Can I Go After My Husband’s Stock Options and RSUs in a Divorce?

Bag o' MoneyIn the past, stock options were primarily an award for a company’s top management team. In the past few decades, however, stock options and RSUs (Restricted Stock Units) have become a much more common employee incentive, and the National Center for Employee Ownership estimates that “since the late1980s, the number of people holding stock options has increased nine-fold.” If your husband has stock options or RSUs in his company, these options are valuable assets that you CAN and SHOULD seek during a divorce. (If you are the one with the stock options or RSUs, this works both ways.)

Stock Option Challenges

Going after your spouse’s stock options and RSUs during a divorce can be tricky, mainly because the value will change over time. For instance, your spouse’s company may release a disappointing quarterly earnings estimate, which may result in a steep drop in stock prices. The value of the stocks will not become fixed until your spouse decides to exercise his options and cash out, or until the RSUs vest.

How to Divvy Up Stock Options

There are two main ways to divide stock options and RSUs. Your spouse can either write you a check based on the value now, or you can receive your portion when your spouse exercises his options or the RSUs vest. Both methods carry their own advantages and disadvantages.

If your spouse cuts you a check for the value of the options and RSUs now, you may miss out on future gains, especially if the company is still in the startup phase. However, most startups fail miserably, so by getting the value of the options upfront, you are also eliminating the risk of future drops in value. Your spouse may want to wait to pay you until he has exercised his options so that you both share the risk together.

What About Unvested Options?

Many companies offer their employees stock options that will vest after the employee has worked for a company for a certain number of years as a strategy to retain that employee. What happens if your husband or spouse had a load of unvested stock options and RSUs that will vest in another year? Don’t let your spouse or your spouse’s lawyer claim that these unvested options are worthless. They aren’t!

One common way the courts have divided these options is like this: Let’s say that Steve joins a company and receives 1,000 stock options that will vest in five years. In year three, Steve and his wife Angela get divorced. A judge may consider 3/5ths of the options to be shared martial property, since Steve and Angela were married for three of the five years that the options were in the vesting process. If Angela lives in a community property state, like California, she will be entitled to half the value of the unvested options that are considered marital property.

Don’t Leave Out Stock Options!

Not every wife knows all the ins and outs of her husband’s or partner’s compensation package. If you are considering a divorce, try to find out if your spouse received stock in his company, stock options, or RSUs. If he received these assets while you were married, they are part of your shared marital property, which means you are entitled to a portion as part of your divorce settlement.

Learn where to search for hidden assets as well as other useful divorce information in our divorce article archive. You can also hear directly from divorce experts by attending a local Second Saturday Workshop near you!

20 thoughts on “Can I Go After My Husband’s Stock Options and RSUs in a Divorce?”

  1. My ex was the top earner in our relationship but she wants the little stock options I have. Ive researched the formulas used for California and I’m a little confused. Are all the stock options that are received community property if they vested a significant amount before we married?

    1. As I understand it, stock options that vested before you married are your separate property. Stock options that weren’t yet vested when you got married are partly community property, measured by the time from date of marriage to date of vesting divided by the total time it took to vest.

  2. Hi, thank you for a great forum!
    I received an RSU award in a job I got after my separation. My ex wants to include it for both spousal support and child support. The argument is that the vested RSU income appears in my W-2. I can understand being included for child support, but why for spousal?

    Grant dare was after separation date (new job after separation) in California.

    Thank you for your thoughts.
    JC

  3. My husband just joined a company a couple of months ago that just went public and he was given 5,000 stocks that will become 25% vested in one year and more as time goes on. If I divorce him in 6 months, how much of these invested a stocks will I be entitled to? I live in a California. We are married 13 years.

    1. The laws of each state are different, but many provide that restricted stock, stock options, and RSUs that were granted during the marriage are part marital assets to be divided, even though they aren’t vested yet. That is the time that they were held during the marriage, divided by the total time from grant to vesting. So if you hold them for six months during the marriage and a portion vest after one year, then 6/12 are marital assets to be divided. Of the portion that vests after two years, 6/24 would be marital assets. And so it goes. Clear? But check with someone who knows the law in your state to see how it is treated where you live.

  4. Hello Ginita
    Hope you are doing well,
    I was with a company for 5 years. I had access to RSU during the 5 years.
    When I left the company, not all the RSU were vested. Im going through a divorce right now.
    My partner is claiming that the unvested RSU need to be part of the settlement.
    Since i never received the proceed of the RSU. Why should this be part of the settlement ?
    Thank you

  5. My husband is trying to keep most of his retirement. We don’t have a pre-nup. Should I cancel the divorce mediation unless he repackages his offer to be more fair and reasonable?
    Ale

    1. Good point. RSU stands for “Restricted Stock Unit”, but that longer term is rarely used, they are almost always known as RSUs. As it says in the article, they are issued by some employers to incentivize employees in some way, similar to stock options. And practically speaking, if the terms RSU and Stock Option are new to you, then your employer hasn’t issued them and you can skip reading the rest of the article.

  6. I received 40% of husbands stock options a year ago in divorce. They just now became fully vested, how do I sell my portion when it is in his name?

    1. Stock options automatically pay out to the employee when they vest, either in cash or in stock. That means your ex received your share of the payout. Look at your divorce agreement to see what it says. It should provide that your ex turns your share of the payout over to you promptly, within a few days of receipt.

      1. When stock options vest, that is when you actually have the option to exercise. It may be possible to transfer vested options, but you have to look into it with the broker. If it is not possible, then your husband has to exercise and transfer the proceeds to you. It can get a little complicated with the tax implications.

  7. Hello!
    How would court calculate RSUs after divorce since the vested RSUs become available for Child Support and Spousal Support? Where can I find the calculator?

    Thanks!

    1. The income from the vested RSUs are income available for child support in most states. I don’t know how that income is treated in your state — there may be a bonus table or calculator that says how much, based on the amount of support he pays on his regular income. Each state is different. If you are trying to google it, try something like “bonus calculation child support” plus the name of your state and see what comes up.

  8. Pingback: Four Critical Facts About Vested vs Unvested Stocks and Your Divorce

  9. Hi Tina. I’m curious if your case was resolved? If so, what was the result of the stock options granted prior to marriage, but exercised after marriage.

    Thanks for your assistance.

  10. Pingback: Can I Go After My Husband’s Stock Options and RSUs in a Divorce? | SortStyle.com

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