Many divorcees wonder how RSUs and stock options are handled in a Gilbert marriage for tech professionals. Many spouses in Arizona receive some form of deferred income in addition to a base salary. Restricted Stock Units (RSUs) and stock options are popular forms of deferred compensation among technology professionals. Still, splitting up RSUs and stock options during a divorce usually presents more hurdles than dividing things like regular paychecks or simple savings accounts.
Arizona family courts must first classify stock options and RSUs as separate or community property before they can be divided.
Arizona RSUs Laws
As a community property state, Arizona courts start with the presumption that any property acquired by either spouse during the marriage is community property. According to family laws, Arizona Revised Statutes § 25-211 defines community property. Arizona Revised Statutes § 25-213 defines separate property.
Community and separate property are not always easily defined when it comes to RSUs and stock options. Many equity awards are granted on a single date, vest over a specific period, and are intended to compensate an employee for past and future service. Every award must be analyzed based on the language of the employer’s stock plan and the dates on which grants were awarded.
The U.S. Bureau of Labor Statistics estimates that benefits account for around 30% of employees’ total pay in the private sector. Restricted stock units (RSUs), stock options, and other types of deferred pay are part of the compensation package for many technology workers, which goes beyond income and may need to be carefully examined during a divorce.
Why Deferred Compensation Can Become Complex
RSUs and stock options are just some examples of the types of compensation packages technology professionals may receive from their employers. Depending on the circumstances, other forms of deferred compensation may include incentive stock options, non-qualified stock options, performance shares, and employee stock purchase plans. Factors that can impact how these assets are treated in a divorce include:
- Date of grant and vesting schedule
- Whether the award was intended to compensate the employee for past or future service
- Date of marriage and date of service of divorce petition
- Employment agreements and stock plan restrictions
- Whether any shares have vested or been exercised
Disposition of these assets requires individualized analysis based on the specific terms of each award.
Technology Employment in Gilbert
In recent years, Gilbert has attracted a growing number of companies in technology, healthcare, aerospace, and advanced manufacturing industries. Many technology workers are traveling longer distances to and from work in the East Valley, taking Loop 202, U. S. Route 60, and the Santan Freeway to avoid traffic.
With more local employers offering equity incentives and stock options to employees, family lawyers are likely seeing an increase in divorce cases involving deferred compensation, executive benefits, and complex asset valuation.
For Gilbert divorces, the Maricopa County Superior Court – Southeast Regional Court Center at 222 East Javelina Avenue, Mesa, AZ 85210 is where cases are filed, depending on where the individuals legally reside and fall under its jurisdiction. If you have any questions about where your divorce petition should be filed, consult an attorney familiar with Gilbert divorce cases.
Hire a Family Lawyer
There are many reasons why an employee would want to hire a family lawyer when their divorce involves executive compensation or deferred income. If you receive stock options or RSUs from your employer, a Gilbert family attorney can help you understand how those assets may be divided in a divorce.
Divorce attorneys can explain equity compensation plans, analyze asset classification under Arizona law, negotiate property settlement agreements, and present evidence related to disputed assets during litigation. Addressing these issues early on may prevent disagreements later and provide greater certainty during property division.
Ellsworth Family Law, P. C. Serving Gilbert Residents.
Founded in 2000, Ellsworth Family Law, P.C. is a boutique Arizona family law firm. Both Steve Ellsworth and Glenn Halterman are Certified Family Law Specialists. Certification by the State Bar of Arizona requires lawyers to demonstrate experience and advanced knowledge in family law. As a Certified Family Law Specialist, Steve has also been recognized as a Fellow of the American Academy of Matrimonial Lawyers and the International Academy of Family Lawyers.
Taylor Larson has experience in high-net-worth family law cases and has provided legal analysis for TV news channels and networks. News outlets frequently seek Attorney Larson’s insights into controversial family law subjects. We can represent you in your divorce or child custody matters.
FAQs
Are RSUs Nonqualified Deferred Compensation?
RSUs aren’t deferred compensation in the traditional sense. With RSUs, the employee doesn’t receive shares until a future date after certain vesting requirements have been met. They can be considered deferred compensation from a tax and legal standpoint, depending on the language of the employer’s equity plan and various laws that apply. Determining how RSUs are classified for legal purposes can impact how they are treated in a divorce.
How Are Unvested RSUs Treated in Divorce?
Simply because RSUs have not vested does not mean they are going to be classified as marital property or separate property. Instead, courts look at the timeline of the RSUs, the rationale for granting them, and when they vest to determine if all or a portion of the stock award is marital. State law and the specific facts of the case are very important factors.
What Assets Are Untouchable During a Divorce?
Some examples of assets that could be considered separate property include property owned prior to marriage, certain inheritances, and gifts made specifically to one spouse. However, there are many instances where separate property becomes contested during divorce if it is commingling with community assets or otherwise loses its separate property character.
What Is the Hug Formula for RSUs?
The Hug formula is a guideline that certain courts apply when determining what portion of certain stock options or other deferred compensation is marital. The formula typically awards the stock based on the amount of time between the grant date and the vesting date that took place during the marriage. State law and specific facts also factor in final determinations. The Hug formula is not applied in every case in Arizona.
How Ellsworth Family Law, P.C. Can Help
Stock options are a way to invest back in employees for their hard work. As the company grows, so does the share of profits. Understanding RSUs can empower you to confidently navigate any challenges that may arise. Contact Ellsworth Family Law, P.C. today if you have concerns regarding RSUs and stock options in divorce. We can help you.
