Court concludes that vested stock options are income

by | Feb 19, 2019 | Divorce, Firm News

The 1st District Court of Appeal overturned previous rulings in a child support modification case brought by a man whose income placed him among top earners in California. The original decision excluded his stock options from income and granted an exemption to Family Code Section 4057(b)(3). That section normally directs courts to base child support amounts on parental income but allows exceptions for people with very high income if the amount would exceed what the children need for support.

On appeal, however, the judge deemed that vested stock options available to a person to sell count as income. Even if the parent chooses not to sell the stock options, their value still represents income regardless of a person’s decision to hold onto them until a later time. He based this ruling on a previous decision made by the 4th District Court of Appeal that determined voluntarily deferred salary served as income according to Family Code Section 4058.

As for the exemption to the child support guidelines, the appeals court judge recognized that children from very affluent households have different and greater needs than children living under modest circumstances. He wrote that wealthy children have a right to a standard of living that reflects their parents’ income.

A parent involved in a contested divorce might want legal advice before making a child support agreement with the other parent. An attorney could explain state guidelines that deal with support decisions. A legal analysis of parental income and ongoing expenses for the children could inform the person about rights to receive certain amounts or obligations to pay.