Annual gifts from wealthy parents complicate son’s divorce case

Parents often want the best for their children, no matter how old they are. In some families, adult children with kids of their own have parents with the means to help their sons or daughters financially. Readers in Orange County, California, may think that children of these parents are considerably lucky and blessed, however gifts and money provided to a child by a wealthy parent may result in complexities during divorce.

For example, the divorce case of a California couple is one of these cases where family wealth muddied the divorce waters. The couple lived a lavish lifestyle during their 20-year-marriage because of the financial support from the husband’s wealthy parents. The couple and their children received a total annual tax-free gift of $130,000 and used that money to purchase and renovate several properties.

A district court concluded that all of the financial gifts that the husband received from his parents were loans and not income that could be used to determine spousal or child support. Whether the gifts would permanently cease after the divorce also affected the issues. A California appeals court later ruled that the money provided by the parents should be considered as income in divorce procedures. The woman did not file for modification or appeal the temporary alimony order.

In the event of divorce, gifts must be disclosed and considered by the court when reviewing divorce legal issues such as child support, spousal support and property division.

Gifts or financial support a family receives from relatives can sometimes co-mingle with marital assets and properties owned by the couple. Co-mingling assets with gifts is something that divorcing spouses in California should be mindful about because it can affect the outcome of the divorce case and their financial security.

Source: Courthouse News, “Wealthy Couple’s Divorce Makes a Stunning Read,” William Dotinga, June 13, 2014