A marital disaster could also be a pitfall for aging clients who consistently gift money
It’s not uncommon for parents to give their children financial support even after they cross the thresholds of adulthood and marriage. But while giving money consistently can be helpful, such aid could come back to bite the beneficiary — particularly in cases of divorce.
Laurie H. Pawlitza, a senior partner specializing in family law at Torkin Manes, related the 2015 case of Bak v. Dobell in a piece for the Financial Post. A 41-year-old husband, who had mental-health issues that prevented him from being self-sufficient, was paying nominal support for his 13-year-old daughter. Over several years, he had received $300,000 from his own father to pay for career training and a home; aside from that, the father was giving him $1,700 a month, which composed the bulk of the man’s income.
Wanting more child support from the husband, the child’s mother filed a motion for the court to impute an income based on his average lifestyle or, alternatively, to value and count the monetary gifts toward his income for support purposes.
The court noted that, under Canada’s Child Support Guidelines, a payor’s presumptive income is based on the “total income” line item on their tax return, which means gifts and lifestyle factors should not count under the presumptive income.
But the court wasn’t done. Under Section 19 of the guidelines, income could be imputed over and above a payor’s presumptive income in specific cases — typically when a spouse is able but unwilling to earn income, or fails to properly disclose their income.
It was ruled that gifts could also form part of income on which support is calculated, depending on the facts of a case. These could include factors such as how regularly they came, for how long they were given, whether they came during cohabitation, and whether they enabled more than a basic standard of living. Whether they went on even after separation, and the role and purpose they played in the payor’s entire income, were also considered.
In the Bak case, the Court of Appeal ruled that since the husband was unable to support himself without financial assistance, his father’s gifts did not have to count toward his income. But just a month after that ruling, the court faced a similar case — and came to a different decision.
In Korman v. Korman, a husband had used monetary gifts to enhance his family’s lifestyle, finance specific family expenditures, fund his various business ventures, and pay for the children’s private school and camp. Over 10 years prior to separation, the gifts added up to roughly $1 million; they continued even after the couple split.
The court acknowledged that the husband’s parents had no obligation to continue with the gifts, but sided with the trial judge’s ruling that they reflected his actual past revenues and his likely future financial position. Therefore, they could be considered as a basis for determining support payments; should the gifts stop coming, the court ruled, the husband could move for an updated determination.
For more of Wealth Professional's latest industry news, click here.
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Young adults living with parents on the rise
Canadian parents willing to give adult children leg up to move out
Laurie H. Pawlitza, a senior partner specializing in family law at Torkin Manes, related the 2015 case of Bak v. Dobell in a piece for the Financial Post. A 41-year-old husband, who had mental-health issues that prevented him from being self-sufficient, was paying nominal support for his 13-year-old daughter. Over several years, he had received $300,000 from his own father to pay for career training and a home; aside from that, the father was giving him $1,700 a month, which composed the bulk of the man’s income.
Wanting more child support from the husband, the child’s mother filed a motion for the court to impute an income based on his average lifestyle or, alternatively, to value and count the monetary gifts toward his income for support purposes.
The court noted that, under Canada’s Child Support Guidelines, a payor’s presumptive income is based on the “total income” line item on their tax return, which means gifts and lifestyle factors should not count under the presumptive income.
But the court wasn’t done. Under Section 19 of the guidelines, income could be imputed over and above a payor’s presumptive income in specific cases — typically when a spouse is able but unwilling to earn income, or fails to properly disclose their income.
It was ruled that gifts could also form part of income on which support is calculated, depending on the facts of a case. These could include factors such as how regularly they came, for how long they were given, whether they came during cohabitation, and whether they enabled more than a basic standard of living. Whether they went on even after separation, and the role and purpose they played in the payor’s entire income, were also considered.
In the Bak case, the Court of Appeal ruled that since the husband was unable to support himself without financial assistance, his father’s gifts did not have to count toward his income. But just a month after that ruling, the court faced a similar case — and came to a different decision.
In Korman v. Korman, a husband had used monetary gifts to enhance his family’s lifestyle, finance specific family expenditures, fund his various business ventures, and pay for the children’s private school and camp. Over 10 years prior to separation, the gifts added up to roughly $1 million; they continued even after the couple split.
The court acknowledged that the husband’s parents had no obligation to continue with the gifts, but sided with the trial judge’s ruling that they reflected his actual past revenues and his likely future financial position. Therefore, they could be considered as a basis for determining support payments; should the gifts stop coming, the court ruled, the husband could move for an updated determination.
For more of Wealth Professional's latest industry news, click here.
Related stories:
Young adults living with parents on the rise
Canadian parents willing to give adult children leg up to move out
