INTRODUCTION
Deana Hess appeals from a trial court’s decision decreasing the child support obligation owed by David M. Mehne for the parties’ twin boys. Hess asserts on appeal that a personal injury lump-sum settlement award received by Mehne should be considered income for the purpose of calculating child support.
BACKGROUND
The parties’ twin boys, Ethan and Evan, were bom on June 30, 1990. A paternity action was filed, and pursuant to an agreement between the parties, temporary child support was set in October 1992 at $674. A settlement agreement, in which Mehne admitted paternity, was approved by the court by order dated March 11, 1993. This agreement further awarded custody of the minor children to Hess, subject to reasonable visitation, *936 and required Mehne to pay $500 in child support, with this amount subject to review and retroactive adjustment upon settlement of Mehne’s pending lawsuit against Burlington Northern Railroad. The record fails to disclose how the $500 figure was arrived at. The agreement, and the order approving it, provided: “If Petitioner is awarded compensation for lost wages and future loss of earnings, the Court shall adjust the support due . . . .”
Mehne filed a “Showing” on November 17, 1994, acknowledging that he had received a settlement amount from Burlington Northern shortly after May 10, 1994. A hearing to determine child support was held on January 9, 1995. By a journal entry filed May 19, 1995, the court found a material change in circumstances and reduced Mehne’s child support to $231 for two children and $148 for one child. In reaching these amounts, the court attributed $737 gross monthly income to Hess ($4.25 x 40 hours) and $775 gross monthly income to Mehne. The income figure attributed to Mehne was reached by applying a 4.43-percent interest rate to $209,820 of his settlement. No portion of the settlement’s principal amount was treated as income.
EVIDENCE ADDUCED AT TRIAL
In March 1991, Mehne injured his back while working as a brakeman and conductor for Burlington Northern. Because of his injury, Mehne was unable to return to that position. In May 1994, as the result of a claim under the Federal Employer’s Liability Act, Mehne negotiated" a gross settlement award of $375,000. In addition to this amount, all of Mehne’s medical expenses were paid. Mehne testified that he did not expect further surgeries resulting from his injury. Burlington Northern deducted from the gross settlement amount slightly over $36,000 for loans to Mehne following his injury, making Mehne’s check from Burlington Northern approximately $339,000. Further deductions for attorney fees, legal expenses, and a $25,000 “sustenance loan” were also made. It is unclear from the record whether the net settlement amount received by Mehne was $209,401 or $209,820. From the net amount received, Mehne paid off additional unspecified bills, leaving *937 $189,401.79. Mehne then purchased a house for $82,000 and a used truck for $10,000. At the time of the hearing in January 1995, Mehne had remaining from the settlement proceeds $3,000 to $4,000 in a checking account and approximately $65,000 in various interest-bearing funds and deposits.
Mehne is currently a full-time student, having started a 4-year course of study in the fall of 1994. He expects to graduate in May 1998 with a bachelor of science degree in nursing. Mehne estimated that he would be able to earn between $30,000 and $40,000 with this degree. Mehne is currently unemployed. He stated that it would be difficult for him to find a job at the current time due to his back injury, but that he would be “very employable” with a nursing degree. At the time of trial, Mehne testified that he had no other form of income and that he relied upon the remaining settlement proceeds to pay living expenses. Mehne is currently married and resides with his wife and her two children from a previous relationship.
Hess currently lives in Denver, Colorado, with her “common law” husband, their newborn child, and her twin sons. Hess is also currently unemployed due to her recent pregnancy and a preexisting back injury aggravated by her pregnancy. Hess testified that she had had four back surgeries in the past and might require a fifth.
Hess is a licensed practical nurse. Prior to moving to Denver, she was employed for approximately 6 months as a nurse, earning $7 an hour. Since moving to Denver, Hess has been employed at several nursing agencies. At her last position, she earned approximately $14.50 an hour, averaging 30 hours a week. At the time of trial, Hess had been unemployed for 11 months. Hess plans to go back to school to get her registered nurse’s degree, which she estimated would take less than 6 months. Due to her back injury and newborn child, Hess estimated she would be able to return to school within another year or so. Hess estimated her monthly expenses to be approximately $1,000 a month.
ASSIGNMENT OF ERROR
In sum, Hess’ sole assignment of error is that the trial court erred in considering as income for child support purposes only *938 the interest produced by Mehne’s lump-sum settlement, rather than the entire amount.
STANDARD OF REVIEW
The trial court’s award of child support after a determination of paternity will not be disturbed on appeal absent an abuse of discretion.
State
v.
Smith,
ANALYSIS
This case presents the issue of whether and how a personal injury settlement award should be considered for purposes of calculating child support. The trial court found that only the income generated by applying a hypothetical interest factor to a “net” settlement amount should be considered.
Should Net Settlement Amounts Be Considered?
Paragraph D of the Nebraska Child Support Guidelines defines total monthly income as the “income of both parties derived from all sources, except all means-tested public assistance benefits and payments received for children of prior marriages.” Although not in effect at the time of this hearing, Paragraph D was amended effective January 1, 1996, to provide, in addition to that stated above: “If applicable, earning capacity may be considered in lieu of a parent’s actual, present income and may include factors such as work history, education, occupational skills, and job opportunities. Earning capacity is not limited to wage-earning capacity, but includes moneys available from all sources. ” This amendment formalizes existing legislative direction and prevailing court decisions that earning capacity as well as the guidelines shall be considered in determining child support. See, Neb. Rev. Stat. § 42-364(6) (Cum. Supp. 1994);
Sabatka v. Sabatka,
*939
Other jurisdictions, interpreting similar definitions of income, have included settlement proceeds in a parent’s income figures. In
In re Marriage of Fain,
Section 14-10-115(7)(a)(I)(A), C.R.S. (1987 Repl.Vol. 6B) provides that “gross income” includes “income from any source and includes, but is not limited to . . .” the items specifically enumerated therein. Therefore, although social security benefits and disability benefits are expressly included as “gross income,” § 14 — 10—115(7)(a)(I), by its plain language, also includes all payments from a financial resource, whatever the source thereof. . . .
While the General Assembly expressly excluded certain benefits from the definition of “gross income,” ... the statute does not provide an exclusion for personal injury benefits.
A similar result was reached by the Superior Court of New Jersey in
Cleveland
v.
Cleveland,
The Minnesota Court of Appeals, applying a similar analysis, reached a similar result. “Income” for the purpose of establishing child support is defined in Minnesota as “ ‘any form of periodic payment to an individual including, but not limited to, wages, salaries, payments to an independent contractor, workers’ compensation, unemployment compensation, annuity, military and naval retirement, pension and disability payments.’ ”
Sherburne County Social Serv. v. Riedle,
The Minnesota Court of Appeals repeated this holding in
Mower County Human Services
v.
Hueman,
Mehne, however, argues that since Nebraska has viewed personal injury settlements as
property
in dissolution cases,
Maricle
v.
Maricle,
Contrary to Mehne’s argument, child support is also different from spousal support. Accordingly, Mehne’s reliance upon
Ainslie v. Ainslie, ante
p. 70,
Mehne also contends that Nebraska has already determined that only interest income derived from personal injury settlements should be considered when awarding child support, citing
Maricle, supra,
and
Lainson v. Lainson,
It has been the law of this state for many years that, as stated in Brus v. Brus,203 Neb. 161 , 164-65,277 N.W.2d 683 , 686 (1979), “[i]n determining the amount of child support to be awarded, the status, character, and situation of the parties and attendant circumstances must be considered. The financial position of the husband as well as the estimated costs of support of the children must be taken into account “Earning capacity” as used in § 42-364(3) means the overall capability of a parent to make child support payments based on the overall situation of the parent making such payments. That overall situation includes moneys available to the parent from all sources, including investment income.
Lainson,
Finally, we are not persuaded by Mehne’s argument that personal injury settlements should be ignored as an income source in determining child support because they are not considered as gross income by Internal Revenue Service laws. The taxability of moneys received provides no logical basis to necessarily include or exclude them from the category of resources available to pay child support. Such a general proposition would exclude such settlements, when in fact many represent compensation for lost wages or diminished earning capacity, which are pivotal considerations in setting child support under Nebraska law. See, § 42-364(6); Sabatka, supra.
Based on the clear language of § 42-364(6), the broad definition of “income” in the guidelines, the Lainson holdings, and the cited decisions of other states, we conclude the district court abused its discretion in considering only interest income available from Mehne’s settlement proceeds in determining Mehne’s child support obligation. Having so found, we must make a de novo determination of what portion of Mehne’s *943 personal injury settlement should be considered and how it should be factored in. Such a determination, by necessity, must depend upon the facts of each case, including what the settlement was intended as compensation for.
What Portion of Settlement Proceeds Should Be Excluded?
No attempt was made by either party to allocate the gross settlement proceeds to any specific element or item of damage. We realize that particularly in a general personal injury settlement context, such allocation is difficult, if not impossible, and subject to some abuse by those who attempt to make an allocation to meet the exigencies of the issues in dispute. Allocation becomes most important when there is a genuine dispute over whether a portion of the proceeds should be excluded because, inter alia, they are (1) compensation for the recipient’s medical care and related expenses,
Gallegos
v. Gallegos,
Of course, Mehne does not argue for any such partial exclusion, but, rather, insists that none of the proceeds should be included. Moreover, the evidence shows that none of the settlement was for past medical costs and that it is reasonably certain that significant medical expenses will not occur in the future from the injury. Based on the economist’s report which was used in settlement negotiations, Mehne’s lost wages and future wage loss alone from the disabling back injury were projected at approximately $716,000. The report was a pivotal tool in his attorney’s April 4, 1994, $625,000 settlement *944 demand. The $375,000 settlement was consummated on April 29, 1994. We believe a fair inference is that the settlement, in large measure, was intended to compensate Mehne for the significant lost wages and future wage loss which he sustained.
We do not suggest that the settlement served no other purpose. To be sure, two back surgeries culminating in a fusion of vertebrae at the L5-S1 level involved pain, suffering, and significant permanent bodily impairment and overall disability. Such damages are, by nature, incapable of precise definition, but nonetheless very real. While it may be reasonable to assume that some undefined portion of the settlement was attributable to such factors, without any guidance evidentially in that regard, what portion was is purely speculative. What is certain from the evidence is that Mehne’s lost wages and future earnings were significant in triggering the settlement. When a settlement is intended to replace income which would have been earned absent injury, it is generally treated as income for child support purposes. See
In re Marriage of Swan,
Hess contends that the entire net settlement amount received by Mehne should be considered in the child support equation. Given the conflict in the evidence, we conclude that this amount is $209,401. Using this amount not only allows Mehne a deduction for the fees and expenses in generating the settlement, but also includes a deduction for approximately $61,000 to repay moneys loaned to Mehne following his injury. Although Mehne has only approximately $69,000 remaining from his settlement, he purchased a house and a vehicle out of the proceeds, and also paid off other significant debts. As a result, a reasonable inference is that he is not now shouldering mortgage, auto loan, or general debt-servicing burdens. We therefore conclude that under the circumstances here, the figure of $209,400 is an equitable sum to factor into our de novo determination of Mehne’s child support obligation. We note, however, that there are several other ways, figures, and methods which may be used to reach a fair result in such cases. The facts *945 and circumstances of each case necessarily dictate the outcome where such settlements are to be considered in determining child support.
How to Consider Proceeds.
We move, finally, to the question of how to factor the settlement proceeds into the determination of Mehne’s child support calculation. Again, as Mehne is insistent that none of it should be considered, he provides no solution in this regard. Hess argues that the entire net amount should be allocated over a period of 4 years to correspond with Mehne’s completion of schooling before returning to the work force. According to Hess, using the child support guidelines, such allocation results in Mehne’s monthly support obligation of $811 for the twins.
Our research discloses that other courts facing this issue have used a variety of methods to calculate support when faced with a lump-sum settlement amount determined to be includable in the recipient’s income for child support purposes. Some view the lump-sum settlement amount as income only in the year in which it was received. See
In re Marriage of Sullivan,
The facts of this case indicate that Mehne is currently unable to engage in work involving strenuous physical labor, the type of work which has represented his livelihood for the 15-year period prior to his injury. He is currently a full-time student, and his current source of income is what remains from his settlement award, some $69,000. He plans to graduate in May 1998 after completing a 4-year program to attain his bachelor of science degree in nursing. He estimates his earning capacity will be between $30,000 and $40,000 gross per annum after graduation. We realize that much of the remaining proceeds may be necessary for basic living expenses of Mehne’s current household during his schooling, absent his obtaining part-time employment to supplement these amounts. At the same time, we cannot ignore that a substantial portion of his settlement proceeds were used to purchase assets and pay debts, which has reduced his necessary monthly living expenses and thus benefits his overall financial condition and standard of living, a standard which would have been shared with his twins if they lived in his household.
In our de novo review, we conclude that the settlement proceeds of $209,400 should be allocated over the period of time from Mehne’s receiving it (May 1994) until the twins reach age 19 (2009), or for 15 years. By using this method, the children benefit from an increase in support from Mehne over the entire time they are entitled to receive it and Mehne is not attributed income which results in a child support obligation totaling nearly $40,000 over a 4-year period — the amount of the award were we to accept Hess’ position. In reaching this decision, we are aware that a reasonable inference is that the settlement proceeds were intended to compensate Mehne for his entire working life. However, spreading the settlement proceeds over a period of 34 years would lead to an untenable result in this case and would not be in the children’s best interests.
By applying the above method, Mehne’s current child support obligation must be calculated using a monthly net income figure of $1,163. The trial court attributed an earning capacity to Hess based upon a 40-hour week at $4.25 per hour *947 and used a net monthly income figure for her of $619. Neither party challenges this figure on appeal. Using that same amount in our de novo determination, Mehne owes $353 per month for child support for the two children and $227 for one child, commencing on June 1, 1995, and continuing thereafter as allowed by law or until further order of the court. No income tax deduction was calculated in determining Mehne’s monthly income figure as, according to Mehne, no income tax is payable on the award. The $1,163 monthly income figure which we have attributed to Mehne must continue to be attributed to him, in addition to his actual earnings, in any future child support determinations.
CONCLUSION
The district court was correct in modifying Mehne’s child support obligation. However, the district court abused its discretion by considering Mehne’s settlement proceeds only to the extent of the interest income which they could generate. Instead, under the circumstances of this case, portions of the settlement proceeds should have been considered in determining child support, either as income or as a factor affecting Mehne’s overall financial condition and thus bearing on his earning capacity. We modify the district court’s order by increasing Mehne’s child support obligation effective June 1, 1995, for two children to the sum of $353 per month and $227 per month if only one child remains to be supported, subject to the directions in this opinion regarding any future child support determinations.
Affirmed as modified.