if reimbursement payments are delayed.  Clear and open communication between the parents is essential for successful implementation of the reimbursement method. Discussing expectations, agreeing on reimbursement procedures, and promptly addressing any issues or concerns can help minimize conflicts.  Strive to make reimbursement payments in a timely manner to avoid financial strain on the parent who initially incurred the expense. Prompt payment demonstrates respect for the other parent's financial contributions and fosters cooperation in co-parenting responsibilities.

Option 2: Joint Checking Account for Children’s Direct Expenses

The joint checking account method is a practical approach utilized by divorced parents to manage and share direct expenses for their children's post-divorce. This method involves the establishment of a joint checking account specifically designated for covering children's expenses, providing a centralized and transparent way to manage financial contributions and expenditures. In this method, the parents jointly open or use an established checking account dedicated to children's expenses. Both parents have full access to the account, allowing them to deposit funds, monitor transactions, and track expenses.  Each parent contributes funds to the joint checking account based on an agreed-upon arrangement. Contributions can be made on a regular schedule, such as monthly or biweekly, or as needed to cover specific expenses. Then the agreed upon direct expenses are paid directly from the joint checking account. Both parents have visibility into the account activity and can monitor expenditures to ensure that funds are used appropriately.

Open communication between the parents is crucial for effectively managing the joint checking account. Discussions regarding expense approvals, budgeting, and financial planning help ensure that both parents are actively involved in decision-making and that the children's needs are adequately met. The joint checking account provides transparency and visibility into financial contributions and expenditures for both parents. This transparency fosters trust and accountability, reducing the likelihood of misunderstandings or disputes. Consolidating children's expenses into a single account simplifies financial management for both parents. With all expenses and contributions documented in one place, tracking expenditures and monitoring account activity becomes more efficient.  Additionally, both parents have complete access to the joint checking account, allowing them to actively participate in decision-making regarding children's expenses. This shared responsibility promotes cooperation and ensures that both parents contribute to the children's financial well-being.

With this method, because effective management of the joint checking account relies on cooperation and communication between the parents, disagreements or conflicts regarding financial decisions could undermine the success of this method.  Ensuring that both parents contribute their agreed-upon share to the joint checking account may pose challenges if one parent fails to fulfill their financial obligations. Resolving discrepancies or addressing non-compliance requires proactive communication and problem-solving. Managing a joint checking account involves administrative tasks such as reconciling account balances, tracking expenses, and coordinating contributions. This complexity may be challenging for parents who are not accustomed to financial management responsibilities.

If you choose this route, establish clear guidelines and procedures for managing the joint checking account, including rules for making withdrawals, documenting expenses, and reconciling account balances.  Maintain open lines of communication with the other parent to discuss account activity, review expenditures, and address any concerns or discrepancies promptly.  Develop a budget for children's expenses based on their needs and your financial capabilities. And make sure you have a plan for revising this method over time as budgets and each party’s ability to contribute to the account may change.

Option 3: Mom Pays/Dad Pays Method for Children’s Direct Expenses

The "Mom Pays/Dad Pays" method for paying children’s direct expenses is a structured approach used by divorced parents to allocate responsibility for specific expenses. This method involves dividing expenses between the parents based on agreed-upon criteria, such as income levels, financial resources, or the nature of the expense itself. By assigning financial responsibility for different categories of expenses, the "Mom Pays/Dad Pays" method provides a clear framework for sharing direct expenses in child support after divorce. This method requires each parent to assume responsibility for specific categories of expenses based on an agreed-upon arrangement. For example, one parent may be responsible for clothes and cell phone, while the other parent covers school tuition and extracurricular activities. The parent responsible for a particular expense pays for it directly when it arises. For instance, if one parent is responsible for healthcare expenses, they pay for medical bills, prescription medications, and insurance premiums as needed.

Open communication between the parents is essential for effectively implementing the "Mom Pays/Dad Pays" method. Discussing expense allocations, coordinating payments, and sharing information about upcoming expenses help ensure that both parents are aware of their financial responsibilities and can plan accordingly.  The "Mom Pays/Dad Pays" method allows for a tailored allocation of financial responsibilities based on each parent's financial means, contributions, and the children's needs. Assigning responsibility for specific categories of expenses provides clarity and predictability regarding each parent's financial obligations. This clarity helps reduce the likelihood of misunderstandings or disputes over financial matters. By dividing expenses between the parents, the "Mom Pays/Dad Pays" method reduces dependency on one parent for all financial support. Both parents contribute to the children's expenses, promoting financial independence and self-sufficiency.

One of the challenges if this method is that the expense allocation may cause one parent to bear a disproportionate share of the financial burden, leading to disparities in contributions between the parents. This could create feelings of inequality or resentment if one parent feels that their financial obligations are unfairly weighted.  Implementing the "Mom Pays/Dad Pays" method requires careful coordination and an understanding of financial capacity.  The method's rigid structure may limit flexibility in adapting to changing circumstances or unexpected expenses. Adjustments to expense allocations or financial responsibilities may be difficult to negotiate once the arrangement is established. And if expenses change over time, for example a child’s interest in a new expensive extra-curricular activity, the allocation to one party may feel inequitable.

Hybrid Options

These three methods are the most common methods for sharing children’s expenses.  There are also opportunities to tailor an agreement that combine elements of each.  For example, parents may decide to share out of pocket medical expenses as they come up through the reimbursement method while also funding a joint account for clothes and extra-curriculars.  Or parents may use a joint checking account for most expenses but one parent pays for cell phones and the other pays for all clothes (Mom pays/Dad pays). After building the children’s budgets, it often helps to consider the logistics of these expenses in determining the best method to share them.  Think about how the expenses are typically paid and who usually facilitates the payment.  If one parent typically buys the clothes and you expect that to continue, then consider using a joint checking account (where that parent may use the funds to buy the clothes) or Mom pays/Dad pays because the reimbursement method may be burdensome to implement.  Or, if you have a category of expense that is rare and/or unpredictable (like a school trip or unexpected medical bill), then reimbursement method may make sense for that category while other expenses can be handled with one of the more routine methods.  

As you think through these options, keep in mind that your children’s expenses will change over time.  A child’s expenses at age three may include daycare and swimming lessons while a teenager may have a cell phone and extra-curricular activities. While you can often budget your children’s current direct expenses, you should also consider the adaptability of the budget as the children age. You may want to establish a durable system that can easily be implemented and then adapted over time. If you and your spouse work well together, it may be most efficient to establish a system up front with built in adjustments so you can avoid legal fees and revise your financial agreement over time.