Recurring $50,000 Annual Gift – Should it be Included in Husband’s “Income”?
In a recent decision called Horowitz v. Nightingale, the key question for the court was whether, in calculating the husband’s annual “income” for equalization purposes, the total should include a regular gift of $50,000 he received each year from his wealthy parents.
The couple had been married about 16 years when they separated. They had three children together, each of whom had special needs. The wife was looking for about $35,000 per month in spousal and child support, based on the husband’s income which her experts estimated was about $1.7 million for 2013, and over $3 million for 2014, including certain withdrawals the husband made from his RRSP. The husband, in contrast, claimed that his overall income for 2013 was under $600,000, and that his support obligation should be adjusted downwards accordingly.
As part of the task of ascertaining the husband’s true income for these purposes, the court was accordingly asked to characterize the $50,000. The parties were at odds on whether the annual cash gifts were regular enough to be counted: The wife claimed that they had been consistently given in the past, and could be counted on to recur in the future. To bolster her position, she produced an excerpt from an e-mail she received from the husband in which he confirmed that the gift was regularly given each year. It read:
It’s a good thing my father gave me $50,000 each year to help with all your expenses (my parents have the cancelled cheques). Don’t expect to see that anymore. And the money many years I had to take out of my RRSP to pay for everything. Don’t expect that to happen anymore.
The husband refuted that the gifts were regular; moreover he pointed out that his father had had passed away recently. Since the gifts had come from both parents (rather than from either of them individually) there were no guarantees, he said, that his widowed mother would keep up the generosity now that the father was gone.
The court started the examination by pointing out that in law, both child and spousal support was governed by the provisions of sections 15.1 and 15.2 of the federal Divorce Act. Those sections provides a list of factors that the court must consider whether ordering the amount of temporary support the husband had to pay the wife in this case. One of them was the consideration of the husband’s means, and his corresponding ability pay support in all the circumstances.
Next, the court observed that for child support purposes, gifts received by a parent are not presumed to be part of part of his or her presumptive annual income; however, under the Child Support Guidelines, the court had discretion to impute income if it was considered appropriate in the circumstances. However, “gifts” was not among the non-exhaustive list of amounts/items a court could impute.
The court then considered prior law on this issue, which confirmed the receipt of gifts was not generally an appropriate circumstances in which to impute income to the recipient. However, that precedent also established a list of other factors, all of which could be considered in this case, including: how regular the gifts are (or whether there were circumstances that made them exceptional); how many years they had been given by the parents to the husband; whether they were part of the family’s income and lifestyle while the couple was together; the income generated by the gifts relative to the husband’s entire income; their true purpose and nature; and whether they are likely to continue.
With this in mind, the court turned to the present facts: The $50,000 gift had been given by the husband’s parents in each of the prior 8 years, since 2006, as confirmed in the husband’s e-mail. He testified that “every dollar” had been used for family purposes, which meant the funds were part of the family’s overall income, and contributed to the lifestyle they came to enjoy. Finally – while conceding that there was no obligation on the husband’s mother to continue making the gifts at all, in the same amount, or with the same regularly – the court concluded that they were likely to continue in the immediately foreseeable future. (Incidentally, the husband had given no specific evidence as to how his father’s death might affect whether there would be future gifts, nor had he presented to the court any copies of the cashed cheques, even though they were available to him. The court drew a particularly negative inference from this latter omission on the husband’s part).
The court therefore concluded that the annual $50,000 annual gift should indeed be considered part of the husband’s income, for the purposes of calculating both spousal support and child support.
For the full text of the decision, see:
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