Dividing assets during a divorce includes not only tangible items like homes and cars but also financial assets such as restricted stock units. RSUs are a type of compensation often given to employees by their employers.
The defining feature of RSUs is that they typically vest over time, meaning the employee does not fully own them until they meet certain conditions. This raises complex questions regarding how to handle RSUs when dividing marital assets during a divorce.
Marital vs. separate property
Colorado is an equitable distribution state, meaning courts aim to divide assets as fairly as possible. To determine how to handle restricted stock units equitably, the court must classify them as marital or separate property. RSUs earned during the marriage are typically considered marital property, even if they have not yet vested. This means that the court may divide them between both spouses.
On the other hand, RSUs granted before the marriage may be separate property. In these cases, the court might not divide them, or it may only divide a portion deemed as marital property. The timing and purpose of the RSUs play a key role in determining how much of them will count as marital property.
Valuing restricted stock units
Valuing RSUs during a divorce can be complex. Since RSUs vest over time, they may have different values at the time of the divorce versus when they eventually vest. Courts in Colorado often rely on financial experts to estimate the value of RSUs, considering factors like the vesting schedule and the company’s stock price.
Dividing restricted stock units
Dividing RSUs could entail awarding one spouse a percentage of the RSUs as they vest, or offsetting the value of the RSUs by awarding other assets to the other spouse. The specific approach will depend on the circumstances of the case. As with other asset division matters, the court will consider the length of the marriage and the financial situation of each spouse.
The most difficult aspect of handling RSUs during a divorce is determining the actual financial value that they represent for the couple. After overcoming the hurdle of valuation, dividing RSUs will follow a similar process as all other asset division matters.