Divorce, Stock Options & Double Dipping

A question that frequently arises in a divorce is how to treat certain income producing assets. Under Massachusetts law, a Probate and Family Court Judge has the authority to equitably divide the marital estate between the parties. Additionally, the Judge can also award support to one of the spouses. Unique to income producing assets is the issue of double dipping. Double dipping occurs when an asset that is divided as part of the marital estate is also considered as a source of income in determining support obligations. While there is no rule that forbids judges from double dipping in issuing divorce judgments, it is disfavored and often leaves the payor feeling wronged. Recently, the Appeals Court addressed how stock options can give rise to concerns of double dipping.

In Ludwig v. Ludwig, the parties entered into a separation agreement that resolved almost all issues in their pending divorce. The parties put the outstanding issues before the Court for determination including whether income Husband realized from unvested stock options not included in dividing the marital estate could be considered in determining his alimony obligation. The Lower Court Judge found that the income Husband realized from the stock options should be used to calculate alimony. Husband appealed, alleging that such inclusion constituted double dipping.

The Appeals Court disagreed with Husband’s contention. The Appeals Court looked to how the unvested stock options were treated in the separation agreement. Under the separation agreement, Wife received an interest in certain stock options awarded to Husband before or during the marriage. The rest remained exclusively with Husband. In determining Husband’s alimony obligation, the Lower Court Judge considered only the income realized from the stock options not already divided in the marital estate. The Appeals Court stated that since these stock options were not included in the marital estate subject to division, double dipping did not apply. Further, even if double dipping did apply, the Appeals Court noted that the Judge properly identified separate portions of the asset for division and alimony, which was within his discretion.

When the marital estate contains income producing assets, the various ways to treat such assets in the divorce must be weighed. Contact an experienced Massachusetts divorce lawyer to understand the most beneficial way to treat income producing assets in your situation.