Support must be based on the actual income of the spouse, not the family fortune.
One wealthy family has managed to neatly snip their son’s ex-wife out of the family fortune without resorting to a prenup. This unusual case highlights an important point about spousal support, namely that it must be based on the actual income of the spouse paying it, not on the family fortune.
The case involves the divorce of Frederick and Mary Kate Williamson, she a former Ann Taylor clerk and he the eventual heir to the fortune of real estate mogul and former LA Times publisher Harry Chandler. During the marriage, the couple lived a lavish lifestyle bankrolled almost entirely by Frederick’s mother, who controlled the bulk of the fortune. Both spouses and each of the children were given the maximum tax-free gift of $26,000 every year, for a total of $130,000 in income per year. Plus, the family also received numerous one-time gifts, “loans,” and advances on Frederick’s inheritance, along with a little income from Frederick’s trust.
In 2005, Frederick quit his job to manage the complicated renovation of one of their many estates, liquidating $470,000 in stock and accepting a $2.2 million dollar “loan” or advance on his inheritance in the process. When the couple separated in 2009, they were spending roughly $45,000 a month despite neither spouse having a job.
When Mary Kate petitioned for spousal support as part of the divorce proceeding, she asked for about half of what she and Frederick had been spending per month. However, in the final divorce decree she received just $2,000, an amount far, far below the standard she had been accustomed to.
Now, in many divorce cases part of the goal of alimony or spousal support is indeed to help the supported spouse maintain a standard of living similar to that which they enjoyed during the marriage. However, in this case a complication arose because their standard of living was not funded by their own marital income, but by gifts from Frederick’s parents.
For the purposes of asset division in a marriage, gifts are counted as joint property. But they are not necessarily counted as income, especially if the gifts appear to have ceased, as was the case for the Williamsons. Frederick’s father testified that he cut his son off from future advances or loans from the trust in 2010.
The court found that the only gift that was regular enough to be considered part of Frederick’s income was the annual $26,000 tax-free gift. Moreover, Frederick’s parents could not be compelled to pay for their son’s divorce. Therefore spousal support was calculated based on Frederick’s own income of $60,000 from a newspaper job begun in 2010, $13,000 in annual trust income, and the $26,000 annual gift.
Even if your finances are nowhere near as complicated as the Williamsons’, it is wise to consult a financial planner who specializes in divorce, as well as an experienced divorce attorney, before finalizing any agreements.
