Stock options and restricted stock units (RSUs) are assets that are often divided in a divorce when one spouse has acquired these assets resulting from an employment benefit. Stock options and RSUs have very different definitions and characteristics. Regardless of their differences, they are assets which will need to be addressed in a Texas divorce.  For purposes of this blog, we will focus on RSUs.

Divorcing couples (or couples contemplating divorce) often inquire –

  • What exactly is an RSU?
  • How are RSUs divided in our divorce?
  • Is there a value to an RSU and, if so, how is the value determined?
  • Which spouse will be awarded the RSUs in our divorce?
  • What if the RSUs are not fully vested?
  • What if some or all of the RSUs require the employee spouse to continue employment with the company after our divorce?

And so many other questions.  Contact Maples | Jones, PLLC (https://maplesjones.com) for more information regarding RSUs and your divorce.  Our attorneys have experience handling complex divorce cases and divorce cases for high-net worth individuals.

Below are a few answers to some of the questions surrounding RSUs in relation to a divorce –

  • Definition: An RSU stands for “Restricted Stock Unit.” RSUs are typically granted by an employer to an employee as an incentive or reward for their work and to align the employee’s interests with the company’s success.
  • Vesting Period: RSUs represent a promise from the employer to grant the employee a specific number of company shares at a future date, usually based on a vesting schedule. The vesting schedule determines when the RSUs will “vest” or become available to the employee. The vesting period refers to the duration during which an employee must work for a company before gaining ownership rights to their stock options.
  • Vested: Once the RSUs vest, the employee receives the equivalent number of actual company shares. At this point, the employee can either choose to keep the shares or sell them on the open market.
  • Characterizing the RSUs: In Texas, RSUs acquired during the marriage are generally considered community property. However, there are exceptions, and RSUs can sometimes be treated as separate property if they were granted before the marriage or if they were received as a result of grants made before the marriage.  Similarly, RSUs on a vesting schedule can be of mixed character – some community property and some separate property of the employee-spouse.

Determining whether RSUs are community property or separate property can be complex, especially if the RSUs were granted over a period that includes both pre-marriage and post-marriage time. In such cases, it may be necessary to trace the origin of the RSUs and determine the portion that is marital property and the portion that is separate property.

  • Separate Property Assets: However, RSUs which are determined to be separate property are not subject to division during divorce and remain with the employee spouse.
  • Community Property State: Texas is a community property state. This means that any assets acquired during the marriage are generally considered community property and are subject to a fair and equitable division between spouses during divorce. RSUs granted during the marriage, even if they vest after the divorce, are often considered community property and subject to division.
  • Valuing RSUs: RSUs can be complex to value and often require an expert to perform the valuation. Several varying factors may impact the value, including, but not limited to, the market at the time of valuation and/or division and the Company’s performance.

 

  • Division & Award of RSUs: An employee spouses’ RSUs are generally divisible in a divorce. However, there are many variables that come into play, such as restrictions by the employer and tax implications.

In summary, characterization and division of a marital asset such as RSUs are impacted by a variety of issues and specific circumstances – the totality of the factors are too numerous to list and are often case-specific.  RSUs and other deferred compensation, including stock options, are often substantial assets, especially in high-net worth divorces. RSUs are considered complex assets in any divorce. The process of valuing and dividing stocks in your divorce can be tricky because of their complex nature and should be done with the guidance from knowledgeable professionals who can advise you of your options and rights in your divorce.

Contact Maples | Jones, PLLC (https://maplesjones.com) for more information regarding RSUs and your divorce.  Our attorneys have extensive experience handling complex divorce cases and divorce cases for high-net worth individuals.

 

Written by: Chris A. Boman