The Effect Of Inheritance On Imputing Income

Inheritance is not considered gross income for calculating Guideline child support but the change in disposable income to the heir is to be considered. County of Kern v. Edward Richard Castle, 1999 Daily Journal D.A.R. 11207.

The California Court of Appeals, Fifth Appellate District, overturned a decision that totally excluded from gross income the benefits enjoyed by a father who inherited his mother‣s $1 million estate. In addition to real property, father received a $240,000 lump sum inheritance, which he used to pay back-taxes, pay off the mortgage on his house, and put money into his newly inherited rental properties. The trial court determined that the monies received by inheritance were not includible for purposes of calculating child support. The only monthly income figures the court imputed to calculate child support was from the rentals he inherited.

Family Code Section 5048 lists what income is included in applying the statutory guideline formula to establish child support. Cash and property obtained through an inheritance is not specifically covered in this statute. The trial court therefore has discretion whether to consider the inheritance as income because the statute provides that the court may consider benefits that result in any reduction in living expenses. For instance, a party‣s housing benefit, which resulted in a reduction in living expenses, was considered income because it provided an increase in money available for child support. Stewart v. Gomez (1996) 47 Cal.App.4th 1748. In the Castle case, the court should have considered as an income resource the mortgage free housing the father was living in when he paid the mortgage off with part of the inheritance proceeds. His living expenses were reduced by $1,150 per month, making more disposable income available for child support.

Public policy expressed in Family Code Section 4053 states that a court must adhere to the principal that the child should share in the standard of living of both parents. Here, the father quit his full time job, his monthly expenses and debts were reduced, and his standard of living improved. It would be in the child‣s best interests to share in his wealth, therefore the court abused its discretion by not considering the father‣s inheritance.

The case further discussed that the trial court could have also considered the interest earned as income if the father had instead invested his inheritance.