Undisclosed Trust Distributions May Justify Retroactive Child Support Modification

Parents who receive trust distributions may have a duty to disclose the amount and source, even if the trust distributions do not necessarily constitute income for child support purposes.  That’s one of the issues raised by Eisenman-Gomez v. Gomez, No. 1596 WDA 2014 (August 11, 2015), a recent decision of the Superior Court that should have been published, but wasn’t.

In Eisenman-Gomez, the mother of two minor children failed to disclose nearly $500,000 in distributions that she received from a trust established by her mother from 2007 to 2009.  During that time period, Mother sought and received child support based on her stipulated income of $25,000 per year.  During a support modification proceeding in 2010, Mother testified that she had withdrawn money in 2009 from a family trust account which had been established by her grandfather “when she was a little girl,” but she did not reveal the $500,000 in distributions from her mother’s trust.

In 2013, when the trust distributions came to light in another modification proceeding, the trial court ordered the support master to consider them with the following directive: “The court directs the parties and the Master to Mencer v. Ruch, 928 A.2d 294 (Pa. Super. 2007). Therein, the Superior Court held that distributions from a trust were to be considered as income for child support purposes.” Subsequently, the judge held: “[D]istributions from the trust that mother received might be treated as if it were in the nature of an inheritance and, therefore, should only be used as a reason for deviating from the support guideline amount as noted in Humphreys v. DeRoss[,790 A.2d 281 (Pa. 2002)]. The money received may not necessarily be considered as income for support purposes. Therefore, the hearing officer shall take testimony regarding the source of receipt.”  Thus, the trial court highlighted an important legal nuance when considering trust distributions in child support proceedings: that trust income distributions may be considered as income, but distributions of trust principal are merely grounds for guideline deviation.

During the ensuing hearing, Mother offered the testimony of a CPA, who testified that she could not distinguish in this case between trust income and principal in the distributions received by Mother.  The trial court therefore held that the distributions must be deemed to be gifts (trust principal), inheritance, or a hybrid — all of which are not income for support purposes.  On appeal, Father argued that the burden should have been Mother’s to demonstrate that the distributions were derived solely from trust principal if she wished to shield them from her support obligation.

The Superior Court disagreed, holding that it was Father’s burden in support modification proceedings to demonstrate a change in circumstances warranting modification.  He had not offered an expert opinion or other evidence to prove that the trust distributions were derived wholly or in part from trust income, so the trial court was correct in assuming they were from principal.  Kimock v. Jones, 47 A.3d 850, 855 (Pa. Super. 2012).

Still, one must wonder whether the Superior Court’s decision was correct.  As the party having exclusive control of the evidence pertaining to the trust, shouldn’t Mother have sustained the burden of proving the source of her trust distributions?  And, didn’t Father by proving that Mother received and concealed the trust distributions, sustain his burden of showing a change in circumstances?  Perhaps the Superior Court in this case confused the burden of proving a change in circumstances with the burden of proving the amount and nature of a party’s incomes, which are separate issues.

The opinion also addresses Father’s request for retroactive modification, which was denied because Father failed to act promptly when he learned of Mother’s trust distributions (and perhaps also, tacitly, because the Court did not include the distributions in her income); Father’s request for a downward guideline deviation, which was denied because Mother’s trust distributions did not affect Father’s ability to pay child support to her; and Father’s request that the court assign a greater earning capacity to Mother, which he did not substantiate with evidence at trial.

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