Stock options and restricted stock units (RSUs) from an employer can make up a large share of a family’s wealth, whether the awards belong to you or to your spouse. Many people assume shares that have not vested yet are off the table in a divorce. In Washington, that is often not true. Here is how courts approach equity pay.
Stock awards earned during marriage are community property
Washington is a community property state, so property earned by either spouse while you are married generally belongs to both of you. Stock options, which give you the right to buy company shares at a set price, and restricted stock units, or RSUs, which are shares you receive over time, are no exception.
The timing that counts is when you earned the award, not when it vests, meaning when you gain full ownership. Equity that rewards work you completed while still married is community property, even if the shares had not vested by the time you separated.
Courts use a time rule for awards that vest after separation
If an award was meant to reward future work, courts look at when that work happened. A formula called the time rule compares the time worked during the marriage with the total time the award takes to vest.
For example, if an award vests all at once 48 months after it was granted and you separated at month 24, about half of it is community property. When an award vests in batches, the rule generally applies only to the batch whose vesting period includes the date of separation. Later batches, earned through work after separation, are generally separate property.
The court divides the community share fairly, not always evenly
After sorting each asset into community or separate property, the court divides all of it, both community and separate, in a way that is just and equitable. That means fair, not automatically 50/50. The judge looks at how long the marriage lasted and each spouse’s finances after the divorce and may decide when you receive your share of an unvested award.
Taxes, company plan rules and the purpose of each grant can change the result, so every case turns out differently.
Getting legal guidance on dividing stock awards
Equity pay is easy to misunderstand because its value changes with the stock price and the vesting schedule. An attorney who handles high-asset divorce can review your grant agreements, identify which awards are community property and help you plan around taxes and timing.
Every case is different, but understanding how awards are classified may help you protect what you earned or claim what you are owed.
