Calculating Guideline Income with Restricted Stock Units

When parties get a divorce, they must determine issues concerning the children, such as child support and parental responsibilities. If the parties have a clear sense of the payor’s income, then determining the base child support amount is a relatively straightforward procedure. However, challenges arise when there are disputes concerning the payor’s income and what should be included as their income. For instance, if the payor receives more than a regular salary, such as stock options like restricted stock units, then the calculation of their income may become more complicated. The court must determine if these RSUs should be included as part of the payor’s income, which can increase their child support obligations.

In this post, we will discuss how a payor’s income is calculated to determine child support, including whether restricted stock units are included. We will also examine a case example, Benko v Benko, 2024 ABKB 400, in which the court found that unvested RSUs were not included in the payor’s income for determining child support. This post will provide important takeaways for parties seeking to understand how income is calculated for child support, including whether RSUs may be included.

How is Guideline income calculated to determine child support?

The first step in determining child support is determining who will pay for it. Generally, the payor is determined by the parenting time schedule and whether one party is the primary caregiver or there is equal shared parenting between the parties. If a party spends less than 40% of parenting time with the child, they are expected to pay child support to the other party as the primary caregiver, as there are additional costs to being the primary caregiver. If the parties have shared parenting, it is common to have a set-off amount between what each party would pay based on their respective incomes.

Calculating a payor’s income for child support is set out in the Federal Child Support Guidelines. Once the payor’s income is determined, there is a set amount of base child support, depending on the province that the child resides in.

Generally, the payor’s income will be the total income set out in their T1 issued by the Canada Revenue Agency. There may also be adjustments to this income. For example, for fluctuating income, the court can consider the party’s income over the last three years to determine a fair and reasonable income. The court can also consider any non-recurring amounts received by the payor and whether these should be included in the party’s income. Non-recurring losses can also be considered when determining income, including any capital or business investment losses.

Further adjustments to income may be made if the party is a shareholder, director, or officer of a corporation. If the court finds that the party’s T1 income is not a fair representation of their income available for support, the court can add back all or part of the pre-tax corporate income for the purposes of determining support.

The payor’s income can also be imputed, meaning the court will make a determination based on the evidence, even if the amount is not the same as what is set out in their T1. For example, the court may determine that a party’s income should be higher if they are intentionally under-employed or unemployed.

Are restricted stock units included in Guideline income?

RSUs are not explicitly mentioned in the Guidelines, but the courts have decided that the value of stock options and RSUs are included in the child support payor’s income after disposition. The courts have decided that it would be unfair to include them as income when the value of stock options and RSUs have not been converted into cash. Therefore, unvested RSUs are also not included in the payor’s income.

Even if part of the RSUs may be available to a party for support purposes, the court may still have difficulty determining the holdback value for previous years, as in the Benko case.

Restricted Stock Units (RSUs) Excluded from Payor’s Income in Recent Case

In the Benko case, the parties separated after a 27-year relationship. The parties had two children together. After separation, the children primarily resided with the mother. By the time of the trial, only one of the children was eligible for support. The parties disputed the calculation of the father’s income for child support purposes.

The father started working at Costco when he was 19. Throughout the years, he was promoted to various management roles. He was promoted to General Manager of a new warehouse just after separation. As part of his compensation package, the father also received RSUs. He was issued a varying amount of RSUs every year in October. At the time of trial, about 67% of the RSUs were vested and were immediately accessible. The remaining RSUs would have been gradually released over 5 years, but due to his long years of service at the company, his remaining RSUs would be immediately accessible in October 2024.

Once the RSUs are vested, they are converted into common stock Costco shares.

According to prior case law, the court found that the unvested and unconverted RSUs should not be included in the father’s income because their value is only included after disposition. The court noted that it would be unfair to include the RSUs, as their value would not be determined until they were sold. While 67% of the RSU s were immediately available to the father in 2023, and these formed part of his means to provide support, it was not possible to calculate the holdback values from previous years and the amounts that would be released to the father in the future, given the stock market’s volatility.

The father’s income was set to be his reported line 15000 income, which was considered the best evidence of his income before the court.

Key Takeaways

Unvested stock options and RSUs are not included in calculating a payor’s income to determine child support. Even if RSUs are vested, there may be limited evidence on the value the court can accept to determine the payor’s income, as they are only valued after sold.

Contact Mincher Koeman Family Lawyers for Assistance with Child Support

Child support is the right of the child, but this may be more complex if the calculation of the payor’s income is not straightforward. Determining a payor’s income for child support is highly dependent on the circumstances of the case, so you should speak with our family law lawyers at Mincher Koeman, who are experienced in assisting parents with child support claims. Our Calgary family law lawyers are dedicated to finding the best resolution for you and your children in your divorce case. 

To book a consultation, please contact us online, or by phone at 403-910-3000.