California Child Support Guide / Income and earning capacity
Equity compensation can be part of income for California child support. The analysis depends on the award, vesting terms, restrictions, and when compensation becomes available. Salary alone may substantially understate earnings when an employer also pays bonuses, restricted stock units, or options.
Do not treat the grant date, vesting date, exercise date, and sale date as interchangeable. Each describes a different event, and the records must show which event produced compensation.
An option generally gives the employee a right to purchase shares at a stated exercise price. A restricted stock unit generally promises stock or value subject to specified conditions. Other equity arrangements can differ.
Obtain the plan, grant agreement, vesting schedule, employer statements, and transaction records. Identify employment conditions, forfeiture provisions, trading restrictions, and whether shares can actually be sold.
The label on a pay stub may not reveal the entire arrangement. Ask for the documents explaining it.
In In re Marriage of Macilwaine (2018) 26 Cal.App.5th 514, the court addressed vested, mature stock options. It held that compensation available when legal restrictions on exercise and sale are removed must be considered, even if the parent chooses not to exercise and sell.
The relevant value is not simply the market value of all underlying shares. The exercise price and actual restrictions matter. A voluntary investment choice does not necessarily postpone support treatment of available compensation.
That holding should not be mechanically applied to every unvested award or restricted private-company interest. Establish the actual rights and restrictions first.
When RSUs vest or settle, payroll records may reflect compensation, while brokerage records show shares delivered, shares withheld for taxes, and later sales. Those records often describe different parts of the same event.
Do not count the compensation once on the wage statement and again in full when the same shares are sold. A later gain may require separate analysis, but the previously recognized compensation must be identified.
Tax withholding is also not necessarily the final tax liability used in a guideline calculation. Review the tax assumptions rather than simply subtracting whatever shares the employer withheld.
Equity awards may vest on irregular dates and change in value. A fixed monthly figure, averaging method, additional-support provision, or other permitted approach must accurately address the compensation.
Family Code section 4064 permits appropriate treatment of seasonal or fluctuating income. The chosen order should define the income covered, reporting obligations, calculation method, and payment timing.
An imprecise reference to “bonuses” can create a later dispute about whether equity compensation is included. Clear drafting matters as much as the initial calculation.
In a divorce, an award may also have a community-property component. Determining ownership and determining income for support involve different inquiries.
Provide the property judgment and any division orders so counsel can evaluate overlap and avoid unsupported assumptions. Do not assume that calling an award separate property excludes all support consequences, or that property division justifies counting the same payment twice.
List each award, grant date, vesting event, restrictions, value, exercise cost if applicable, payroll reporting, tax withholding, and sale. Connect each entry to the underlying document.
A timeline helps identify missing records and shows whether the proposed guideline figure captures the full compensation package. It also makes annual reconciliation easier if the order uses additional support.
Macilwaine rejects that assumption where compensation is available without legal restrictions.
The award terms and applicable law must be examined; a future expectancy is not identical to available compensation.
No. It may omit timing and restriction information necessary for the support analysis.
Edgar & Dow helps parents analyze compensation documents and draft support provisions that address variable earnings accurately.
This article provides general information about California law. For advice about your case, contact Edgar & Dow at 951-684-6885.
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