Opinion ID: 2549527
Heading Depth: 1
Heading Rank: 5

Heading: Expended Amount of the Inheritance As Gross Income

Text: Having decided that the statutory definition of gross income includes monetary inheritances, we now examine whether all or only a portion of the principal should be included in gross income. Colorado's statutory guidelines establish a rebuttable presumption of child support payments. Although the statute broadly defines gross income to include both parents' total earnings, it expressly empowers the trial court to deviate from the guidelines when their application would be inequitable, unjust, or inappropriate. § 14-10-115(3)(a), 5 C.R.S. (2002). Consequently, the trial court has discretion to increase or reduce the gross income based on the facts of a case. Other states with similar guidelines have held that courts should only include a portion of the inheritance in gross income. To determine how much to include, these courts must conduct a fact specific analysis. In Indiana, for example, trial courts consider the nature and use of the inheritance. There, the courts weigh factors such as whether the inheritance is cash or securities (there is no monetary requirement in Indiana), whether the inheritance affects the financial circumstances of the parent, whether the inheritance will benefit the child, and finally, whether the parent invests the inheritance for a future use. Gardner, 743 N.E.2d at 358-59. Likewise, in Virginia, the trial courts must consider other factors, which include, but are not limited to: whether the financial resources were used to reduce marital debt, enhance the marital estate or benefit any child; whether the asset is received with regularity; whether the asset is liquid; and whether the asset or property is income-producing. Goldhamer, 525 S.E.2d at 603-04. These states recognize that the very nature of an inheritance may warrant a deviation from the basic child support guidelines, because first, people can inherit almost anything, [7] and second, the recipient can use the inheritance in an infinite number of ways. We agree that courts should examine the nature and use of an inheritance when deciding how much of the principal to include in gross income. Specifically, the trial court must apply a two-part test. First, a court must decide whether an inheritance is monetary. If so, the inheritance is includable in gross income. If not, it does not fit the statutory definition of monetary gift and this ends the analysis. The term monetary refers to cash or [a]ssets that can be easily converted to cash, e.g., money markets, mutual funds, stocks, and bonds. Black's Law Dictionary 1021 (7th ed.1999) (defining money). Other statutes support this definition. For instance, section 39-22-524(9)(b), 11 C.R.S (2002) defines monetary to include cash, stocks, or bonds. Likewise, 18 U.S.C. § 1956(c)(5) (2002) includes investment securities or negotiable instruments in the definition of monetary instruments. If the court finds that an inheritance is monetary, it must next examine the recipient's use of the money. If the recipient uses the principal as a source of income either to meet existing living expenses or to increase the recipient's standard of living, the expended principal should be included in that year's gross income. If the monetary inheritance is saved or invested, such reserved principal is not included in gross income. As we discuss below, the interest generated by the principal is properly considered income. The two-part test is fact-specific and will require a case-by-case evaluation on the part of the trial court to decide whether and to what extent the principal of the inheritance is included in the beneficiary's gross income for each year.