Divorce can be an unfortunate part of marriage. According to the Settlement Board, the divorce rate in Florida for the year 2005 was 9 per 1,000 marriages; more than double the national average of 3.6 per 1,000. The traditional trend for divorce, as far as alimony is concerned, has been that men have primarily accounted for the lion’s share of alimony payment. In today’s world, however, more and more women are paying spousal support. Close to 4% of alimony paid out in the recent past was paid by women. The process of determining alimony is based primarily on the income of the spouse deemed responsible to pay.
In view of this fact, the importance of a precise and accurate calculation of income in the course of a divorce, or during family life court proceedings, cannot be overstated. Income is the main driver of child support obligations. The definition of income for the purpose of determining child and spousal support is quite different from the purpose of paying federal tax. Many employers in different companies today offer stock options to their employees; especially higher ranking positions. As a result, those employees that are offered stock options may want to know whether those stock options can be included in ordinary income for the purpose of calculating alimony.
A few examples of what may be considered as income by a court may include trusts, partnerships, stock options, trust disbursements, loan amnesty, and signing bonuses. These might be considered as income in some cases but not in others. Chapter 61 of Federal Statutes-
F.S. §61.0467- has two different definitions of what constitutes as income. It defines income as any payment that is made to a person regardless of the source. This includes income sources such as wages and salaries, bonuses, commissions, compensation for independent contractors, disability benefits, worker’s compensation, retirement benefits, pension, royalties, interest, trusts, retirement benefits, dividends and all forms of payments made by individuals, federal and state governments, private entities and any unit of the local government.
F.S. §61.302 offers a different definition of income intended for the purpose of child support. It states that monthly income should be determined for both the obligee and the obligor and should include things such as commissions, bonuses, overtime, allowances, tips, business income from partnerships, self-employment, close corporations, and independent contractors. Business income is determined by taking the gross receipts and deducting any ordinary and necessary expenses that are incurred during the process of producing income. Other types of income listed are social security benefits, unemployment compensation, rental income, reimbursed expenses, spousal support that is received from previous marriages and gains that are derived from property dealings if these are recurring. This list is not exhaustive, but gives a general idea of what should be considered as income.
Stock options, in some cases, may be viewed as an ‘‘income or an asset for equitable distribution.’’ If the stock options happen to be divided in equitable distribution, then they are not considered as income when determining a person’s income. When determining income, the family law practitioner should look to verify whether the asset, in this case the stock options, has already been ‘‘distributed through equitable distribution.’’
The Family Law Act states that during Family Law proceedings, there should be an equal division of all financial gains obtained during the marriage. Net Family Property (NFP) for each spouse is determined by calculating the net worth of the person at the date of separation and subtracting this figure from the net worth of the individual on the date they got married, excluding property gained in the course of the marriage. The spouse with less NFP is awarded one half of the difference between the spouses’ NFP. This is referred to as equalization of NFP.
When attempting to value an individual’s stock options for the purpose of NFP equalization, the Black Scholes Method is normally used. Since employee stock options cannot be sold or traded, valuators use the value to owner definition, considering the stock options have no willing buyer.
Kenny Leigh & Associates is a law firm that specializes in handling Family Law for men only. Our firm’s mantra is ‘Quality Customer Service.’ Our lawyers are responsive, personable, courteous and effective. We are experts at handling alimony cases and can help you determine whether your stock options should be included in your alimony payments. We also give professional advice on prenuptial agreements to protect your assets. Call us today and let us take care of your alimony issues.
By Kenny Leigh
