Dividing marital assets is stressful under any circumstances. But when a significant portion of your compensation sits in restricted stock units, the stakes are considerably higher.
Since 1982, the Law Offices of Michael A. Robbins has helped high-asset individuals in Michigan protect their financial interests through complex divorces. The best step you can take right now is to educate yourself on how RSUs factor into divorce, so you can confidently manage your assets.
Here’s what you need to know about RSUs and divorce:
- RSUs are typically marital property: RSUs granted or earned during the marriage are generally subject to division.
- Division is complex: Vesting schedules, fluctuating stock values, and significant tax implications all complicate the process.
- Strategic options exist: A present-day buyout or a deferred distribution plan are the two primary methods for dividing RSUs equitably.
Are RSUs Considered Marital Property in Michigan?
In a Michigan divorce, property is categorized as either marital or separate. Understanding the difference is key to determining what happens to your restricted stock units (RSUs).
Marital property includes assets that were earned or acquired during the marriage. In most cases, this property is subject to division between spouses.
Separate property, on the other hand, typically includes assets that were owned before the marriage or received individually as a gift or inheritance. Separate property is usually not divided, unless it was mixed with marital assets or both spouses contributed to its growth.
When it comes to RSUs, timing matters.
If the RSUs were granted as compensation for work performed during the marriage, they are often considered marital property, even if they have not vested yet. That’s because they were earned, at least in part, during the marriage.
However, RSUs granted before the marriage may be treated as separate property. The key question becomes whether those shares were truly earned before the marriage or whether they reflect ongoing work performed while married.
Every situation is different. The court will look at when the RSUs were granted, why they were granted, and what portion of the earning period overlaps with the marriage. The goal is to divide property fairly, based on what was built together during the relationship.
Why Is Dividing RSUs So Complicated?
Once RSUs are classified as marital or separate property, many people assume dividing them will be straightforward. Unfortunately, that is rarely the case. Several practical challenges can make the process far more complicated than splitting a bank account.
- Vesting schedules: Some RSUs cannot be sold or transferred until a future date. If a portion is considered marital property but has not yet vested, you and your spouse must decide how it will be handled when that date arrives. This can mean waiting years for a division or finding another way to balance things now.
- Uncertain future value: The value of company stock can change significantly over time. No one can accurately predict what they will ultimately be worth. That uncertainty can create tension during negotiations and make it harder to feel confident in a settlement.
- Tax consequences: RSUs are typically taxed as income when they vest. If your divorce agreement does not clearly address who is responsible for those taxes, one spouse could receive far less than expected. What appears equal on paper may not feel equal after taxes are paid.
Dividing RSUs requires more than simply identifying what portion is marital. It requires thoughtful planning about timing, risk, and long-term financial impact.
What Are Your Options for Dividing RSUs in Divorce?
If some or all of your RSUs are considered marital property, the next step is deciding how they will be divided. In most cases, couples choose one of two general approaches. Each comes with advantages and trade-offs.
Option 1: One Spouse Keeps the RSUs (The “Buyout” Approach)
Under this option, the employee spouse keeps all of the RSUs. In exchange, the other spouse receives different marital assets of comparable value, such as cash, retirement funds, or a larger share of home equity.
Pros:
- Creates a clean financial break.
- Avoids future coordination after the divorce is final.
- Provides more immediate certainty.
Cons:
- Requires enough other assets to offset the value.
- Can be difficult if the RSUs have not yet vested and their future value is uncertain.
- One spouse assumes all the future risk and potential reward of stock price changes.
Option 2: Divide the RSUs When They Vest (Deferred Distribution)
Instead of offsetting the value now, the spouses agree to divide the RSUs if and when they vest in the future. When that happens, the non-employee spouse receives their share according to the divorce agreement.
Pros:
- Both spouses share in future gains or losses.
- Avoids guessing what unvested shares may be worth today.
Cons:
- Keeps the parties financially connected for years.
- Requires careful drafting to address taxes and distribution logistics.
- Can create stress if communication between former spouses becomes difficult.
There is no one-size-fits-all answer. The right approach depends on your broader financial picture, your tolerance for risk, and your desire for a clean break versus shared future value. An experienced property division attorney can help you weigh these options and craft an agreement that protects your financial future.
Make the Right Decisions for Your Financial Future
Restricted stock units can represent a significant portion of your financial future. While they are often considered marital property, deciding how they should be divided is rarely simple. The choices you make today can affect your income, tax obligations, and long-term stability for years to come.
You deserve clear guidance, thoughtful strategy, and an advocate who understands both the legal and financial dimensions of these assets. Attorney Michael A. Robbins has the experience to assess your situation, identify the right strategy, and represent your interests at every stage of the process. Contact us today to schedule a consultation.