RENDERED: DECEMBER 17, 2020 TO BE PUBLISHED
Supreme Court of Kentucky 2018-SC-0451-DG
LAURA R. NORMANDIN APPELLANT
ON REVIEW FROM COURT OF APPEALS V. NO. 2016-CA-0392 OLDHAM CIRCUIT COURT NO. 13-CI-00741
SCOTT W. NORMANDIN APPELLEE
OPINION OF THE COURT BY JUSTICE KELLER
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
Laura R. Normandin (Laura) appeals from an order entered by the
Oldham Circuit Court, Family Division, on February 2, 2016, and subsequent
denial of her motion to alter, amend, or vacate the order entered on March 21,
2016. Specifically, she appeals the Family Court’s classification and division of
marital property, calculation of maintenance, and calculation of child support.
The Court of Appeals affirmed the decision of the Oldham Family Court in
whole. Having reviewed the record and considered the arguments of the
parties, we hereby affirm in part, reverse in part, and remand for further
proceedings consistent with this opinion. I. BACKGROUND
This case stems from Laura’s dissolution of marriage action against Scott
W. Normandin (Scott). The parties were married in Madison County, Virginia,
on January 25, 2004. The marriage resulted in the birth of four children who
are still minors. In November 2013, Laura filed for dissolution. The parties
attempted to reconcile for approximately a year, before moving forward with the
divorce proceedings that ultimately culminated in a trial on January 6, 2016.
The Oldham Family Court issued its findings of fact and conclusions of law on
February 2, 2016.
Prior to and immediately after their marriage, Laura worked as a
commercial real estate manager in Washington, D.C. Following the birth of
their first child in 2005, Laura focused on responsibilities as a stay-at-home
mother and homemaker. From that point until the time of divorce, Laura had
no substantial source of income outside of marital funds with the exception of
her receipt of approximately $450,000 from her father’s estate while the divorce
proceedings were ongoing in the trial court below.
Scott was the sole income earner for the family after Laura left the
workforce. At the time of the divorce proceeding he was employed by Humana
as the Chief Security Officer with a base salary of $226,096 per year. In this
position, he was also the recipient of regular bonuses and incentive-based
income, including restricted stock units (RSUs). Classification of Scott’s RSUs
is the primary issue before the Court. The Humana RSUs were usually granted
annually, at Humana’s discretion, and vested to the employee after three years.
2 Prior to vesting, the RSUs were subject to restrictions, unavailable to the
employee, and non-transferrable until such restrictions lapsed and vesting
occurred. The primary restriction was that if Scott was no longer employed by
Humana on the date of vesting, any RSUs would be forfeited with only limited
exceptions (retirement, disability, or death) which are not applicable to Scott.
The RSUs represented a significant portion of the couple’s marital
income. In fact, Scott admitted that his 2013 grant of RSUs was due to vest
shortly after the conclusion of the trial and would result in a payment of
approximately $220,000. In addition to the 2013 grant of RSUs, Scott had
similar grants in 2014 (vesting in 2017) and 2015 (vesting in 2018). However,
at the time of the trial, Humana was in discussions with Aetna regarding a
merger, clouding Scott’s job outlook due to likely restructuring. This merger
was never consummated.
In addition to the RSUs, the parties contested the classification and
equitable distribution of two other pieces of property: Scott’s 401k and a plot of
unimproved land in Wyoming. The 401k was valued at $499,879. At issue was
the portion of the 401k deemed Scott’s nonmarital property. The account
consisted of funds derived from Scott’s employment at Humana during the
marriage, Honeywell both prior to and during the marriage, and the Secret
Service and British Aerospace prior to the marriage. At trial, Scott testified to
rolling his retirement funds from his premarital employment into the Humana
account in 2009, claiming $77,000 as the present nonmarital value of the
3 account. Laura argued that Scott did not sufficiently prove any nonmarital
interest in the 401k.
The unimproved Wyoming property was purchased prior to the parties’
marriage. Laura stated she paid the initial down payment of $5,000 for the
property when they purchased it. Scott testified that although Laura made the
down payment, he reimbursed her for it thereafter. They both argued that
based on their payment of the down payment, a portion of the property should
have been classified as their individual nonmarital property. Neither party
provided documentation to support their testimony.
The family court in its February 2, 2016, order found all proceeds from
Scott’s unvested RSUs were his nonmarital property and did not include them
in his income when calculating maintenance or child support. It accepted
Scott’s $77,000 estimate of the value of his nonmarital portion of his 401k. It
found neither party proved by clear and convincing evidence a nonmarital
interest in the Wyoming property, deeming it all marital and dividing its value
equally.
In determining maintenance, the trial court found Laura’s reasonable
needs to be $6,000 per month. After considering the nonmarital inheritance,
her portion of the marital property awarded, and her ability to become
employed, the trial court awarded her maintenance of $1,500 per month for
forty-eight months. The trial court granted joint custody, identifying Laura as
the primary residential parent, with Scott having custody every other weekend
and Wednesdays after school. Turning to child support, the trial court found
4 the couple’s monthly adjusted income was above the statutory guideline ceiling
of $15,000. Applying the top of the guidelines and declining to adjust upward
from that standard resulted in a support award of $2,199.60 per month paid
by Scott to Laura.1
Following the decree, both parties filed motions to alter, amend, or vacate
and motions for additional findings of fact. Those motions were denied by the
trial court in a second order on March 21, 2016. Laura appealed that order to
the Court of Appeals, disputing the classification of the RSUs, the retirement
account, and the Wyoming property, as well as the calculation of maintenance
and child support, and the denial of attorney’s fees.
The Court of Appeals affirmed the Oldham Family Court in full. The
Court of Appeals held that the RSUs were Scott’s separate property relying
principally on Sharber v. Sharber, 35 S.W.3d 841 (Ky. App. 2001), and
Gallagher v. Gallagher, 2012-CA-00671-MR, 2013 WL 5886028 (Ky. App.
November 1, 2013). The Court of Appeals held that the trial court’s
classification and division of the 401k was supported by substantial evidence
and that the trial court properly found neither party met the burden of proving
a nonmarital interest in the Wyoming property. As to maintenance and child
support, the Court of Appeals held that under an abuse of discretion standard
the trial court did not abuse its discretion in awarding $1,500 per month
1 In addition to the child support ordered to Laura, Scott was under an order for child support in the amount of $680 to a prior born child and also to maintain the children on his health insurance policy.
5 maintenance or in its decision to deny an upward adjustment from the child
support guidelines. Laura now appeals the Court of Appeals’ decision with
respect to the classification of the RSUs, the 401k, and the Wyoming property,
as well as the calculation of maintenance and child support.
II. STANDARD OF REVIEW
The conclusion of whether property is marital or nonmarital is reviewed
under a two-part inquiry in which the factual findings made by the court are
reviewed under the clearly erroneous standard and the ultimate legal
conclusion denominating the item as marital or nonmarital is reviewed de
novo.2 KRS3 403.190 states that “all property acquired by either spouse after
the marriage and before the decree of legal separation is presumed to be
marital property,” a presumption that may be rebutted by showing the
acquisition was via a means excepted by the statute. The trial court’s specific
findings of fact as to the acquisition of the property are viewed under a clearly
erroneous standard while its conclusions of law applying those facts are
reviewed de novo.4 Lastly, equitable division of marital property need not be
equal, rather only “in just proportions,” and we will not disturb the trial court’s
equitable division unless the trial court has abused its discretion.5
2 Smith v. Smith, 235 S.W.3d 1, 6 (Ky. App. 2006); see also Holman v. Holman,
84 S.W.3d 903, 905 (Ky. 2002) (The trial court’s classification of property is a statutory conclusion of law which we review de novo.). 3 Kentucky Revised Statute. 4 Barber v. Bradley, 505 S.W.3d 749, 754 (Ky. 2016). 5 Smith, 235 S.W.3d at 6.
6 The standard of review for determinations of maintenance and child
support is an abuse of discretion.6 “The test for abuse of discretion is whether
the trial judge’s decision was arbitrary, unreasonable, unfair, or unsupported
by sound legal principles.”7 An appellate court will not disturb the holdings or
substitute its own judgment when the evidence supports the trial court’s
decision and it did not abuse its discretion when deciding the case.8
III. ANALYSIS
A. The trial court improperly classified the restricted stock units as entirely nonmarital property.
This Court has never directly addressed the marital division of RSUs. The
Court of Appeals, when considering this issue, has classified them
inconsistently.9 Kentucky statutes are deceptively simple in classifying property
as marital or nonmarital. KRS 403.190(3) states that:
[a]ll property acquired by either spouse after the marriage and before a decree of legal separation is presumed to be marital property, regardless of whether title is held individually or by the spouses in some form of co-ownership such as joint tenancy, tenancy in common, tenancy by the entirety, and community property.
6 Stipp v. St. Charles, 291 S.W.3d 720, 727 (Ky. App. 2009) (reviewing maintenance); Downing v. Downing, 45 S.W.3d 449, 454 (Ky. App. 2001) (reviewing child support). 7 Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999) (citations omitted). 8 Combs v. Combs, 787 S.W.2d 260, 262 (Ky. 1990). 9 See Gallagher v. Gallagher, No. 2012-CA-00671-MR, 2013 WL 5886028, *11- 12 (Ky. App. November 1, 2013) (holding the Defendant’s UPS RSUs were too speculative to be included in the marital estate.); but see Penner v. Penner, 411 S.W.3d 775, 781 (Ky. App. 2013) (unvested RSUs may represent marital property, income to RSU recipient, or proportional income to each party at vesting).
7 (Emphasis added). This Court has broadly defined property in this context as
referring “to a determinate thing or an interest in a determinate thing.”10 The
statute goes on to state the party seeking to rebut the presumption has the
burden to show the property meets one of the exceptions specified in KRS
403.190(2).11 Those exceptions are limited to: (i) property acquired by gift,
bequest, devise or descent; (ii) property acquired in exchange for such property
or property acquired prior to marriage; (iii) property acquired after decree of
legal separation; (iv) property specifically excluded by valid agreement; or (v)
the increase in value of property acquired before marriage, where such increase
did not result from the active efforts of the parties during marriage.12
RSUs are “a form of equity-based compensation under which the issuer
company promises to deliver whole shares of stock of the company in the
future to an employee at no cost to the employee, if pre-specified vesting and
distribution conditions are satisfied.”13 Vesting conditions generally tie the
employee’s compensation either to a performance metric or time of service
10 Travis v. Travis, 59 S.W.3d 904, 909 n.6 (Ky. 2001). 11 KRS 403.190(3). 12 KRS 403.190(2). 13 Michael J. Halloran, et al., VENTURE CAPITAL & PUBLIC OFFERING NEGOTIATION, Ch. 15 § 7 (3d ed. 2020) (hereafter VCPON); see also In re Marriage of Micheli, 15 N.E.3d 512, 521 (Ill. App. Ct. 2014) (“RSUs are a form of deferred compensation paid in stock that upon the expiration of any restrictions become fully tradable common stock.”).
8 metric.14 Unvested restricted stock units generally are not transferable.15
States are divided on how to classify such assets in a divorce.16
Laura analogizes the RSUs in question to the contingency fee contract at
issue in this Court’s recent Grasch opinion.17 We note that Grasch was
rendered after completion of the trial court’s consideration of this case and
submission of briefs to the Court of Appeals, so the lower courts did not have
the benefit of this Court’s opinion in that case as guidance. In Grasch, the
parties contested the appropriate classification of an attorney’s contingency fee
contract entered into during the marriage, but did not become payable until
after the divorce.18 We held that a contingency fee contract constitutes marital
property and is subject to division in a dissolution proceeding.19 We stated that
such division was limited to the proportion of the work performed before the
14 Id. 15 EXECUTIVE COMPENSATION § 2715 (Wolters Kluewer, 2018 WL 2447699). 16 See Schiavone v. Schiavone, No. 314058, 2014 WL 1401686, at *4 (Mich. Ct. App. Apr. 10, 2014) (Defendant's restricted stock options that vested after the divorce were not earned during the marriage.); Walsh v. Walsh, No. A-4046-03T2, 2006 WL 2315846, at *8 (N.J. Super. Ct. App. Div. Aug. 11, 2006) (holding subject RSUs were not vested prior to the petition for dissolution and therefore not subject to equitable distribution); 750 Ill. Comp. Stat. Ann. 5/503 (2019) (“[A]ll stock options and restricted stock…granted to either spouse after the marriage and before a judgment of dissolution of marriage or legal separation or declaration of invalidity of marriage, whether vested or non-vested or whether their value is ascertainable, are presumed to be marital property.”); In re Marriage of Hug, 201 Cal. Rptr. 676, 678 (Cal. Ct. App. 1984) (established a ratio of marital to nonmarital for unvested assets as the number of months employed by the grantor while married divided by the total number of months employed upon vesting); Wendt v. Wendt, 757 A.2d 1225 (Con. App. Ct. 2000) (RSUs are divisible as marital property based on time between grant and separation.). 17 Grasch v. Grasch, 536 S.W.3d 191 (Ky. 2017). 18 Id. at 192. 19 Id. at 194-95.
9 dissolution, and the indeterminate value of the asset made it particularly
suitable for delayed division.20 This holding is consistent with prior Kentucky
opinions and many of those in other states regarding unvested assets with
uncertain values.21
In addressing the appropriate division, Laura argues that the RSUs
themselves represent wages as of the date of the grant, making them entirely
marital property. In support of this proposition she relies on the Court of
Appeals’ affirmation of the trial court in Penner v. Penner.22 In Penner, the trial
court classified the husband’s Humana RSUs as marital property at time of
grant, equally dividing the unvested shares.23 Similarly, in Dotson v. Dotson,
the Court of Appeals affirmed a trial court’s division of the wife’s United Parcel
Service Restricted Performance Units (RPUs) as marital property, holding that
her right to participate in the program accrued during the marriage even
though the value was unvested.24 Laura argues that Scott’s right to participate
20 Id. at 195. 21 See McGinnis v. McGinnis, 920 S.W.2d 68 (Ky. App. 1995) (holding nonvested shares of stock as marital property); Poe v. Poe, 711 S.W.2d 849 (Ky. App. 1986) (holding nonvested military pension to be marital property); In re Marriage of Short, 890 P.2d 12, 13 (Wash. 1995) (Unvested stock options were part community property and part separate property.); but see In re Marriage of Miller, 915 P.2d 1314 (Colo. 1996) (Shares of restricted stock granted during marriage constituted marital property in their entirety.). 22 411 S.W.3d 775 (Ky. App. 2013). 23 Id. at 778. (Penner was remanded by the Court of Appeals because in addition to dividing the interest in the RSUs, the trial court attributed 100% of the value to the noncustodial parent for purposes of child support and maintenance, finding this to be “double dipping.”) 24 523 S.W.3d 441, 445 (Ky. App. 2017). It should be noted that while similar,
RSUs and RPUs have significant technical differences. RPUs are transferred to an
10 was based on his work performance during marriage and was marital property
upon grant. This is directly contrary to Grasch, where we acknowledged that
signing the contingency contract was only the necessary, first step in receiving
the compensation.
Scott argues the trial court and Court of Appeals were correct in
classifying the RSUs as nonmarital, that they represented a “mere expectancy”
with no value to divide prior to the vesting date. He argues Grasch must be
read consistently with this Court’s opinion in Holman v. Holman.25 In Holman,
the husband was the recipient of a disability pension as the result of an on-
the-job injury as a firefighter.26 This Court held that whether such benefits
were marital or nonmarital was determined by the character of the property
they replaced.27 We held that “income earned, or payments made…to replace
income earned post-divorce are nonmarital.”28 The proper classification of
these types of assets requires a careful case-by-case analysis of the employee
compensation agreement or other agreement granting them. In this case, Scott
argues that the RSUs are nonmarital as income earned after the dissolution of
employee’s account upon grant but must be returned if for any reason they do not vest. Employees may not trade the shares represented by the RPUs between grant and vesting but do receive voting rights and dividends during the restricted period. RSUs are not added to an employee’s account until vesting and the employee receives no dividend income or voting rights until vested. 25 84 S.W.3d 903 (Ky. 2002). 26 Id. at 904. 27 Id. 28 Id. at 910.
11 the marriage and therefore not part of the marital estate,29 comparing them to
the debt relief afforded a broker in Cobane v. Cobane.30
In Cobane, the husband was paid $967,243 as part of a transition
incentive program.31 Attached to the payment were promissory notes
incrementally forgiven over a period of nine years.32 At the time of divorce,
approximately $426,000 of the attached promissory notes remained
outstanding.33 The trial court found that all of the funds already forgiven as
well as 65% of the outstanding balance were marital property.34 The Court of
Appeals reversed, holding that the encumbered funds were “more akin to
unearned future income than an unvested benefit.”35 As such, the prepaid
compensation was nonmarital as to the portion still attached to unforgiven
promissory notes as of the date of the divorce decree.36
Scott argues that like unforgiven debt in Cobane, he only earns the
income upon the vesting of the RSUs because they are fully subject to forfeit
prior to that point. We do not find this argument persuasive because, under
this reading, one would have to believe that the only performance required to
29 Sharber v. Sharber, 35 S.W.3d 841, 844-45 (Ky. App. 2001). 30 544 S.W.3d 672 (Ky. App. 2018). 31 Id. at 676. 32 Id. 33 Id. 34 Id. 35 Id. at 678. 36 Id.
12 earn the RSUs was given on the day of vesting. We find the grant of RSUs to be
more analogous to the contingency fee contract in Grasch than Cobane’s debt
relief. And as we stated in Grasch, assets like the contingency fee contract, or
Scott’s RSUs, may represent both marital and nonmarital property.37 To
appropriately classify such assets, the trial court must first determine whether,
and to what extent, they were granted as compensation for service prior to the
grant versus as an incentive for the employee's future services.38
Like the contingency fee contract, the RSU grants were contracted for
during the marriage but required Scott’s continued employment for a period of
time before they would be paid out. Also like the contingency fee contract, Scott
would either receive the entire value of the RSUs or nothing. As we stated in
Grasch, assets like the contingency fee contract, or Scott’s RSUs, may
represent both marital and nonmarital property.39 “[T]he consideration critical
to the issue of distribution is the extent to which the anticipated benefits will
have been generated by the mutual effort of the parties.”40
We decide, as a default rule, that RSUs are “earned” over the period
between grant and vesting.41 This methodology is consistent with KRS 403.190,
37 536 S.W.3d at 195. See also Dejesus v. Dejesus, 687 N.E.2d 36, 41 (N.Y. 1997). 38 See Barth H. Goldberg, VALUATION OF DIVORCE ASSETS § 7:8 (Rev. Ed. 2019). 39 536 S.W.3d at 195. See also Dejesus v. Dejesus, 687 N.E.2d 36, 41 (N.Y. 1997). 40 Id. at 193. This rule is similar to the rule first articulated in the case of In re Marriage of 41
Nelson, 222 Cal. Rptr. 790 (Cal. Ct. App. 1986). The Nelson test limits the consideration to the period between grant and vesting, with a corresponding marital
13 in that the proportion of the RSUs “acquired” for purposes of marital
classification is the proportion of time between grant and decree of separation
that is marital.42 This is also consistent with our reasoning in Grasch wherein
we stated, “[w]hile the attorney spouse may put forth work, for the benefit of
the marriage, on the contingent-fee case itself, the non-attorney spouse,
through that spouse's work and efforts elsewhere for the benefit of the
marriage, anticipates receipt of the benefits resulting from the attorney
spouse's work on that case.”43 Parties may overcome the presumption that the
grants represent compensation for employment during the vesting period by
offering contrary evidence. Such evidence may include, but is not limited to,
appropriate plan documents such as Securities and Exchange Commission
filings, plan prospectus, or grant documents.
Turning to Scott’s Humana Stock Incentive plan, both parties testified
that the RSUs were generally awarded in February of a given year, vesting three
years later. The value of the RSUs was reported as ordinary income on Scott’s
W-2 in the year of vesting and appropriately taxed at that time. Scott testified
allocation calculated by the number of months married during vesting period divided by the total vesting period. Courts applying the Nelson formula tend to view the compensation in question as compensation for employment during the vesting period or as a retention tool by the grantor. Past performance may have made the employee eligible to receive the grant, but the grant’s purpose was to ensure continued employment for a reasonable period after the grant. 42 See Brett R. Turner, EQUITABLE DISTRIBUTION OF PROPERTY § 5:22 (4th Ed. 2019) (Payments received under an employment contract are acquired when the employee performs the required services for the employer, and not when the contract is signed.). 43 536 S.W.3d at 194.
14 that the grants were a means of hiring and retention for Humana. Based on
these facts, we find no reason to disturb our general rule that the RSUs are a
form of deferred compensation representing payment for services over the
three-year vesting period. As such, the marital portion of each RSU allotment is
the proportion of time in each three-year vesting period that was marital. We
therefore reverse and remand for appropriate classification of Scott’s 2013,
2014, and 2015 RSUs consistent with this Opinion.
We note that appropriate classification as nonmarital or marital property
is only the first step. The trial court must then assign any nonmarital property
to the appropriate party before finally exercising its judgment in equitably
dividing the marital property.44 KRS 403.190 outlines principal factors to be
considered, but the court should include other relevant factors. For instance,
RSUs, unlike plans regulated under the Employee Retirement Income Security
Act (ERISA), may not qualify for division via a Qualified Domestic Relations
Order (QDRO) resulting in adverse tax consequences if immediately divided.45
Deferred compensation arrangements are generally taxed fully to the earning
employee, so any division must consider the tax paid and expenses incurred by
the RSU owner in liquidating the RSUs.46 The RSUs in this case have already
44 Sexton v. Sexton, 125 S.W.3d 258, 265 (Ky. 2004). 45 Brett R. Turner, 18 No. 1 Divorce Litig. 1 (January 2006). See also Atkisson v. Atkisson, 298 S.W.3d 858, 867 (Ky. App. 2009) (“Trial court should consider the tax consequences of its division of marital property.”). 46 Charles P. Kindregan, Jr. and Patricia A. Kindregan, Unexercised Stock Options and Marital Dissolution, Suffolk U.L. Rev. 227, 238 (2001); see also Brett R. Turner, EQUITABLE DISTRIBUTION OF PROPERTY § 5:22 (4th ed. 2019).
15 vested so it should be relatively easy for the parties to determine the after-tax
value received, but courts in future cases should consider orders for delayed
division upon vesting due to the uncertain value the RSUs represent.
Accordingly, on remand the trial court must classify the RSUs as marital or
nonmarital, and then equitably divide the marital portion.
B. The Trial Court erred by not considering bonuses and RSUs in its award of child support.
Laura contends the trial court abused its discretion by failing to adjust
upward the child support from the top of the statutory guidelines. The review of
an award of child support is for an abuse of discretion.47 Typically a court
calculates the parents' combined monthly adjusted gross income and
determines the appropriate child support obligation amount from the
guidelines table.48 However, the guidelines top out at $15,000 in combined
monthly income; therefore, KRS 403.212(5) provides: “[t]he court may use its
judicial discretion in determining child support in circumstances where
combined adjusted parental gross income exceeds the uppermost levels of the
guideline table.” In the instant case, we have two issues to address. First, did
the trial court correctly calculate the combined monthly adjusted gross income
at $19,894? And second, if it did, was its decision to set support at $2,199 per
month an abuse of discretion?
47McCarty v. Faried, 499 S.W.3d 266, 271 (Ky. 2016) (citing Plattner v. Plattner, 228 S.W.3d 577, 579 (Ky. App. 2007)). 48 KRS 403.212(2)–(7).
16 For purposes of child support, income is defined as “actual gross income
of the parent if employed to full capacity or potential income if unemployed or
underemployed.”49 KRS 403.212(2)(b) goes on to state:
“Gross income” includes income from any source, except as excluded in this subsection, and includes but is not limited to income from salaries, wages, retirement and pension funds, commissions, bonuses, dividends, severance pay, pensions, interest, trust income, annuities, capital gains, Social Security benefits, workers' compensation benefits, unemployment insurance benefits, disability insurance benefits, Supplemental Security Income (SSI), gifts, prizes, and alimony or maintenance received. Specifically excluded are benefits received from means- tested public assistance programs, including but not limited to public assistance as defined under Title IV-A of the Federal Social Security Act1, and food stamps.
(Emphasis added). The trial court considered only his base salary when setting
Scott’s income as $18,841 per month. Finding that this exceeded the maximum
contained in support guidelines, it then chose to dispense with consideration of
the RSUs given their indeterminate nature.
In making child support determinations, courts must consider all income
proven by substantial evidence.50 The party seeking to use a different income
level bears the burden of showing that such future earnings will not be
consistent with their recent experience.51 While Layman v. Bohanon, provides
the trial court some allowance for adjusting the parties’ anticipated income,
49 KRS 403.212(2)(a). 50 Bootes v. Bootes, 470 S.W.3d 351, 355 (Ky. App. 2015). 51 Layman v. Bohanon, 599 S.W.3d 423, 434 (Ky. 2020) (citing Keplinger v. Keplinger, 839 S.W.2d 566, 569 (Ky. App. 1992)).
17 such adjustments must be supported by evidence.52 Here, Scott testified to a
possible merger between Humana and another healthcare insurance provider
as the only reason to support a deviation. Such testimony was speculative and
even if true, unlikely to alter Scott’s near-term prospects.
In Penner, a case to which both parties cite, the Court of Appeals
reviewed a similar issue where the trial court decided directly opposite to this
trial court regarding questions of unvested income. The trial court in Penner
divided the unvested equity as marital property and included 100% of the value
in the employee-spouse’s income for purposes of maintenance and support.53
The Court of Appeals said this was “double dipping” on the part of the non-
employee spouse and the trial court abused its discretion by applying the
income in this manner.54 Based on our holding in III(A) above, the RSUs should
have been treated as deferred marital income and said income should have
been added proportionally to each spouses’ gross monthly income in
determining child support. The trial court erred in failing to do so. Had the trial
court calculated the parties’ income properly, their combined monthly income
would have approximately doubled and should have compelled the court to
adjust upwards from the child support guidelines. We recognize applying the
RSUs in this manner is likely to skew the relative proportion of the monthly
gross income in a way that is not representative of the actual earning power of
52 Id. 53 411 S.W.3d at 781. 54 Id.
18 the parties, but the trial court has discretion to take this into consideration
when ordering child support.
In any support determination, KRS 403.211(3) and 403.212(5) give the
court broad discretion when the combined parental gross income exceeds the
upper limit.55 We said in McCarty v. Faried that when setting the support above
the guidelines, the trial court’s determination must be in the best interests of
the child.56 “When making that determination, a trial court may use its judicial
discretion with regard to weighing the factors such as: the needs of the child,
the financial circumstances of the parents, and the reasonable lifestyle the
child may have been accustomed to before or after the parents separated.”57
Child support determinations must be supported by appropriate written
reasons based on specific facts and circumstances and not merely on simple
mathematical extrapolation from the guidelines.58 As we have noted, the
55 Seeger v. Lanham, 542 S.W.3d 286, 298 (Ky. 2018) (The statutory factors to be considered are merely representative and not exhaustive.); C.D.G. v. N.J.S., 469 S.W.3d 413, 418 (Ky. 2015) (“[T]he courts of this Commonwealth have repeatedly stated, trial courts have broad discretion in determining child-support matters.”); see also McIntosh v. Landrum, 377 S.W.3d 574, 577 (Ky. App. 2012) (“Trial court retains considerable discretion over the establishment or modification of child support; however, that discretion is not unlimited, but the Legislature has created general guidelines and presumptions, which the trial court may only deviate from if it gives appropriate written reasons.”) (quoting Com. Ex rel. Marshall v. Marshall, 15 S.W.3d 396, 400-01) (Ky. App. 2000); Brown v. Brown, 952 S.W.2d 707 (Ky. App. 1997) (Courts have flexibility to fashion appropriate child support orders for situation not addressed by statutory scheme.). 56 499 S.W.3d 266, 273 (Ky. 2016). 57 Id. 58 Downing, 45 S.W.3d at 457 (reversing lower court’s strict reliance on a linear extrapolation of support unwarranted by any evidence of actual need).
19 combined gross monthly income captures all sources of income available to the
parties including bonuses, RSUs, and maintenance.59 Therefore, it is clear the
RSU income should have been included in the income calculation, and the trial
court erred in not doing so. For this reason, we reverse the trial court’s child
support calculation. On remand the trial court must appropriately allocate the
RSUs to the parties then recompute the child support weighing all the
ordinary, relevant factors addressed in such a support award including “the
reasonable lifestyle the child may have been accustomed to.”60 In doing so, the
court can consider whether its previous order that the parties equally split the
costs of the children’s extracurricular activities is still appropriate.
Lastly, we note the problematic nature of the current guidelines. The
current income tables are in need of updating by the legislature, both to
capture a greater range of incomes and ensure the support allocations in the
table remain both realistic and appropriate. Until then, it is incumbent upon
the courts to use their discretion in assessing the relevant factors when
addressing incomes not explicitly covered by the table and in deciding on
departures from the guidelines’ recommendations in light of the parties’
circumstances.
C. The trial court did not abuse its discretion in its award of maintenance.
Laura challenges the maintenance award of $1,500 per month for forty-
eight months. The statutory test for granting maintenance is whether the
59 KRS 403.212(2)(b). 60 McCarty, 499 S.W.3d at 273; see also KRS 403.211(5).
20 spouse is unable to support her own reasonable needs through her property,
including her part of the marital estate, and is also unable to support herself
through suitable employment.61 Once a court deems an award of maintenance
to be proper, the statute directs:
(2) The maintenance order shall be in such amounts and for such periods of time as the court deems just, and after considering all relevant factors including:
(a) The financial resources of the party seeking maintenance, including marital property apportioned to him, and his ability to meet his needs independently, including the extent to which a provision for support of a child living with the party includes a sum for that party as custodian;
(b) The time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment;
(c) The standard of living established during the marriage;
(d) The duration of the marriage;
(e) The age, and the physical and emotional condition of the spouse seeking maintenance; and
(f) The ability of the spouse from whom maintenance is sought to meet his needs while meeting those of the spouse seeking maintenance.62
Under the statute, the trial court’s responsibilities are to make relevant
findings of fact and exercise its discretion in the determination of appropriate
maintenance in light of those facts.63
61 KRS 403.200(1). 62 KRS 403.200(2). 63 Perrine v. Christine, 833 S.W.2d 825, 826 (Ky. 1992).
21 Laura proposed a budget identifying her reasonable needs as $9,000 per
month. After review, the Oldham Family Court found her reasonable needs
were actually $6,000 per month. While Laura was not currently employed, the
trial court found she was capable of earning at least $1,733 per month and had
personal property (nonmarital and her share of marital property) valued at
approximately $700,000. The trial court acknowledged that the couple had
lived a relatively lavish lifestyle and been married for twelve years, two of which
were during the pendency of the divorce. The trial court noted that prior to
marriage, Laura had earned a significantly higher salary than the imputed
number, but she would be required to update her educational and licensing
background to resume that level of employment. Based on these facts, she had
a monthly shortfall of $4,267 between her reasonable needs and imputed
income which must be serviced by a combination of maintenance and Laura’s
personal assets.64
Laura principally relies on our opinion in Powell v. Powell, 107 S.W.3d
222 (Ky. 2003), where we reversed the trial court’s maintenance obligations as
insufficient. In Powell, the couple was married eighteen years with a combined
income of nearly $600,000 annually, entirely from the husband’s neurosurgery
practice.65 The trial court awarded the wife $3,000 per month in maintenance
64 It should be noted in the divorce decree, the trial court incorrectly calculated the shortfall as $3,267 per month. The calculation was corrected in its order regarding the parties’ motions to alter, amend or vacate. Following the correction, the court did not adjust the maintenance award. 65 Id. at 223-24.
22 for three years.66 The wife had proposed a budget establishing her reasonable
needs at $5,400 per month.67 A plurality, writing for the court, remanded the
case in part because the trial court failed to address the gross discrepancy in
incomes between parties and for a lack of analysis as to what the wife’s
reasonable needs were in light of the couple’s standard of living.68 A two-vote
concurrence accepted the wife’s proposed budget as sufficient evidence of
reasonable need, but found the trial court failed to adequately analyze the
wife’s ability to meet that reasonable need independently and remanded for
that reason.69
Laura postulates that like Powell, the trial court failed to adequately
calculate her reasonable monthly needs. Furthermore, she argues the trial
court never considered that Scott’s income was more than adequate to support
the higher amount of maintenance requested. Finally, she advances that if her
independent assets are to be considered as a source for the shortfall, the trial
court must make a specific finding as to the reasonable income imputed to
those assets, seemingly arguing that the principal of the assets is beyond the
court’s consideration.
66 Id. at 223 (The wife had been a registered nurse, and the trial court found
three years to be a reasonable timeframe to allow her to renew her licenses and meet any new educational requirements.). 67 Id. at 227. 68 Id. at 225. 69 Id. at 227.
23 Scott relies principally on this Court’s decision in Perrine v. Christine,
where the couple was married for thirty-four years living on the husband’s
annual income of $151,000.70 Upon dissolution, the couple essentially divided
all assets fifty-fifty including numerous investments, property, and the
husband’s deferred compensation and pension benefits totaling approximately
$600,000.71 The trial court found the wife’s reasonable needs were $46,000 per
year and found that the division of marital property was sufficient to meet that
need.72 We held that the trial court was not clearly erroneous in eliminating the
temporary maintenance in light of the assets available to the wife to meet her
needs.73 We stated, “[l]ike anyone else with financial responsibilities and
limitations, [the wife] may decide whether and when liquidation, and what
investment strategy, is in her best interest. The trial court need only decide
whether the party seeking maintenance has available sufficient resources to
meet the conditions of KRS 403.200.”74
Applying the abuse of discretion standard, we hold the trial court’s
decision was not arbitrary, unreasonable, unfair, or unsupported by legal
principles. The trial court is not required to delineate every factor, but only to
consider the factors in its decision.75 Like the trial court in Perrine, the trial
70 833 S.W.2d at 825. 71 Id. at 826. 72 Id. 73 Id. at 827. 74 Id. 75 Shafizadeh v. Shafizadeh, 444 S.W.3d 437, 446 (Ky. App. 2012) (citing
McGregor v. McGregor, 334 S.W.3d 113, 118 (Ky. App. 2011)).
24 court here rightly considered Laura’s independent assets, whether as an
income source or through principal liquidation, in determining Laura’s ability
to support herself. Such considerations do not require the court to undertake
the work of an investment advisor, only to make reasonable conclusions based
on the facts presented as to the adequacy of those resources. The trial court
addressed Laura’s inability to immediately return to the job market at her
previous level. Unlike the trial court in Powell, the Oldham Family Court made
specific, if not budget level, findings regarding Laura’s proposed monthly
needs.
Consideration of the lifestyle to which Laura had become accustomed
during the marriage is captured in KRS 402.200(2)(c) separately from Scott’s
ability to pay. As the Court of Appeals correctly noted, “the trial court is not
required to analyze [Scott’s] income when it calculated [Laura’s] maintenance
payment…only to consider his ability to provide for himself and make the
payments ordered.”76 The ability to pay is not an independent plus factor in the
award of maintenance, unlike the similar provisions in Kentucky’s child
support statutes. In KRS 403.211(3) and 403.212(5), excess income above
guidelines is an independent factor supporting an upward departure from the
support guidelines. KRS 403.200(2)(f), on the other hand, operates as an equity
check, allowing courts to determine whether the resulting maintenance
calculations based on the reasonable needs of the dependent spouse can be
76 Normandin v. Normandin, No. 2016-CA-000392-MR, 2018 WL 2450534, at *4
(Ky. App. June 1, 2018).
25 adequately served by the paying spouse while meeting his or her own needs.
Courts may disagree as to what constitutes the reasonable needs of a lower
wage-earning spouse in high income divorces where the couple maintained an
extravagant lifestyle, but we cannot find the trial court abused its discretion.
For these reasons, we find no abuse of discretion by the trial court and affirm
the Court of Appeals as to maintenance.
D. The issues of classification of the Wyoming property and Scott’s 401k are not properly before the Court.
Laura raises two issues in her brief that were not addressed in her
motion for discretionary review: (i) the trial court’s classification of the
Wyoming property; and (ii) the nonmarital allocation of Scott’s 401k. Although
fully briefed, these issues are not properly before the Court pursuant to
Kentucky Rules of Civil Procedure 76.20(3)(d). Consistent with prior holdings,
this Court will not address issues which the Appellant fails to raise in the
Motion for Discretionary Review.77
IV. CONCLUSION
In conclusion, we hold that the Oldham Family Court improperly
classified Scott’s restricted stock units and, due to the nature of the restricted
stock units, miscalculated the combined monthly income for purposes of
setting child support. We also hold the Oldham Family Court did not abuse its
77See Indiana Ins. Co. v. Demetre, 527 S.W.3d 12, 41 (Ky. 2017); Wells v. Commonwealth, 206 S.W.3d 332, 335 (Ky. 2006); Ellison v. R & B Contracting, Inc., 32 S.W.3d 66, 71 (Ky. 2000).
26 discretion by not considering Scott’s income as an independent factor for
increasing the directed maintenance or computing Laura’s reasonable needs.
For the foregoing reasons, we affirm the Court of Appeals on the question
of maintenance but reverse on the issues of the marital division of the
restricted stock units and resulting child support calculation and remand for
further proceedings consistent with this Opinion.
Minton, C.J; Hughes, Keller, Lambert, VanMeter and Wright, JJ., sitting.
All concur. Nickell, J., not sitting.
COUNSEL FOR APPELLANT:
Paul Joseph Hershberg Paul Hershberg Law, PLLC
Louis Paz Winner Clay Daniel Winner LLC
COUNSEL FOR APPELLEE:
James Daniel Theiss James L. Theiss Theiss Law Offices PLLC