Can stock options impact child support in Arizona? Under the laws of Arizona, a parent can ask for modifications in child support obligations whenever he or she has evidence of a substantial and continuing change of circumstances. The Arizona court case known as Engel v. Landman, 221 Ariz. 504, 212 P.3d 842 (Ariz. App. 2009), discussed many different legal issues related to this kind of request. One of the primary elements of this case had to do with stock options, as these were used to determine one party’s overall income. Income is factored into the court’s determination of whether or not one parent is entitled to child support from the other one, so how your income is valued can have a significant impact on what amount of child support is ultimately awarded.

Child Support and Stock Options: A Challenging Circumstance

The couple in the case divorced in 2004 and the husband was ordered to pay child support to the tune of $2,000 a month based on income of $25,000 per month and other relevant factors. In 2008, the husband requested modifications of child support arguing that he had changed circumstances since the wife had received a big inheritance that boosted her income significantly.

Why Both Parents Should Be Aware of Income Valuations

Arizona law requires that both parents contribute financially for the support of minor children. Divorce court combines the monthly income for both parents and uses this, as well as factors such as the cost of health insurance for the children, child care costs, and parenting time to determine the amount of child support required. The husband in this particular case received stock options as part of his income from 2004 to 2006. Although the options were vested, he had not exercised them.

Valuation of these stock options became a significant issue in terms of his gross income. The husband suggested various valuation methods but the divorce court ultimately rejected them. Finally, the court used the method of multiplying the total number of his shares by the price per share increase that had happened in 2006 and used this figure to supplement his gross income for 2006 for child support purposes. The husband argued that this was unfair since it also included option values for the option values accumulated during three years for his income in 2006 alone.

The Court of Appeals ultimately agreed with the husband that the valuation method was not fair. The Court suggested that the analysis on a “case by case” basis and that no one rule would apply equally in all situations of this kind. In complex situations where issues like stock options have a serious impact on the child support award, it is imperative to consult with a knowledgeable Arizona family lawyer. Make sure you are all on the same page and raise any concerns about valuation to your attorney immediately.

This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Can Stock Options Impact Child Support in Arizona?, or any other family law issue, please feel free to contact Sheri D. Shepard at 480.461.5300, log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.