Pennsylvania: Child Support post-Hanrahan and trusts

Does it count as Child Support if a parent sets up a trust for their minor children by a previous spouse? According to the Pennsylvania Supreme Court ruling in Hanrahan v. Bakker in June 2018, the answer is: No!

As part of a multi-tiered opinion handed down earlier this year, the state Supreme Court said a voluntary contribution to a trust for the child or children, cannot be considered as part of a child support obligation.

“Put simply,” wrote Justice Baer in his majority opinion, “a parent’s voluntary contribution to a trust does not rise to the level of a special need or circumstance rendering the proper amount of support unjust or inappropriate.”

Wealthier parents typically have more savvy and/or access to estate planners who may recommend ways to sustain their children while skirting tax laws.  Of course, any parent is allowed to provide for their children’s financial future as best they can and see fit to do.

The issue in Hanrahan arose when the Father who made the contribution asked that his child support obligation be lowered because of $2.5 million he put into an irrevocable nongrantor trust for his children. “At best, it is a laudable act which would be denigrated by a downward deviation,” wrote Justice Baer, “and at worst a nefarious manipulation of income for which a downward deviation would result in a troubling, if not unjust, award.”

(Elsewhere in the Hanrahan opinion, the father did win the right for downward deviation based on a reasonable needs analysis individualized to his particular family and standard of living, not just a percentage-of-income calculation.)

In child support cases, state guidelines try to treat parties with similar incomes the same. When dealing with the minority of high income parents negotiating monthly support payments, the law has evolved to grapple with the established precept that courts should consider the standard of living of the parties and their children when awarding child support.

While this may open a path for parties to argue for more or less support, the Court has also firmly shut the door to parents re-defining estate planning as child support.

If you are a high-income parent and the new ruling affects you, I can help. Call my office at 215-345-5259 for a free first consult.

– Elissa C. Goldberg, Esquire

Law Office of Elissa C. Goldberg
107 North Broad Street, Suite 211
Doylestown, PA 18901