Continued Gifts Considered Income

Those who are or have gone through a divorce or custody dispute know very well just how expensive litigation can be. Anyone who is able to retain legal counsel knows that the more work that is required, the higher the legal fees. When a case takes a turn for the litigious, many find themselves in a position where they cannot afford an attorney without some sort of financial assistance. Some people are fortunate enough that they have the support of a friend or family member who is willing and able to help pay for the party’s attorney fees. Many, especially those who don’t have this luxury, would consider this too good to be true and in fact, in some cases, they are right. In a recent decision from In re Marriage of Smith (2015) 242 Cal.App.4th 529, the Court explained how regular, recurring gifts as income for purposes of awarding attorney fees.

In Smith, husband and wife divorced but continued to litigate issues regarding custody and support. Husband filed a request to modify child support and a request that wife be ordered to pay his attorney fees as sanctions. Subsequently, husband filed another request seeking modification of child custody while wife filed a request for modification of child support. All three requests were heard on the same date. Ultimately, the trial court held that wife and her attorney had been unreasonable, unduly burdensome and had at times acted in bad faith. As a result, the court awarded husband attorney fees and costs pursuant to Family Code Section 2030 and 271. Wife appealed and the Court of Appeals affirmed.

In support of its decision, the Court pointed to the fact that wife had “no concern” about her attorney fees and costs because her father was the one paying those fees and costs. In fact, wife’s father had testified that he did not expect to be repaid during his lifetime. Although wife argued that these funds were a loan on her inheritance (6 million is what wife would inherit upon her father’s death), the court referred to In re Marriage of Williamson ((2014) 226 Cal.App.4th 1303). In Williamson, the Court held that even if characterized as a loan, advances on a party’s inheritance could be treated as a gift and thus, as income for purposes of support. The Court in Smith found that the repeated payment of wife’s attorney fees as an advance on her inheritance properly qualified as a gift under the ruling in Williamson and therefore was properly considered income. The Court explained that it is within the direction of the court to consider such “regular, substantial infusions of cash” as part of assessing the parties’ relative financial circumstances and the ability to defend against the proceedings at hand. As stated above, wife was set to inherit $6 million at her father’s death. Husband, however, had very little in liquid assets, had paid most of his fees by credit card, and thus was not in a position to be able to financial litigation in the same manner as wife.

When getting financial help from someone, this is not likely the first thing that comes to mind. However, it is an important case to know when considering having one’s friends and/or family help with regularly paying attorney fees. Here at Mello & Pickering, LLP we can help you navigate through your divorce and/or custody case. With over 28 years combined experience, we know how to assist clients in assessing their claims and put together a plan that will help ensure that their divorce goes as smoothly as possible.