When it comes to divorce, the division of unique assets like stocks or restricted stock units (RSUs) can be a complex matter. This is largely due to issues in determining what constitutes separate property (which is not subject to property division under Florida law) and community property (which is subject to equitable division), as well as the unique nature of RSUs.
As a family law firm experienced in handling high-asset and complex financial divorces, our team at Schuttler, Greenberg & Mullins, LLC provides assistance in navigating all issues inherent to property division, including matters involving business ownership interests, executive compensation plans, employee stock options, and the division of stocks. We cater to the unique needs of clients throughout Boca Raton and the surrounding areas of Florida, where a number of businesses (especially in the tech industry) have increasingly turned to RSUs as part of employee compensation packages.
When it comes to dividing RSUs, there are several important things to consider:
- Equity compensation involves a company’s stock value, which can vary, making it difficult to predict fair market value of a stock at a future date.
- Grant, vesting, and sale dates of RSUs will vary.
- Many RSU grants do not permit transferring ownership of shares from an employee to a spouse.
- RSUs do not vest unless conditions (such as continued employment or performance benchmarks) have been satisfied.
- RSUs may be given in compensation for past performance, meaning employees may be awarded RSUs after the date of separation for work performed during the course of a marriage.
The following information can help you better understand how RSUs may be subject to division during your divorce:
- During marriage – RSUs granted and vested during marriage will afford the employee spouse with options. For instance, they may choose to keep the vested stock and reach an agreement to offset the non-employee spouse’s share based on current fair market value. If spouses agree to split the current value of the stock, half of the vested stock can be sold and given to the non-employee spouse. However, there may be capital gains taxes incurred during the sale that will need to be addressed.
- After marriage – When RSUs are granted during marriage, but vest after marriage, there will be complicating issues. For one, vesting is often contingent on an employee staying with the company for a specified amount of time, which means that termination or resignation will render RSUs valueless. Spouses may arrive at agreements to value the RSUs and provide compensation in the form of equalization payments, or they may wait until the RSUs vest, and equally split its current market value. Both of these approaches introduce difficulties in valuing future stock prices and in requiring spouses to remain in contact for future transactions. When out-of-court negotiations and agreements can’t be reached, any party can benefit from working with skilled attorneys who can help address the complex laws and issues involved in bringing matters of stock option division to court.
- Past performance – In cases where RSUs are granted after a date of separation for work performed during a marriage, there are arguments that can be raised regarding the RSUs being awarded for future work (which may allow the employee spouse to keep the RSUs) or that it was awarded solely for past performance which took place during the marriage (which may entitle non-employee spouses to a share).
For as long as RSUs and stock options continue to be a form of compensation used by employers, employees who receive them will likely run into issues when dividing their assets during divorce. Given the complex nature of these matters, conflicting case law, and their importance in the futures of divorcing spouses, it becomes vital that anyone seeking a divorce with these issues seek the assistance of proven lawyers who have the experience and resources to handle high asset and complex financial divorce.
To discuss your current situation, divorce, and property division with a member of our team, contact us to request a consultation. Schuttler, Greenberg & Mullins, LLC is comprised of attorneys with more than 75 years of collective experience, as well as a Supreme Court Certified Mediator and Board Certified Specialists in Marital and Family Law (Florida Bar Board of Legal Specialization).