Sunday, February 27, 2011

Are Monetary Gifts Considered Income in Child Support Calculations?

Until 2009, it was uncertain whether monetary gifts received by a mother or father of a minor child could be considered by a court in a divorce or paternity case in calculating child support.  That year, a California Appellate Court agreed to decide that issue.  It is very common for parents to give their married children cash gifts to help them pay expenses, particularly when the married couple is young and just getting started.    Likewise, parents often help their adult single mother child or single father child with their bills.  In this 2009 case, In re Marriage of Alter, the husband’s mother had been gifting him $3,000 per month for years.  After dissolution was filed, the husband moved in and lived with his mother.  The mother then bought a house for her son to live in.  She increased her son’s “allowance” to $6,000 per month.  Of that amount, $3,000 was for him to use for his expenses, and the other $3,000 was for him to give back to his mother as rent for the house that she purchased for him to live in. 
We are now in family court and the Wife is asking the Court to consider her Husband’s receipt of gifts from his mother over the years as income to him for the purposes of calculating child support.  The Husband responded that the money he received from his mother were gifts and not income.  What is the result?
Existing California case law provided little guidance on the point. The Appellate Court agreed it is settled that the principal amount of a one-time, lump sum gift or inheritance is not income but the rents, interest, or dividends generated by the gift are income. However, no cases specifically addressed a pattern of recurring gifts.  The Court looked at other states and found that they went in different directions, with some considering gifts as income and some not. It agreed with the treatment described in the Illinois case of In re Marriage of Rogers (2004), wherein the father received gifts and loans from his family which amounted to a steady source of dependable annual income he had received each year over the course of his adult life. He had never repaid any portion of those sums, nor paid tax on them. Rogers held that these gifts fell within the definition of income contained in the Illinois statute, which defined net income as “‘the total of all income from all sources.’”
The Alter Court concluded that “nothing in the law prohibits considering gifts to be income for purposes of child support so long as the gifts bear a reasonable relationship to the traditional meaning of income as a recurrent monetary benefit.”  So, the rule is that One-Time Gifts are NOT INCOME.  However, Recurring Gifts are INCOME so long as they “bear a reasonable relationship to the traditional meaning of income as a recurrent monetary benefit.”  The Trial Court HAS DISCRETION to consider whether to include these recurring gifts as income.  Yet, the Court is NOT REQUIRED to do so.  “While regular gifts of cash may fairly represent income, that might not always be so.”

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