In today’s job market, many executives receive compensation that goes beyond just a regular salary. Companies often offer stock options and other equity incentives as part of the compensation package. When it comes to calculating child support payments, these benefits can significantly impact the final numbers—even if they haven’t been converted to cash.
How Courts View Income for Child Support
Generally, when calculating child support, courts look at all forms of income—both taxable and non-taxable. While regular income from an asset (like rental income from a property) counts toward child support calculations, the value of unsold assets typically doesn’t count as income. However, stock options are a notable exception to this rule.
Stock options give employees the right to buy company stock at a set price after a certain waiting period. Once this waiting period ends and all restrictions are lifted, the options become “vested,” meaning the employee can exercise them (buy the stock) and sell them if they choose. For years, courts have agreed that profits from exercised stock options should count as income for child support. But in 2018, a California court case (In re Marriage of Macilwaine) addressed a crucial question: When exactly do these options first count as income for child support purposes?
What This Means for Parents
The court made a significant decision: stock options must be counted as income as soon as all restrictions on exercising and selling them are removed—even if the employee hasn’t actually exercised or sold them yet. This means you don’t have to sell your options right away, but you must pay child support based on their value when they first become available to sell. Any increase in value after that initial date doesn’t count as immediate income for support purposes (unless you actually sell the options and spend the money).
Because this type of income is not consistent, the Court uses a bonus table to calculate what percentage of the income should be paid for child support.
Beyond Stock Options
While the court specifically addressed stock options, similar principles apply to other forms of equity compensation, such as Restricted Stock Units (RSUs)—shares of company stock given to employees after certain conditions are met—and Employee Stock Purchase Plans (ESPPs), which allow employees to buy company stock at a discount.
For parents who receive stock options or other equity compensation as part of their compensation package, understanding these rules is crucial for both those paying and receiving support. The impact on support calculations exists whether or not these benefits have been converted to cash. Given the complexity of these arrangements, consulting with an experienced family law attorney can help you understand how this might affect your specific situation.
This article is published in the San Diego Business Journal, click the link for the full publication : CEO of the Year Awards 2025 FINALISTS Archives – San Diego Business Journal.
