What happens if a divorcing husband’s parents are rich — very rich — and have a history of giving money to their son? Is the wife allowed to add up the money that her in-laws have given and use that to get higher child and spousal support? Not always, the California Court of Appeal said in a recent case entitled In re Marriage of Williamson.
In Williamson, the principal issue was “whether the trial court abused its discretion by declining to treat historical cash advances from (the husband’s) parents as income in calculating child and spousal support”. The appeals court upheld the trial court because “the advances ceased before trial and there was no evidence they would resume. Recognizing it could not order (the husband’s) parents to make further cash advances, the court reasonably concluded it could not base an enforceable child or spousal support order on them”.
In this case, the husband’s parents made annual tax-free gifts of $26,000 to the husband, the wife, and each of their children, for a total of $130,000.00 per year. They also paid the children’s private school tuition. In 2000, the parents gifted the husband and each of his siblings $900,000.00. Another time, the father advanced the spouses $395,000.00 to purchase a home. Finally, during the final two years of the marriage, the husband obtained large sums of money from his parents to help pay for the renovation of a home.
The advances to the couple totaled over $2,168,055.00, including interest. Of great importance, at trial, the father said that he did not intend to make any further advances to his son other than the annual $26,000.00 tax-free gift.
Those are pretty much the facts. At trial, the judge made the common sense observation that “[t]he suspicions that the family would make its wealth available to (the husband) to pay spousal support before allowing (the husband) to go to jail for contempt . . . . although perhaps likely and maybe even the driving forces behind this litigation, are largely irrelevant or unsupported by sufficient evidence on which to make findings”.
The judge also said he could not order the father and mother to make further cash advances or gifts and it was entirely speculative whether additional advances would be made.
The appeals court recognized established precedent 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”. But “while regular gifts of cash may fairly represent income, that might not always be so”. In other words, it is up to the trial court, on a case by case basis, to determine whether to treat these gifts as income. In many cases, it may simply come down to what the judge thinks is fair.
Here, the advances were irregular and outside “the traditional concept of income as a recurrent, monetary benefit”. But the appeals court said that if advances were made in the future, it could modify the amount of child support.
As for spousal support, there is no precedent that analyzes which gifts should be treated as income and which should not. But the appeals court upheld the trial court because, though the marital standard of living was high, there was no guaranteed income to maintain the standard of living. (The standard of living is one of the things the court must look at in deciding spousal support.) The appeals court summed it up this way: “Having found that (the parents) are no longer advancing funds to (the son), the trial court appropriately based its spousal support order on (the son’s ability to pay), rather than that of his parents. . . . “Charity, once extended is . . . not an entitlement. Parents are not obligated to pay the costs of their children’s divorces”.
This whole case could have come out differently. If the trial judge, who is entitled to make determinations about witness credibility, did not believe the father and believed that surely the advances would continue just as the sun rises in the East, it could have made much higher support orders. And the appeals court might have affirmed that decision as well. Support orders, like many decisions in the law, are usually left up to the wide discretion of the trial court.
(The whole analysis is based on the holding at the appellate level that the advances were gifts, not loans. If the money paid out constituted loans, the outcome would have been the same — no consideration of the parental contributions — but for a different reason. Established case law, at least in the area of child support, says that loans can never be considered as income.)
The decision in Williamson was unanimous — 3-0. The case arose out of Santa Barbara County, but in California, state appeals decisions are binding on trial courts throughout the state in most cases.