Option Income Not Included in Child Support Calculations

August 12, 2004 (PLANSPONSOR.com) - Post-divorce stock option exercise proceeds not included in gross income cannot be used in the calculation of a child support award.

Upholding a lower court’s ruling, the New Jersey Superior Court, Appellate Division held that since the sale of stock options was not included in the husband’s gross income then the proceeds could not be used for computing his child support obligation under the property settlement agreement (PSA) of the divorce.  

The court agreed with the lower court, finding the term stock options absent from “Gross earned income” as defined in the PSA, “all gross wages, commissions, salaries, bonuses and income from businesses.”   Further, the lower court said the PSA laid out, “”[e]ach party waives and relinquishes all right, title and interest in and to any benefits under any past, current or future profit sharing, pension or retirement plan of the other.”

Thus, themotion judge found, as “[t]he specific phrase ‘stock options’ does not appear within the definition ‘income,'” it was “an intentional omission and that the parties did not intend that stock options be included with gross income.” The lower court therefore concluded “the stock options provided forthe defendant are not appropriately considered income for the purposes of support.”

“We agree with the motion judge that the PSA did not include these post-divorce stock options within the definition of gross income for the purposes of calculating child support,” the Superior Court ruled.

“The express exclusion of such options from equitable distribution, combined with the lack of reference to post-divorce options, while providing that property acquired in the future would remain free from claim by the other party, supports the motion judge’s conclusion that the PSA intended that future stock options were not to be included in gross income,” the count said.   “Accordingly, we hold that the exercise and sale of the post-divorce after acquired stock options in question does not constitute ‘income’ under the PSA for purposes of child support.”

The case is Heller-Loren v. Apuzzio , NJ Appellate Division, No. A-0494-2T3.