How to Treat Gifts from Grandparents of the Children to Their Child in Calculating Child Support

In the recent case of Suzanne D. v. Stephen W. the Pennsylvania Superior Court, 2013 Pa. Super 93, filed April 22, 2013, discussed a case where a grandfather supplied his son with reimbursements for the grandchildren’s medical expenses and school activities and how such reimbursements impacts support. The appealing father indicated that the amounts supplied by his father, the children’s grandfather, were loans not gifts. Secondly, the father asserted that his father’s support of him by way of reimbursements for the children’s medical or extracurricular expenses could not be the basis for an upward deviation in support guidelines. Next, father indicated that it was an error of law or an abuse of discretion to find, under the facts of the case, that an upward deviation from the support guidelines was required. Next, the appealing father indicated that there was an error of law or abuse of discretion to find that the health care expenses and extracurricular activity expenses should not have been allocated between the parties.

Finally, the Appellant indicated that it was an error of law or abuse of discretion to award the mother attorney’s fees under the facts and circumstances of the case. Mother filed a cross-appeal indicated that the trial court committed an error of law or abuse of discretion when it concluded that regular, periodic transfers from the grandfather to the father were not income for support purposes even though the transfers were made at the father’s request and used to support his lifestyle but not required by law.

Father claimed that the money he received was a series of loans and pointed to demand notes and that the balance, if not paid, would be deducted from his inheritance. Mother urged that the trial court was acting within its discretion when it concluded that the payments were gifts. Mother particularly noted that the demand notes were not proof that the payments were loans because the demand notes only required payment of the lesser amount of either the $100,000.00 which the father had received; the unpaid principal; or amounts demanded. The amounts demanded could, at least in theory, have been nothing.

The trial court, in reviewing the record, found the father’s assertion that the payments were a loan not to be credible. Grandfather, when he testified, was unfamiliar with the demand note or its terms.

Income, for purposes of determining support, is defined to include compensation for services, including, but not limited to, wages, salaries, bonuses, fees, compensation in kind, commissions and similar items; income derived from business, gains derived from dealings in properties, rents, royalties, dividends, annuities, income from life insurance, contracts, all forms of retirement, pension income from the discharge of indebtedness, distributive share of partnership gross income, income from a decedent, income from interest in an estate or trust, military retirement benefits, other retirement benefits, temporary and permanent disability benefits, worker’s compensation; unemployment compensation; other entitlements and lump sums, including lottery winnings, income tax refunds, insurance compensation or settlements, awards or verdicts. 23 Pa.C.S.A. § 4302.

The Court noted the definition, though expansive, did not include gifts or loans. A gift, which is what the Court found in this case, or a loan would not be part of income for calculation of support but a gift could be the basis for a deviation from the guidelines. A loan could not. The Court here found a gift.

Mother argued that the gifts were income because they were used to support father’s lifestyle rather than for investments. Father argued gifts not given in exchange for services are not income under the statute. The Superior Court agreed with the trial court that gifts are not income. Monetary gifts from family members are a common practice and would have been known to the drafters of the statute. Had the General Assembly wished to include gifts as income it would have done so. The Court is not empowered to add language to the statute that the legislature did not.

Next, the Court reviewed Rule 1910.16-5 which states that the Court may deviate from guideline amounts but must state the reason for the deviation. Rule 1910.16-5(a) lists items which the Court may consider in determining a deviation including unusual needs or fixed obligations; other support obligations of the parties; other income in the household; ages of the children; relative assets and liabilities of the parties; medical expenses not covered by insurance; standard of living of the parties or the children; in a spousal support or alimony pendente lite case, the duration of the marriage from the date of the marriage to final separation and other factors, including the best interests of the children. The trier of fact must explain the basis for a deviation if it makes one. Gifts may be a consideration as the basis on which the Court may support a deviation.

Here the Court used actual income, not to include gifts, to calculate support. The Court considered the gifts in making a deviation. This is consistent with the law and rules of Court.

Thereafter, the Court did not allocate expenses for certain periods of time where the grandfather provided father with reimbursement for the same. The father argued that this was in error because Rule 1910.16-5 provides that unreimbursed medical expenses and other needs of the children shall be allocated. Other needs have been interpreted to include costs associated with extracurricular activities. Father was directly reimbursed for all expenses from the grandfather or a family trust such that father did not have to spend his own income for these expenses. Thus, father did not contribute to these expenses and the trial court did not require mother to pay an allocated portion of the expenses. The trial court did not abuse its discretion declining to require mother to pay a share of the expenses while father was being reimbursed by grandfather for those expenses.