GIFTS CONSIDERED INCOME:
CASH GIFTS AND OTHER FINANCIAL BENEFITS FROM LEGAL STRANGERS
The latest case to address whether gifts are income is Anna M. v. Jeffrey E. 1, which comes out of Los Angeles County Superior Court. Mother and Father shared equal physical custody of a ten-year-old child. Father earned $400,000 per year while mother had no income. However, mother did receive benefits from her non-romantic friend valued at $30,000 per month. Mother lived in her friend’s home which had a monthly fair market value rent of $10,000. Mother’s friend also paid mother’s bills and allowed her to use his vehicles without charge.
Seeing that mother was benefiting greatly from her friend’s kindness, father asked the trial court to impute mother with $30,000 of income for the benefits she received. The trial court refused, noting that Mother’s friend recently began paying these expenses, and that there is a legal preference for parents to pay child support for their children. Thus, the trial court ordered father to pay child support and attributed zero income to mother.
The appellate court reviewed case law addressing this topic. Standing out was Marriage of Alter, which held that recurring cash gifts from family constituted income for child support purposes.2 However, this court ultimately held that mother would not be imputed with income despite receiving $30,000 in gifts from her friend.
The court distinguished the facts in this case from previous cases. In Alter, father received recurring cash payments from his mother each month. The appellate court ruled that those payments should be considered income. Contrastingly, the Anna M. court noted that the relationship between mother and her friend are of legal strangers, and their support arrangement was unclear. Evidence showed that they were merely friends, and not romantic partners or family. It was also unclear how much mother’s friend gave mother each month, although monthly payments supposedly averaged $12,000. Compare that to the familial relationship and unchanging monthly payments made in Alter. The Anna M. court noted the friend’s cash payments were akin to gifts made on an as-needed basis, and did not fit traditional definitions of income.
Moreover, the father in Alter had been receiving payments for roughly a decade, whereas the mother in Anna M. only recently began receiving financial support from her friend. The court also pointed out that the money mother received from her friend was earmarked for specific purposes, which made it less likely that it was available for child support. Contrast with the cash in Alter, which was given freely to the father without ties to any specific purpose.
Thus, the appellate court ruled that the cash gifts mother received from her friend were not income, and affirmed the decision not to impute her with income for child support purposes. In particular, the court noted that imputing mother with income in this case would cause the child to be partly dependent on a third-party legal stranger for support, which goes against public policy.
The facts and legal conclusion in Anna M. v. Jeffrey E. lead us to wonder whether the outcome would be different if any of the following were true: Suppose all the facts remained the same, but mother had been dating her friend. Or what if mother had been receiving cash from her friend for a longer period of time? We’ll definitely be keeping our eye out for new cases in this developing area of the law.
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Marissa Major and Hillary Warren of Warren Major LLC are Marin County family law attorneys, specializing in divorce, child custody and support, marital contracts and other family law issues. If you are looking for honest, expert legal advice, please contact our office for a consultation
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1Anna M. v. Jeffrey E., No. B267004 (Cal. Ct. App. Jan. 11, 2017).
2Marriage of Alter, 171 Cal.App.4th 718 (2009).