Empowering Families

I frequently receive questions about handling complex compensation plans in divorces in New York. Hi, I’m Katherine Miller, and I’ve been working with high-net-worth divorces in New York for over 30 years. One common issue involves restricted stock units (RSUs), which are often granted as both rewards and incentives to retain valuable employees. These RSUs vest over a period of time, and this can complicate their division during a divorce.

Let’s walk through a scenario. Suppose one party, let’s say the wife, receives 90 RSUs under a three-year vesting plan. In this plan, 30% vest in the first year, another 30% vest in the second year, and the final 30% vest in the third year.

Imagine the divorce occurs after the first year. At this point, the first 30 RSUs are fully vested. Therefore, these 30 shares are divided equally between the spouses.

For the second tranche, which vests in the second year, the spouse has worked half of the vesting period during the marriage and half after. Thus, half of these 30 shares are considered marital property and are divided equally, while the remaining half belongs solely to the titled spouse. So, 15 shares (or 25% of the total RSUs) go to the non-titled spouse, and 15 shares (or 75%) go to the titled spouse.

The third tranche, vesting in the third year, reflects one-third of the vesting period during the marriage and two-thirds after. Consequently, one-third of these 30 shares are marital property and are divided between the former spouses, while two-thirds remain the separate property of the titled spouse.

Typically, we wait until the RSUs are actually vested to divide them, but this explanation provides a general approach to handling complex compensation plans.

If you have any other questions, don’t hesitate to reach out on our email address info@miller-law.com or call us at (914) 685-9805. I’d be happy to help. Thanks for listening!