Deferred compensation is one way for companies to motivate workers to do their jobs to the best of their abilities. Giving a worker an interest in the company’s success or extra pay based on their performance can be a powerful motivator.
Professionals with deferred compensation packages may be eligible for restricted stock units (RSUs), which allow them to directly profit from the company’s success. Typically, RSUs are subject to a multi-year vesting schedule. The professional must meet certain performance metrics or stay with the company for a specific amount of time before the RSUs vest.
Those with deferred compensation included in their employment contracts may have both vested and unvested RSUs. Does the vesting status of their RSUs affect the property division process during divorce?
Both types of RSUs may be divisible
Contrary to what professionals might believe or hope, unvested RSUs are not automatically their separate property. Both vested and unvested RSUs are theoretically part of the marital estate.
Any portion of a deferred compensation package earned during the marriage is technically marital income, even if the professional does not yet have access to those resources. Well-compensated professionals and concerned spouses may need help reviewing employment contracts to determine what portion of their deferred compensation is subject to division and also how to value RSUs.
Anyone concerned about the economic challenges of a high-asset divorce may benefit from consulting with an attorney before making any formal agreements with their spouses. Understanding how the courts handle various valuable resources, including complex compensation packages, can make negotiating a property division settlement or preparing for litigation a much simpler, fairer process.
