When is a Gift Considered Income in the Calculation of Child Support?

When a couple with children divorces, often the parent with the higher income will be responsible for making child support payments to the other parent, dependent on parenting and access arrangements. In a case where one parent earns considerably more from their job or has significant personal wealth, the calculation of support can be a simple determination. However, how is income applied when one parent marries a new spouse who is extremely wealthy? Can this money ever be imputed to the parent as income for the purposes of calculating child support? A recent decision of the Albert Court of Appeal says yes.

A Father’s Lifestyle is Funded by His New Wife

In the case at hand, the parents had been married for fifteen years and had four children together. At the time the couple divorced, the father was earning approximately $200,000, and child support was set based on this income. Soon after, the father went on disability and his income was reduced to $84,000. As a result, the child support order was varied to reflect the change in circumstances.

A few years after the variance to the child support arrangement, the father remarried. His new wife was a business owner with significant personal wealth. The former wife requested a variance in child support again, requiring both parties to provide financial disclosure. The father was less than forthcoming about his finances and his former spouse made a formal request for full disclosure, as well as disclosure regarding his new spouse and her business. The former wife was successful on both counts.

The disclosure revealed that the new wife’s business brought in between $6 and $11 million per year, and as a result of her Indigenous status, neither she nor the company paid income tax. The new wife owned multiple residences and vehicles, and paid all of her family’s living expenses. While he owned no property himself, the husband had very few financial obligations of his own. The father listed his income for the preceding few years as between $65,000 and $78,000.

Mother Requests Imputed Income Based on Father’s Lifestyle

The mother sought an order to impute income to the father for child support purposes, as well as an order that he contribute to s. 7 expenses for the couple’s children.

The chambers judge found that the father had a credit card that was paid in full each month, and that the average monthly bill exceeded his stated monthly income by approximately $200. The bills were predominately comprised of items classified as discretionary spending, including clothing, travel and recreation. NOting that the purpose of the Federal Child Support Guidelines is to ensure that the children of a marriage benefit from the financial means of both parents, he imputed income to the father for the following reasons:

(1) DAJC’s day-to-day living expenses and at least some of his discretionary expenditures are funded by [his new wife] and (2) his current employment income from a non-arm’s length company is significantly lower than his employment income at the time of the separation in 2007.

The judge imputed an income of $250,000 to the father retroactive to 2013 and ordered the father to pay 75% of his children’s s. 7 expenses. The father appealed the decision.

Gifts Can Be Income if They are Regular & Likely to Continue

On appeal, the court considered the chamber’s judge’s reasoning and order, ultimately holding that:

As a general rule, gifts are not included in the payor parent’s guideline income but courts retain discretion to impute them in appropriate circumstances. Gifts to payor parents have been attributed as income when they are regular, long standing, materially affect the payor parent’s standard of living and are likely to continue… In this context, gifts are not limited to transfers of property ownership to the payor spouse. Regular payments of a payor parent’s everyday living expenses and his or her luxury expenditures may be imputed as income in appropriate circumstances…

However, the Appeals Court found that there was no clear basis for the calculation of an imputed income of $250,000 on the evidence. Rather than remit the matter back to the chambers court for determination, the Appeals Court varied the amount, adding $4,000 per month the father received for his personal credit card expenses to his stated income of $77,800.

The family law lawyers at Mincher Koeman are exceptionally experienced when it comes to both child support obligations and dealing with a party who is less than forthcoming about finances. We will work with you to ensure that you receive a fair distribution of assets and, if applicable, a support award that accurately reflects the true financial positions of the parties. Contact our office today by calling us at 403-910-3000 or contact us online.