Can alimony calculations include a spouse’s unvested stock options, even if they weren’t considered marital property in equitable distribution? The Massachusetts Supreme Judicial Court recently answered this question. In Ludwig v. Lamee-Ludwig, the Court said yes. [1]
At issue was a practice colloquially known as “double-dipping,” which brings up “the seeming injustice that occurs when property is awarded to one spouse in an equitable distribution of marital assets and is then also considered as a source of income for purposes of imposing support obligations.” [2] As an example, Double-dipping occurs when a party divides their unvested stock options equitably during the divorce. Later, they count the vested options as income for calculating alimony payments.
In the case at hand, the parties divorced in 2014. Under their separation agreement, the wife received alimony based on the husband’s base salary and bonuses. The trial court applied “the time rule,” which considers unvested options and the time the husband held them PRIOR to the divorce.
The Court noted that the trial judge ignored unvested stock options as marital property for division during the divorce. Therefore, the parties did not experience double-dipping. “Here, there is no such injustice because the contested shares were not part of the equitable distribution of assets; by operation of the time rule, they were assigned to and retained by the husband outright.” [3] The property assignment source included only options attributable to the marital partnership. It excluded stock options for post-marital efforts. The Court ruled that unvested options could count as income when calculating alimony.
Interestingly, the Court clarified that the law does not prohibit double-dipping. However, the trial judge must consider the equities of each case.
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[1] Ludwig v. Lamee-Ludwig, No. 15-P-1177 (October 17, 2016-February 7, 2017).
[2] Id., at 5, quoting Champion v. Champion, 54 Mass. App. Ct. 215, 219 (2002).
[3] Id., at 5.