Do “Gifts” From My In-Laws to My Spouse Matter in My Divorce?

It’s not at all uncommon for the parent(s) of a spouse going through a divorce to help their adult child out financially through the difficult period of adjusting to life post-separation. This could mean something as simple as sending a few small checks to help cover bills or pay for an apartment deposit. But in other cases, this might mean a wealthy parent essentially takes care of the divorcing spouse indefinitely such that the receiver of the gift is living above their means.

Parental generosity is all well and good, but, where the parental support – or support from any other person – is extensive and/or recurring, it can have legal implications as well, not just for support but also attorney’s fees.

For example, if the husband in a divorce is receiving $10,000 a month from his parents tax-free to pay for all of his living expenses, should this factor into whether the wife who makes gross income of $7,500 a month should pay a significant portion of that to the husband as spousal support, when in effect he has more cash coming in every month than she does? Conversely, if an “out of work” film producer mother claims she has no income to pay child support, but is living in a stately house that her parents just purchased for her, and receives intermittent “loans” of $20,000 every month that she may or may not have to pay back, should that be considered in determining how much, if any, she should pay in child support?

California courts, not surprisingly, have dealt with these types of questions with some frequency. First things first, parents generally do not have an obligation to support their adult children (outside of special circumstances, i.e. where the adult child has a severe disability) nor the children of their adult children, and a former spouse should not expect their in-laws to assume their obligation for spousal support and/or child support, no matter how wealthy the in-laws might be. That said, if third parties such as in-laws are providing significant financial support to either a potential payor or payee of support, a court may well consider that in determining what support should be paid and in determining related issues such as payment of attorney’s fees.

Are the Funds a Loan or a Gift?

A significant determination made by the court will be whether the financial support given to an adult child is a loan or a gift, the obvious difference being that a loan should be paid back to the parent but a gift does not have to be paid back. Courts in general will not consider a loan to be income, whereas a gift could qualify as income. Which may lead some parents to call a gift a loan to avoid funds being attributed as income to the receiver, but the other side may dispute whether the “loan” is in fact a gift. For example, if a spouse receives $5,000 “loans” every month, but never pays back any of the loans and there is no documentation evidencing terms of a loan, that spouse may face challenges in proving that the funds are indeed loans.

Are the “Gifts” Recurring “Income”?

Assuming the funds received are in fact gifts, another analysis a court may make is whether the funds a person receives are ongoing, recurring income to that person such that the court should factor those funds in determining support (or in determining other issues such as ability to pay their own or the other party’s attorney’s fees, a commonly disputed issue in California divorces).

Essentially, if a gift was a one-time occurrence and/or the gifts occurred for a period and have since stopped, a court may be less likely to consider the gifts as income to the receiving spouse for the relevant issues. On the other hand, if the gifts appear to be “periodic and regular” or recurrent for a period of years as an ongoing part of the parents’ gifting and estate planning, a court may be more likely to consider such financial support as income to the receiver, meaning the gifts might reduce the amount of support that person receives from an ex-spouse or co-parent, or conversely increase the amount of support that person has to pay.

Divorce litigation is often funded by well-meaning parents in an effort to help their children facing custody and support issues. It’s not unheard of that each side will incur legal fees of $500,000. In cases where the Courts find that neither party a greater ability to pay legal fees and legal fees incurred are far in excess of either party’s ability to pay, the Court may deny a request for fees. Courts have a wide degree of discretion in assessing how third-party gifts should be treated in determining support and attorney’s fees, and parties facing this issue are encouraged to work with skilled counsel in navigating their family law case.

Guidance on Your California Family Law Questions From a Westlake Village Family Law Attorney

If you would like to learn more about how our office can provide guidance on any California family law issues you are facing in Ventura County or Los Angeles County, contact the Zonder Family Law Group office today at (805) 777-7740 or (818) 877-0001, or schedule your strategy session using easy-to-use online form here.