What does Earning Capacity mean?
Earning capacity is the ability of a spouse to earn money in the future given their education, work experience, job skills, and talents. During a divorce the court will evaluate a spouse's earning capacity prior to dividing the couple's possessions, including personal property and real estate. For example, spousal support may be based on each spouse's likely future earning capacity.
In addition to property division, a court may also use a spouse's earning capacity to determine child support and spousal support payments. Interestingly, a spouse's earning capacity can also be "imputed" if one spouse is deliberately unemployed or underemployed in an effort to lower their support payments but has the capacity to earn more money.
Also, if one spouse's sacrifice is found to have significantly contributed to the advancement of another spouse (i.e. one spouse stayed at home and reared the children or worked two jobs to allow the other spouse to attend medical school) the court may decide the benefited spouse's increased earning capacity is a marital asset. In this case the court may give more compensation or more property to the spouse who supported the family.