Fluctuating income is the rule rather than the exception for high-earning professionals. Executives receive annual bonuses tied to company performance. Sales professionals earn commissions that swing with quarterly results. Investment professionals receive year-end carry distributions and incentive fees. For each of these categories, a fixed monthly support order pegged to a single income figure either under-serves or over-serves the supported family depending on what the year actually delivers. California courts addressed this problem in In re Marriage of Ostler & Smith (1990) 223 Cal.App.3d 33, and the percentage-based bonus support order that the case authorized has become a standard tool in California family law practice.
The Ostler & Smith Holding
In Ostler & Smith, the trial court entered a support order that combined a fixed monthly amount with an additional percentage of the supporting parent's future bonuses. The supporting parent appealed, arguing that the percentage-of-bonus component was error as a matter of law. The First District Court of Appeal affirmed. The court held that the trial court could properly include a percentage-based bonus component in a support order to capture fluctuating income that would not otherwise be reflected in a fixed monthly figure.
The court reasoned that the family's economic reality, in which the supporting parent's income varied substantially from year to year, would not be fairly captured by either a low fixed number based on base salary alone or a high fixed number that assumed every year would produce a maximum bonus. The percentage approach allowed the support to track the actual income as it was earned. This structural insight has been applied across decades of subsequent California family law cases involving variable compensation.
Mechanics of an Ostler-Smith Order
A typical Ostler-Smith order, often referred to as a Smith-Ostler order depending on the practitioner, has two parts. The first is a fixed monthly amount based on the supporting parent's predictable base compensation. The second is a percentage of the supporting parent's bonus, commission, or similar variable income, paid in addition to the fixed amount. The percentage may be different for child support and spousal support, and the order may include caps, floors, or other adjustments to address particular concerns.
The percentages are typically calculated by running the support guideline at multiple income scenarios and identifying the marginal percentage of each additional dollar of income that the guideline would direct to support. Software tools used in California family law, such as the DissoMaster program, can produce these percentages directly.
What Categories of Income Are Captured
An Ostler-Smith order can cover any form of fluctuating compensation that meets the order's defined trigger. In modern practice, the order is often drafted to reach bonuses, commissions, restricted stock unit vestings, stock option exercises, profit-sharing distributions, performance share payouts, and similar items. The order should specify with care what it covers and what it does not. Vague language about bonus income leads to predictable disputes when a new form of compensation arrives that the parties did not specifically discuss.
In re Marriage of Mosley (2008) 165 Cal.App.4th 1375 confirmed that an Ostler-Smith percentage need not be limited to traditional cash bonuses and can reach other forms of variable compensation. Many modern orders explicitly enumerate the categories of compensation that trigger the percentage, with a catch-all for other forms of variable compensation to address unforeseen items.
Gross or Net
One of the most common drafting pitfalls is failing to specify whether the percentage applies to gross income or net income. The difference is substantial. A 20 percent order on the gross of a $200,000 bonus is $40,000. The same 20 percent order on the net after federal and state withholding is materially less. Disputes over the meaning of an ambiguous order typically end up before the same trial court that issued it, and the practical solution is to be explicit at the drafting stage.
Most modern orders apply to gross compensation and then adjust the percentage to reflect the tax consequences. Some orders use net income with carefully specified deductions. The choice is less important than the clarity. Drafting that simply says percent of bonus invites litigation.
Timing and Payment Mechanics
Bonuses and commissions arrive on schedules that do not align with the monthly support cycle. A well-drafted Ostler-Smith order specifies when the percentage payment is due after the underlying income is received. Common formulations require payment within a stated number of days of receipt, accompanied by documentation showing the gross amount and any applicable withholdings.
The order should also address how the supporting parent demonstrates the amount and timing of the income. Standard documentation requirements include pay stubs, W-2 forms or 1099 forms at year end, brokerage statements for equity events, and similar documentation appropriate to the source of the income. Annual reconciliations are sometimes built into the order to capture true-up payments based on the year-end totals.
Caps and Floors
Where the supporting parent's potential bonus income is very high, the receiving parent may invoke the extraordinarily high earner provisions of Family Code section 4057(b)(3) to argue that the percentage produces support that exceeds the children's needs. Some orders therefore include a cap, expressed either as a dollar limit on the bonus support or as a cap on the underlying bonus income that triggers the percentage. The Macilwaine litigation, In re Marriage of Macilwaine (2018) 26 Cal.App.5th 514, involved a structure of this kind, where the trial court had capped the income subject to the percentage at $1.2 million per year.
Floors are also common, particularly where the supporting parent's base salary is modest in relation to expected bonus income. A floor can ensure a baseline level of support in lean years while still allowing upside in strong years.
Pros and Cons of the Percentage Structure
The principal advantage of an Ostler-Smith order is that it tracks the supporting parent's actual income without requiring repeated modification motions when income changes. For families with substantially variable compensation, this can save years of litigation and substantial professional fees. The order also provides predictable mathematical certainty about the result, which both parties can plan around.
The principal disadvantage is the disclosure and reconciliation burden. Both parties have to monitor the supporting parent's income, the receiving parent has to verify that the percentage payments are accurate, and disputes about whether a particular item of compensation falls within the order's coverage are common. For supporting parents who value finality, the open-ended nature of a percentage order can feel like an ongoing intrusion. Some choose to negotiate a higher fixed amount in exchange for elimination of the percentage component.
Spousal Support Applications
Ostler & Smith was originally a combined spousal-and-child-support case, and the percentage structure has been used in both contexts. On the spousal support side, however, the analysis is somewhat different. Spousal support under Family Code section 4320 is tied to the marital standard of living and involves discretionary factors that the guideline child support framework does not include. Some California cases have expressed caution about Ostler-Smith orders that effectively impose permanent escalation of spousal support without tying that escalation to the supported spouse's actual need. The use of Ostler-Smith on the spousal side is therefore more fact-dependent and often involves more explicit treatment of duration, caps, and reconciliation than on the child support side.
Drafting Considerations
Experienced California family law practitioners typically include the following elements in an Ostler-Smith order: a clear identification of the income categories covered, the percentage applicable to each category, whether the percentage applies to gross or net (with definitions where applicable), the timing of payment, the documentation requirements, any caps or floors, the treatment of equity compensation specifically including stock options and RSUs, and the procedure for resolving disputes over coverage. Reconciliation provisions, tax documentation requirements, and standard penalties for late payment also appear in many orders.
Enforcement and Modification
Enforcement of an Ostler-Smith order generally proceeds in the same way as enforcement of any other support order: by motion to the trial court, with the receiving parent bearing the burden of demonstrating the amount due. Modification follows the same general framework, requiring a showing of a material change in circumstances. Where the original order was carefully drafted and accurately reflects the supporting parent's actual income, modification motions tend to be uncommon, because the percentage structure already adjusts automatically to changes in income.
Conclusion
The Ostler-Smith percentage-based support order is one of the most flexible and effective tools California family law offers for families with variable compensation. Its successful use depends almost entirely on the quality of the drafting, the clarity of the income categories covered, and the rigor of the documentation requirements. For executives, sales professionals, investment professionals, and other high earners with fluctuating income, an Ostler-Smith structure is often the best available answer to the support question.
This article is for general informational purposes and is not legal advice. Outcomes in any particular case depend on the specific facts and applicable law.