Executive compensation rarely arrives in twelve equal pieces. Base salary lands on a predictable schedule. Then a bonus, a commission settlement, an RSU vesting tranche, or a carried interest distribution shows up once a year in a number that dwarfs the paycheck it sits next to. California support law has a specific tool built for that pattern, and it carries the names of the two parties in a 1990 appellate decision.
Key Takeaway: A Smith/Ostler order is a California support order that sets a base monthly amount tied to salary and adds a fixed percentage of any bonus, commission, or other variable income the payor actually receives above that salary. It captures fluctuating executive income without forcing the court to guess at an annual average, and it can attach to child support, spousal support, or both.
The mechanics matter more than the label. A percentage written into a judgment without a ceiling, without a definition of what counts as bonus income, and without a documentation duty will end up back in front of a judge. Below is how these orders get built for high-income earners in Los Angeles County, and where they go wrong.
What Is a Smith/Ostler Order in California?
A Smith/Ostler order is a two-part support order: a fixed monthly amount calculated on base income, plus a stated percentage of variable income received above that base. The percentage is applied only when the variable income is actually paid, which means the supported party shares in a strong year and receives nothing extra in a flat one.
Practitioners say “Smith/Ostler” or “Ostler/Smith” interchangeably. Both refer to the same authority. The name reversal is a quirk of habit, not a legal distinction, and courts in Los Angeles use both without comment.
The structure exists because California defines income for support expansively. Family Code section 4058 defines annual gross income to include income from whatever source derived, expressly listing commissions, bonuses, and other employment compensation. A bonus is income. The only real question is how a court captures it without either overstating or understating what the payor will actually earn.
Why Does Variable Executive Compensation Break the Standard Support Formula?
The guideline formula assumes a monthly income figure, and a payor whose compensation is 40 percent base and 60 percent variable does not have one. Family Code section 4055 sets the statewide uniform guideline for child support as an algebraic formula that takes each parent’s monthly net disposable income as an input.
Feed that formula a twelve-month average of a lumpy income stream and one of two things happens. If the coming year underperforms, the payor is bound to a monthly obligation the current cash flow cannot service. If it outperforms, the children and the supported spouse are locked out of income the marital standard of living was built on.
In our experience representing executives and their spouses, this is the single most common reason a support order returns to court within eighteen months of entry. The number was never wrong when it was made. The income simply moved. A Smith/Ostler percentage removes that failure mode by making the order responsive to what actually gets paid rather than to a forecast.
What Did In re Marriage of Ostler and Smith (1990) Actually Decide?
In re Marriage of Ostler and Smith (1990) 223 Cal.App.3d 33 approved a support order that combined a fixed base amount with an additional percentage of future bonus income, rather than requiring the trial court to estimate an annual bonus average in advance. The appellate court accepted that a percentage applied to bonus income when received was a permissible way to set support for an earner whose compensation fluctuated.
The holding confirmed that a court is not confined to a single monthly number, and that variable compensation is reachable for support even when its amount and timing are unknown when the order is made.
The decision is now roughly 35 years old and remains the working authority. Courts throughout California cite it as shorthand for the entire percentage-of-bonus mechanism, which is why the term appears in judgments without any further explanation of the underlying case.
How Is the Smith/Ostler Percentage Calculated?
The percentage is derived by running the guideline calculation at several hypothetical bonus levels and identifying what share of each additional dollar the guideline itself would allocate to support. It is not a figure the parties invent, and it is not a flat share of the bonus.
The practical method looks like this. Counsel or a forensic accountant runs the guideline software with base income only, then reruns it with an assumed bonus layered on top, then again at a higher assumed bonus, and again above that. Each run produces a support number. The increment between runs, divided by the increment in bonus income, yields the marginal percentage at that income band.
Two features of the guideline drive the result. Support as a share of each marginal dollar declines as income rises, because the formula is not linear. And the child support and spousal support components respond differently, because guideline child support under section 4055 and the section 4320 spousal support factors are not the same analysis.
That declining marginal share is why a competently drafted order uses a tiered table rather than one flat percentage. A single percentage set at the low end overpays at high bonus levels. A single percentage set at the high end underpays at low ones.
What Does a Tiered Smith/Ostler Bonus Table Look Like in Practice?
The table below applies a tiered structure to a payor with a $600,000 base salary who receives a $1,400,000 annual bonus. The tiers apply to gross bonus dollars above base salary, and each tier applies only to the dollars falling within it.
| Bonus income tier (above base salary) | Dollars in tier | Combined support percentage | Support payable from tier |
|---|---|---|---|
| $1 to $250,000 | $250,000 | 20% | $50,000 |
| $250,001 to $750,000 | $500,000 | 15% | $75,000 |
| $750,001 to $1,500,000 | $650,000 | 10% | $65,000 |
| Above $1,500,000 (ceiling) | $0 | 0% | $0 |
| Total on a $1,400,000 bonus | $1,400,000 | 13.6% effective | $190,000 |
The effective rate lands at 13.6 percent because most of the bonus falls in the lower-percentage tiers. A flat 20 percent applied to the same bonus would produce $280,000, an overpayment of $90,000 against what the guideline itself generates at that income level.
The table does not tell you how the $190,000 splits between child support and spousal support. That allocation has to be stated separately, because the two components carry different tax consequences, different durations, and different modification standards.
Why Does a Smith/Ostler Order Need a Ceiling?
A ceiling caps the bonus dollars to which the percentage applies, which prevents an extraordinary year from generating a support transfer untethered from any actual need. A bonus percentage drafted without a ceiling does not protect anyone. It simply moves the litigation to the year the number gets large.
Consider what happens without one. A payor whose bonus runs $400,000 in a typical year has a liquidity event, an acquisition closes, and the bonus comes in at $9,000,000. An uncapped 15 percent produces $1,350,000 in additional support for a single year. No one drafted that outcome. Someone will litigate it.
The ceiling is also the practical link to the extraordinarily high earner rebuttal, which is the doctrine that governs exactly this situation and which we take up next.
How Does the Extraordinarily High Earner Rebuttal Under Section 4057(b)(3) Interact With a Smith/Ostler Order?
Family Code section 4057(b)(3) makes the guideline amount rebuttable where the payor has an extraordinarily high income and the guideline amount would exceed the needs of the children. That provision is the statutory basis for capping a Smith/Ostler percentage at high bonus levels.
The burden sits with the party seeking to depart from guideline, and the showing is needs-based rather than fairness-based. The argument is not that the number feels large. The argument is that the guideline output at that income exceeds what the children reasonably require, measured against the standard of living they actually had.
This is where high-income support practice diverges sharply from ordinary practice, and it is why we cover the mechanics in depth in our guide to child support for high-income earners in California. A well-built Smith/Ostler table has the section 4057(b)(3) analysis baked into its upper tiers, so the cap is agreed in advance instead of fought about after the bonus lands.
The receiving party has a real counterweight. A cap set too low deprives the children of a share in income that funded their actual lifestyle, and the standard of living evidence cuts both directions. Neither side should treat the ceiling as a formality.
Can the Same RSU Be Divided as Property and Counted as Income for Support?
No. The same restricted stock unit cannot be both awarded to the non-employee spouse as community property and counted as the employee spouse’s income for support, and a Smith/Ostler order has to be drafted to exclude the portion already divided as an asset.
This is the point most often missed. Equity granted during marriage is apportioned between community and separate property under the time-rule formulas discussed in California stock option and RSU division under the Hug and Nelson time rules. Whatever share the time rule allocates to the community is divided as property. It is already the receiving spouse’s asset.
If the judgment then defines bonus income to include the gross value of all vesting equity, the receiving spouse gets that same value a second time through the support percentage. That is the classic double dipping problem in a California divorce, and in equity-heavy cases it is worth seven figures.
The most common drafting error we see is a bonus definition that reads “all bonus, incentive, and equity compensation received” with no carve-out. That clause hands the receiving party a windfall the court never intended, and it is usually not discovered until the first vest statement is exchanged two years later.
Which Forms of Variable Compensation Are Property, Which Are Income, and Which Are Both?
The classification below is the drafting checklist. Every item in a compensation package should land in one column before the percentage language is written.
| Compensation item | Divisible as community property | Available as income for support | Drafting note |
|---|---|---|---|
| RSUs granted during marriage, vesting after separation for services performed during marriage | Yes, to the community share under the time rule | No, as to the divided community share | Exclude the awarded share from the bonus definition by grant date and tranche |
| RSUs granted after separation for post-separation services | No | Yes, at gross value on vest | Specify valuation as the fair market value on the vest date |
| Annual cash bonus paid after separation for a post-separation performance year | No | Yes | Core Smith/Ostler income; apply the tiered percentage |
| Annual cash bonus paid after separation for a performance year that ended before separation | Yes, in whole or part | Only as to any separate-property share | Allocate by performance period, not payment date |
| Carried interest in a fund formed during marriage | Yes, to the community share | Post-separation distributions on the separate share only | Requires separate valuation and a distribution waterfall carve-out |
| Signing or retention bonus received after separation with a clawback | No | Yes, subject to a repayment reserve | Add a reserve and a reimbursement clause if clawback triggers |
| Deferred compensation earned during marriage, paid out later | Yes, to the community share | Only as to the separate-property share | Coordinate with the plan document and the distribution election |
Two rows carry their own complications. Carried interest in a California divorce raises valuation problems no support formula solves on its own, and deferred compensation division in California turns on plan documents that often contradict what a support stipulation assumes.
If you are negotiating a support term against an equity-heavy compensation package, do the classification work above before you agree to any percentage. Call (888) 42-BORNA for a confidential consultation.
Does a Smith/Ostler Order Apply to Both Child Support and Spousal Support?
Yes. A percentage of bonus income can be ordered for child support, for spousal support, or for both, and the two components are calculated and drafted separately.
Child support flows from the section 4055 guideline. Spousal support flows from the section 4320 factors, which include the marital standard of living, the earning capacity of each party, the duration of the marriage, and the supported party’s progress toward self-support. Family Code section 4320(a) makes the marital standard of living the reference point for the spousal component, and that operates as a practical ceiling concept: bonus income that exceeds anything the marriage ever spent is difficult to justify as necessary to maintain that standard.
The differences that matter in drafting are duration and modifiability. A spousal support percentage can carry a step-down schedule and a termination date. A child support percentage runs until the statutory termination event for each child, and the percentage should be restated as each child ages out. Post-judgment adjustments follow the change-of-circumstances framework covered in our guide to spousal support modification in California.
How Should a Smith/Ostler Order Handle Gross Income, Timing, and Documentation?
The percentage should be applied to gross bonus income, with the order specifying a payment deadline measured in days from receipt and a standing duty to produce pay stubs, vest statements, and the annual W-2 or K-1 within a stated period.
Gross is the standard because Family Code section 4058 defines annual gross income for support purposes, and withholding on a large bonus is frequently over-withheld relative to the payor’s actual effective rate. Netting at the payroll withholding rate understates the income systematically.
Three operational terms belong in every one of these orders:
- A payment trigger. Payment falls due within a stated number of days of receipt, commonly 10 to 15, with receipt defined to include the settlement date of a vest rather than the sale date of shares.
- A documentation duty. Pay stubs within a stated period of each bonus payment, vest statements on issuance, and the complete W-2, K-1, and 1099 package within a set number of days of receipt each year.
- A true-up. An annual reconciliation against the tax documents, with a stated deadline for any shortfall payment or credit, so a mid-year error does not compound into contempt exposure.
In our experience representing executives and their spouses, the documentation clause does more to prevent litigation than the percentage itself. Disputes over these orders are overwhelmingly disputes about what got paid and when, not disputes about the arithmetic. Where the numbers are genuinely contested, a forensic accountant in a California divorce can reconstruct the compensation history from plan documents and payroll records.
What Happens If the Bonus Never Gets Paid?
Nothing is owed on the variable component, because a Smith/Ostler percentage applies only to income actually received. The base monthly support amount remains due in full regardless.
That is the structural advantage of the mechanism from the payor’s side, and it is why a payor with genuinely volatile compensation should generally prefer a Smith/Ostler term to an averaged monthly figure. A zero bonus year produces a zero percentage obligation automatically, with no motion required.
The qualification is voluntary reduction. A payor who restructures compensation to suppress reportable bonus income, or who defers a bonus without a business reason, invites an earning capacity argument. California courts can attribute income based on ability and opportunity to earn, and the analysis is set out in our guide to imputed income in California child support.
Can a Smith/Ostler Order Be Modified?
Yes. A Smith/Ostler percentage is a support order and is modifiable on a showing of a material change of circumstances, unless the parties agreed to a non-modifiable spousal support term in writing.
The changes that most often support a modification request are a change in the compensation structure itself, such as a shift from cash bonus to equity or a move to a different employer with a different mix; a change in custodial timeshare, which moves the guideline inputs directly; and a change in either party’s earning capacity.
One caution from the case law is worth stating precisely. In re Marriage of Mosley (2008) 165 Cal.App.4th 1375 addressed the danger of layering a bonus percentage on top of guideline support without accounting for the payor’s total resulting obligation, and the case is regularly cited for the proposition that the combined burden has to be examined rather than assumed. In re Marriage of Kerr (1999) 77 Cal.App.4th 87 likewise addressed the treatment of bonus income in setting support and the limits on how a court handles fluctuating compensation.
Both cases make the same practical point: the percentage cannot be evaluated in isolation from the base order it sits on top of.
What Are the Most Common Drafting Errors in Smith/Ostler Orders?
Six errors account for nearly every Smith/Ostler dispute we are asked to clean up after the fact:
- No ceiling, so the percentage runs to infinity and the first outsized year becomes a trial.
- An undefined bonus term. “All additional compensation” sweeps in expense reimbursements, relocation payments, and the community share of vesting equity.
- No property carve-out, so equity already divided as an asset gets counted again as income.
- A flat percentage instead of tiers, which is guaranteed to be wrong at one end of the range or the other.
- No allocation between child and spousal support. The tax treatment, duration, and modification standard all differ, and an unallocated lump hides every one of them.
- No documentation deadline, which leaves the receiving party no way to verify and turns enforcement into a discovery motion.
Every one of these is fixable at the drafting stage for a fraction of what it costs to fix post-judgment. Where fees become an issue in a contested support matter, read the fee-shifting framework in our guide to attorney fees in a California divorce before the motion gets filed.
Frequently Asked Questions About Smith/Ostler Orders
Is there a Smith/Ostler calculator?
No official calculator exists, because the percentage is derived from the guideline software rather than from a standalone formula. Practitioners generate the tiers by running the section 4055 guideline calculation at several assumed bonus levels and measuring the marginal support change at each band. Any online tool that offers a single Smith/Ostler percentage without running the guideline is producing a guess.
How is the Smith/Ostler percentage calculated?
The guideline calculation is run at base income, then rerun at successively higher assumed bonus amounts. The change in support divided by the change in bonus income gives the marginal percentage for that band. Those marginal percentages become the tiers in the bonus table, and they decline as income rises because the guideline formula is not linear.
Is a Smith/Ostler order based on gross or net bonus income?
Gross, in the standard formulation. Family Code section 4058 defines annual gross income for support purposes, and applying the percentage to gross avoids disputes over supplemental withholding rates, which frequently exceed the payor’s actual effective tax rate on a large bonus. Some stipulations use a net figure with a defined tax calculation, but that approach requires far more specific drafting.
Do RSUs count as bonus income under a Smith/Ostler order?
Only the portion not already awarded as community property. RSUs granted during marriage are apportioned under the Hug and Nelson time rules and divided as an asset, and that divided share cannot be counted again as income. RSUs granted after separation for post-separation services are ordinarily available as income at their fair market value on the vest date.
Can a Smith/Ostler order be modified?
Yes, on a material change of circumstances, in the same way as any other support order, unless the parties made spousal support non-modifiable by written agreement. A change in the compensation structure, a change in custodial timeshare, or a change in either party’s earning capacity are the usual grounds. The percentage tiers themselves can be revised, not just the base amount.
Does a Smith/Ostler order apply to both child and spousal support?
It can apply to either or to both, and the components should be stated separately in the judgment. Child support percentages derive from the section 4055 guideline; spousal support percentages derive from the section 4320 factors, with the marital standard of living under section 4320(a) as the reference point. The two carry different durations and different modification standards.
What happens if the bonus never gets paid?
No variable support is owed for that period, because the percentage applies only to income actually received. Base support continues unchanged. A payor who suppresses or defers bonus income without a legitimate business reason risks an earning capacity attribution rather than a simple zero.
Does a Smith/Ostler order cover carried interest and partnership distributions?
It can, but only with drafting written for that income type. Carried interest requires a distinction between the community share valued and divided as property and post-separation distributions attributable to the separate share, and the waterfall structure of the fund has to be reflected in the order. A generic bonus clause will not do this correctly.
How Do You Get a Smith/Ostler Order Drafted Correctly?
The percentage is the visible term, but it is not the term that decides the outcome. The definition of bonus income, the property carve-out, the ceiling, the allocation between support types, and the documentation schedule determine whether the order holds up when a large number lands.
Borna Houman Law represents executives, founders, physicians, entertainers, fund principals, and their spouses in Los Angeles County divorces where variable compensation drives the support analysis. We build the tier table from the guideline output, coordinate it with the equity division so the same dollar is not counted twice, and write the accounting terms that keep the order from coming back to court.
Call (888) 42-BORNA for a confidential consultation.
This article is general information about California law and is not legal advice. Support outcomes depend on the specific facts of each case, and no result is guaranteed. Reading this article does not create an attorney-client relationship with Borna Houman Law. For the current text of the statutes discussed, see Family Code section 4058 and Family Code section 4057 on the California Legislative Information site.