Dividing Stock Options & RSUs in Divorce
Stock options and restricted stock units (RSUs) are increasingly common in modern compensation packages. But during a divorce, dividing these assets can be a complex process. Florida courts classify and value stock-based compensation differently depending on when and why the stock was awarded. Whether the options are vested or unvested, for past or future service, makes a big difference in equitable distribution.
Stock Options as Deferred Compensation
Under Florida Statute § 61.075(6)(a)1e, both vested and non-vested benefits earned during the marriage may be subject to equitable distribution. This includes employer-provided stock options and RSUs, even if they have not yet been exercised.
In Jensen v. Jensen, 824 So.2d 315 (Fla. 1st DCA 2002), the husband received stock options during the marriage for past performance but was required to remain with the company to exercise them. The court held that the grant date—not the vesting date—was the key factor in determining whether the options were marital property. Because the options were granted as deferred compensation for services already performed, they were found to be marital assets.
Distinguishing Past vs. Future Service
Courts in Florida distinguish between compensation for past service and future performance. In Seither v. Seither, 779 So.2d 331 (Fla. 2d DCA 1999), the court explained that when stock options are awarded for past or current service, they are generally considered marital. However, when they are granted as an incentive for future performance, they may be classified as non-marital.
This distinction was crucial in Ruberg v. Ruberg, 858 So.2d 1147 (Fla. 2d DCA 2003), where the court upheld the classification of unvested options as non-marital because they were granted for the husband’s future service and had not been earned at the time of filing.
Using the Coverture Fraction Formula
When options or RSUs are partly marital and partly non-marital, Florida courts may apply a “coverture fraction” or “time rule” to determine the portion earned during the marriage. In Parry v. Parry, 933 So.2d 9 (Fla. 2d DCA 2006), the court held that this formula was appropriate to equitably divide partially earned stock options. The numerator represents the time the employee was married while the award vested; the denominator is the total vesting period.
Valuation and Tax Concerns
Determining the value of stock options and RSUs may require input from financial experts. Courts may apply a marketability discount when the options are not easily transferred or sold. In Williams v. Williams, 683 So.2d 1119 (Fla. 3d DCA 1996), the court affirmed the trial court’s decision to apply such a discount due to limited liquidity.
If you have questions about equitable distribution or need guidance during your divorce, contact Rhoden Law Group at 321-549-3162 call/text or use the contact form on this site. We serve clients in Melbourne, Titusville, Viera, Palm Bay, the beaches, and throughout Brevard County.