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Gifts, Loans, and Child Support

Child support is typically based on the respective incomes of the parents of the children for whom support is sought; but what counts as income? Some people are fortunate enough to be the beneficiary of sizable gifts or loans from family and friends which help pay one’s bills and financial obligations. Should such loans and gifts be considered in developing a child support order? The recent case of Suzanne D. v. Stephen V., 65 A.3d 965 (Pa.Super.2013) attempts to answer this question.

In Suzanne D. Father was ordered to pay child support to Mother pursuant to a guidelines calculation based on their respective incomes. In addition, the Court assessed Father the entire cost of extracurricular activities and medical expenses for certain years and deviated from the guidelines upward to account for Father’s significant gifts from his own father (“Grandfather”). Father received regular monthly funds from Grandfather that were approximately equal to Father’s actual earned income. The parties disputed whether the funds received from Grandfather were gifts or loans and whether they should be considered in developing a child support obligation.

Father argued that the funds received from Grandfather were loans. Specifically, Father argued that Grandfather provided him a series of loans which he is obliged to repay, and, if he does not, the loaned money could be deducted from his inheritance from Grandfather. Father even produced a demand note to prove the existence of the loan.

Mother, by contrast, contended the sums given to Father were gifts, not loans. She argued that the demand note produced by Father does not necessarily even require the sums to be paid back to Grandfather. Further, Mother argued that the sums given to Father, being nearly equal to his earned salary, were exorbitant and, on their face, should warrant a deviation.

The Court, when reviewing the evidence presented, did not find Father’s assertion that the funds given were loans to be credible. The Court noted that Grandfather had a long history of giving money to Father, both regularly and on Father’s demand, and it was only after the parties’ marriage separated that Grandfather’s gifting generosity suddenly turned to lending, and Grandfather was Father’s employer, which, on its face, shed a suspicious light on the status of the monies given to Father. The Court did not find the demand note persuasive enough to cast the given funds as loans that required repayment. Further, perhaps justifying the Court’s determination of Father’s lack of credibility, Grandfather’s testimony about the demand note during a hearing conflicted with his deposition testimony on the subject and he demonstrated that he was unfamiliar with the demand note and its terms. Similarly, Father was unfamiliar with his own monthly expenses, likely due to them having been paid by Grandfather for so long. Based on the above, the Court ruled that the funds given to Father by Grandfather were gifts.

After the Court ruled the funds referred to above were gifts, the Court next had to determine whether these gifts ought to have any effect on the child support order. Father argued that since 23 Pa.C.S.A Section 4302, which determines what income is for the purposes of child support, does not include gifts, so the funds he received from Grandfather ought not be included as income for the purposes of child support.

The Court acknowledged that the funds could not be categorized as income based on the plain language of the statute cited above, but the gifts could be considered in order to warrant a deviation from the basic child support guidelines. The Court ruled that since the gifts from Grandfather were frequent, could be given on demand, had been given for many years, and nearly doubled Father’s income, it clearly warranted a deviation from the child support guidelines, especially as it put Mother at an extreme disadvantage as her base salary was only about twenty (20) percent of the joint parental income not including the gifts made by Grandfather.

Finally, extra-curricular activities and medical expenses are generally divided between the parents proportionate to their incomes; however, in this case, Grandfather, for a number of years, paid for all of the extra-curricular activities and medical expenses himself without contribution from either Father or Mother. As Father did not incur any of the expenses for extra-curricular activities and medical expenses for those years, the Court, therefore, ruled that Mother was not obliged to reimburse Father for her proportionate share of those expenses for that time.

The Court of Suzanne D. makes it abundantly clear, while gifts cannot be included as income for the purposes of a child support guidelines calculation, if large enough, they can warrant a deviation from those same guidelines.

Originally published in Upon Further Review on April 16, 2014 and can be found here.

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One thought on “Gifts, Loans, and Child Support

  1. Pingback: A Collection of Family Law Writings by James W. Cushing, Esquire | judicialsupport

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