Speculating on Stock Options and Child Support: Long on Income and Short on Value (and Theory)—A Jurisprudential Attempt at a Butterfly Straddle?
The article commences with a brief overview of the objectives that can underpin a child support obligation. For this purpose, the article relies heavily on the analysis contained in the American Law Institute’s “Principles of the Law of Family Dissolution,” which reflects the vast majority of themes found scattered in buckshot fashion through the jurisprudence of the various states. This is followed by a similarly brief look at aspects of the conceptual underpinnings of the formulae used to calculate child support, again relying very heavily on the Principles. This leads to a consideration of the resources, actual or imputed, which may be looked to in order to determine the amount of any award and to satisfy the obligation. No effort is made to be comprehensive; rather, the goal is to reflect the pressures and considerations that may come to bear on a child support determination in the context of a family’s domestic economy where options are present—in particular as these considerations impact the triangulated tensions of the interests of the child and those of the parents inter se. The article then turns to the nature of options and how the characteristics of options tend to generate confusion when it comes to relying on options to provide “income” in formulating a child support award. In particular, the article considers issues like the potentially protracted vesting period of option, the purpose behind the grant and the vesting period, the ability to defer the benefit, the varied and oftentimes inappropriate techniques used to value options, and the impact of these techniques, illiquidity issues, and other problems associated with actually extracting any nominal value from the options. The next part considers the decided cases as they grapple with the theoretical and practical concerns just outlined. The treatment emerges as somewhat fragmentary, in part precisely because jurisdictions have been unable, or unwilling, to attempt to develop a comprehensive jurisprudence in the area. The final part of the article suggests considerations that might reduce the risk of judicial treatments which are theoretically untenable or produce results that are inappropriate or unrealistic.
David S. Rosettenstein,
Speculating on Stock Options and Child Support: Long on Income and Short on Value (and Theory)—A Jurisprudential Attempt at a Butterfly Straddle?,
82 Neb. L. Rev.
Available at: https://digitalcommons.unl.edu/nlr/vol82/iss4/3