When are Gifts Considered Income for Support Purposes?

It is not uncommon these days for aging parents to share wealth with family members, in part due to the tax benefits available, the difficulty of young adults in entering the housing market, and a general shift in mindset towards finances and the transfer of wealth.

Multigenerational transfers of money within families presents a challenging question as to how these amounts will be treated when couples separate.

Are funds received by one party during the relationship or after separation considered income when it comes to child or partner/spousal support? 

Every case will be treated differently based on the unique circumstances of each family, but there are some general principles to consider when considering the effect a gift from a parent may have on one’s support obligations.

A person’s income for both child and spousal support is decided based on the factors under the Federal Child Support Guidelines for married parties, or the Alberta Child Support Guidelines for unmarried parties.

Generally, gifts from third parties are not automatically included as a source of income under the Guidelines. However, the Court has jurisdiction to impute income to a party where it considers it appropriate. The Court is not only concerned with “income” but also a payor’s “means”.

In determining whether parental gifts should be included in a party’s income, the Ontario Court of Appeal case Bak v Dobell, 2007 ONCA 304, which has been adopted by the courts in Alberta, outlined the following relevant factors:

·         The regularity of the gift;

·         The duration of their receipt;

·         Whether the gifts were part of the family’s income during cohabitation that supported a particular lifestyle;

·         The circumstances of the gifts that earmarked them as exceptional;

·         Whether the gifts do more than provide a basic standard of living; 

·         The income generated by the gifts as compared to the payor’s entire income;

·         Whether they are paid to support an adult child through a crisis or period of disability;

·         Whether the gifts are likely to continue; and

·         The true purpose and nature of the gifts.

Another factor the Court will consider is the test for imputing income as set out in Hunt v Smolis-Hunt, 2001 ABCA 229, which may soon be altered or confirmed in the pending decision of Peters v Atchooay, 2021 ABCA 237.

In Alberta, the Court currently requires that there must either be “proof of a specific intention to undermine or avoid support obligations, or circumstances which permit the court to infer that the intention of the obliger is to undermine or avoid his or her support obligations” (Hunt v Smolis-Hunt, 2001 ABCA 229 at paragraph 42).

Ultimately, deciding if a party’s income should be imputed to include gifts will be dependent on the facts of each individual case, and the family at issue.

Where there has been an established pattern of consistent payments over time, that are used to provide more than just the basic standard of living, and those gifts will continue into the future, it is more likely that those gifts will be considered when imputing income. The circumstances of the recipient may also be a factor as Courts appear reluctant to impute income from gifts when they are received and used by a recipient of child support, and for the benefit of the parties’ child(ren).

If you have questions about how gifts may be considered income for support purposes, and how it might impact your family matter, please reach out to our team.