Divorce is already a challenging process. Dividing complex assets can add to the complexity.
In Arizona, a community property state, stock options and restricted stock units (RSUs) may be considered marital property. Understanding how to handle these assets can help facilitate a fair settlement.
Understanding stock options and RSUs
Stock options give the employee the right to purchase company stock at a predetermined price, known as the strike price, at a future date. In contrast, RSUs entitle the employee to the cash value of the stock on that date. Both types of stock compensation have vesting schedules, meaning they become fully owned by the employee after a certain period.
Community vs. separate property
Under community property law, both spouses own equal shares of assets acquired during a marriage. If stock options or RSUs were granted during the marriage, they are typically considered community property and subject to division. However, if they were granted before the marriage or as an incentive for future performance, they may be considered separate property.
Valuation and division
Valuing stock options is challenging due to their fluctuating nature. The value is often determined based on the stock’s market price at the time of separation or divorce. Once valued, division options include:
- Buy-out: Employee spouse buys the other spouse’s share at its determined value
- Offset: Non-employee spouse receives other marital assets of equivalent value
- Equal division: Stock options are divided equally between spouses
There is much to consider when dividing complicated marital assets. Having experienced legal guidance can help you ensure that you get a fair settlement.