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Seeking stock options and RSUs in a divorce

| Jan 27, 2021 | Uncategorized |

Stock options and restricted stock units have become a common incentive for employees. There was a ninefold increase in the number of people holding stock options since the 1980s, according to one estimate. These options are valuable assets that should be sought through divorce property division, especially in a high asset divorce.

Martial property

Learn about your spouse’s compensation package. Seek information on whether your spouse received stock in their employer’s company, stock options or RSUs. These are part of shared marital property if you spouse received them during your marriage. You may be entitled to part of these assets in your divorce settlement.

Changing value

Seeking these assets may be challenging because the value of stock options and RSUs change over time. Your spouse’s company, for example, may issue negative quarterly earnings estimate which severely depresses stock prices. The stocks’ value, however, is not fixed until your spouse exercises their options and cashes out or the RSUs vest.

Dividing stock options

Stock options and RSUs are typically divided in two ways. First, your spouse can write you a check based on their current value. Or you can receive your allocation when your spouse exercises their options or the RSUs vest.

Receiving a check for the current value of the options and RSUs prevents you from receiving the earnings of any future gains, especially if the company is a startup. But most startups are serious failures and getting the options value upfront eliminates the risk of loss if it later drops in value. Spouses can wait to pay you until their options are exercised so that you both share the risks.

Unvested options

To retain employees, most companies offer stock options that will vest after the employee worked for it for a specified number of years. Unvested stock options and RSUs that will vest in the next few years are valuable assets.

These may be allocated according to the length of the marriage. For example, a spouse receives 1,000 stock options that will vest in five years and the couple divorces in year three. The judge may consider 3/5ths of the options as shared marital property.

An attorney can help you learn about your options and seek a fair and reasonable settlement. They can also pursue your rights in court.