Nashville, Brentwood or Franklin divorce and restricted stock units

  Posted on February 18, 2020
Calculator used to calculate numbers in a divorce settlement

This week I have had three clients in my Nashville and Brentwood / Franklin offices ask me how to divide RSUs or restricted stock units in a divorce settlement.  So, this blog will focus on RSUs. 

An RSU or, restricted stock unit can be given to an employee as part of their annual compensation package.  If you or your spouse receive RSUs, it is important to understand they typically have a vesting schedule over a period of years.  Five years is a common period of time for the RSUs to vest.

What does this mean for a divorce settlement?  If a spouse received 100 RSUs as part of their compensation 5 years ago, the RSUs are 100% vested and are an asset that can be cashed out and divided in a settlement.  It is important to remember there are tax consequences to cashing in the RSUs and a divorce agreement should divide the net proceeds.

If the spouse received 100 RSUs as part of their compensation 3 years ago, this means on 3/5 of the RSUs are vested or, 60 shares are vested.  There will be tax consequences when these RSUs are cashed and the divorce agreement should divide the net proceeds.

It is also important to understand the employee needs to be employed by the company who issued the RSUs at the time they vest in order to cash them in and receive cash.  When an employee leaves a company, any unvested RSUs typically expire.

So, if you have RSUs in your marital estate and are considering divorce or, are in the midst of a divorce, pay attention to the details to ensure you get a financially smart divorce.


Posted in: Finances, Taxes