Restricted Stock Units (RSUs) and California Family Law

Restricted Stock Units (RSUs) and California Family Law

Oftentimes, executives and other key employees are granted restricted stock units (RSUs), also known as “golden handcuffs,” as a form of compensation.

These units are granted on a specific day through the receipt of a grant letter but the executive or key employee does not receive the actual stock units until a specified day thereafter. It is typical that portions of the granted stock vest over a three or five-year period. What stocks vest when are usually delineated in a vesting schedule. If the employee leaves the company before vesting, the stock is often lost. Hence the term, golden handcuffs.

When going through a divorce or support matter, it is imperative to learn all material facts and information surrounding the Restricted Stock Units (RSU). RSUs are an asset that will be characterized and divided in the divorce proceeding.

Likewise, any separate property RSUs will be considered income available to pay support.

The RSUs will be considered income available to pay support when RSUs are exercisable (right to buy/sell) whether or not the spouse holding RSUs sells or holds the units.

In your family law proceeding it is important to obtain all grants of RSUs as well as the corresponding vesting schedules and RSU or compensation agreements explaining the reason for the RSU’s being granted. An expert will then determine what portion of each tranche of RSUs is separate or community property.

Consider consulting a knowledgeable divorce attorney who can navigate the complexities of these financial instruments within the scope of California family law.