LOS ANGELES (CN) - Money that wealthy parents gave their son throughout his marriage must be counted as income in divorce proceedings, a California appeals court ruled.
As recounted in the Thursday opinion, Frederick and Mary Kate Williamson lived it up during their 20-year marriage, with monthly expenses averaging $45,000, despite a lack of employment income from either, by the time they separated in 2009.
The family relied on Frederick's parents - his mother is an heir to the fortune of real estate magnate and former Los Angeles Times publisher Harry Chandler.
Frederick, his wife and each of their children each received an annual tax-free gift of $26,000, for a total of $130,000, from those coffers. Frederick's parents also bankrolled private school for the grandchildren, gave Frederick a one-time gift of $900,000 in 2000, and "loaned" him money to buy and renovate several homes in Southern California, each more lavish than the last, not counting any family properties in which Frederick owns an interest.
One of the last properties Frederick acquired with Mary Kate - they bought a Montecito vacation home around the same time - was on Featherhill Road in Santa Barbara.
In 2005, the complicated renovation of Featherhill led Frederick to quit his job at the LA Times and liquidate $470,000 in inherited stock to pay the bills.
After the renovation ate up that money, Frederick's parents gave them nearly $2.2 million. Although Mary Kate considered the money another gift, Frederick's father made it clear that he considered the money advances on Frederick's inheritance. Mary Kate, who had met Frederick while working as a salesperson at an Ann Taylor store, later told a divorce court that "everybody in the family just gets money when they need it."
Frederick's father testified during those proceedings that he had cut his son off from future inheritance advances. The Santa Barbara News Press hired Frederick to work in its classified ads department in 2010. Though that job pays $60,000 a year, the additional $13,000 from his trust account and $26,000 from his parents brought him a total annual income of $99,000.
The Santa Barbara Superior Court eventually concluded, however, that all the money Frederick had previously received from his parents, save the annual tax-free gift, were loans and therefore not income that could be used to calculate child or spousal support payments.
Mary Kate failed to challenge the child-support order because a panel of the Second Appellate District found that the gifts from Frederick's parents appear to have stopped permanently. Treating them as historical income could hurt his future ability to pay, the ruling states.
"Generous relatives do not have a duty to support a family member's minor children," Judge Steven Perren wrote for the panel. "That duty belongs to the children's parents. Once gifts to a supporting parent have ceased, without any reasonable indication they will resume, they may not be used to impute income to that parent. Treating such gifts as income would lead to support payments based on money the parent does not have. Accordingly, the trial court's decision to exclude the historical parental cash advances as income was within the proper exercise of discretion."
Mary Kate also complained about the trial court's paltry $2,000 monthly spousal award - she had asked for $28,782 - and said it required her to live well below the standard to which she had grown accustomed. Since case-law has also established, however, that parents have no obligation to pay for their children's divorces, Perren declined to address whether Frederick's inheritance advances should be considered in calculating spousal support.
"Spousal support must be established according to the needs of both parties and 'their respective abilities to meet these needs,'" Perren wrote, citing In re Marriage of Meegan
. "Having found that Frederick's parents are no longer advancing funds to Frederick, the trial court appropriately based its spousal support order on Frederick's ability to pay, rather than that of his parents. Whether the parental cash stream is characterized as a loan or a gift is irrelevant here. However characterized, it had ceased."
Where the trial court made a mistake, the panel found, was in modifying a temporary support order and using the proceeds from the sale of Featherhill to make spousal- and child-support payments - essentially making Mary Kate pay half of her own support.
"As Frederick concedes, a trial court lacks jurisdiction to retroactively modify a pendente lite support order to any date earlier than the date on which a proper pleading seeking modification of such order is filed, unless it specifically reserves jurisdiction to do so," the court wrote.
"Here, it is undisputed the temporary support order was final," the ruling concludes. "The trial court did not reserve jurisdiction over the order and no appeal or request for modification was filed."