NJSBA Family Law Section

Gabrielle L. Strich, Esq.
Marcia N. Leach, Esq.
Diane Maurin
Vickie Bilinski

STRICH LAW FIRM, P.C.
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The most relevant NJ case is Heller-Loren v. Apuzzio, 371 N.J. Super. 518 (App. Div. 2004) The issue was: Did the trial court err in interpreting the parties' Property Settlement Agreement ("PSA") as excluding from defendant's gross earned income for purposes of child support Husband's stock options and proceeds from sale of stock options? The court held

No.  Although "the law generally holds that income is generated by the exercise of an option earned and acquired post-divorce if exercised at a price below fair market value or if sold at a profit", the law "does not support the contention that stock options should be treated as income upon mere vesting".  Id. at 522.  Despite this law, however, the parties' PSA specifically excluded such stock options, or the exercise of same, from income for purposes of child support.  Accordingly, the trial court did not err in excluding same from any calculation concerning defendant's income for purposes of child support.  In reaching this conclusion, the Appellate Court "emphasize[d]" that the "decision [was] based on the particular PSA in question".  Id.

You may wish to review and Shep Murray v. Murray, 128 Ohio App.  3d 662 (1999).  A brief summary of that case is as follows:

• This was the first case in the United States which deliberately treated an executive's unexercised stock options as income for child support purposes. 
• The wife moved to modify child support on the ground that her ex-husband's income had increased, in part, from the increase in value of the stock options.
• Her husband argued that the appreciation in value of his options should not be considered because it was non-recurring income. 
• The Court held that where employees have complete discretion to exercise the options, the appreciation in stock value should be included as gross income even if the employee chooses not to exercise the options in each year.
• The Court reasoned that since the employee had complete discretion to exercise the options, "the option then becomes an investment choice, and its value may be imputed as part of appellant's gross income."  This precludes the employee from shielding a significant portion of his income from the Court and depriving his children of the standard of living they would otherwise enjoy.

Of course, this case is contrary to the ruling in Heller-Loren v. Apuzzio, 371 N.J. Super. 518 (App. Div. 2004).

You may also wish to review:

1. In re Engel v. Landman, 221 Ariz. 504 (Ct. App. 2009)
2. Hoegen v. Hoegen, No. 14–P–149 (Massachusetts Appeals Court, January 22,2016): Income father received from employer-issued vested restricted stock units was income subject to inclusion when calculating father's child support obligation.http://www.mass.gov/courts/docs/sjc/reporter-of-decisions/new-opinions/14p1491.pdf

Hope this helps.

Chuck

Dear Marcia:

Try also Pascale v. Pascale, 140 N.J. 583, 611 660 A.2d 485 (1995),

Mike