Dividing Restricted Stock Units in a Texas Divorce

A divorce settlement that treats restricted stock as mere numbers on an employee benefits statement rather than as valuable compensation may fail to account for the full value of the marital estate. Dividing restricted stock units in a Texas divorce requires determining what the employee may receive, when the award becomes available, and how much belongs to the marital estate. Restricted stock units, often called RSUs, are promises from an employer to give an employee company shares or cash in the future if certain requirements are met. Even so, the award may still be important property in a divorce. If you want to learn more about dividing restricted stock units in a Texas divorce, it is advisable to speak to an attorney. The experienced Dallas divorce lawyers of McClure Law Group can inform you of your rights and help you take the steps necessary to protect your financial future.

Texas law generally assumes that property held by either spouse during the marriage or when the marriage ends is community property. A spouse who claims that some or all of an asset is separate property must prove that claim with clear and convincing evidence. Restricted stock units can be difficult to classify because an award may be made during the marriage but continue to depend on employment after the divorce.

The Texas Family Code provides a time-based method for separating the part connected to post-divorce work from the part connected to the marriage. In simple terms, if an employee must keep working after the divorce before the stock becomes available, the portion tied to that later work may be the employee’s separate property. The remaining portion may belong to the community estate and may be divided. Each group of units that becomes available on a different date must be considered separately. Dividing restricted stock units in a Texas divorce therefore requires more than reading the total shown on an online account. Lawyers and any financial professionals involved should review the award date, vesting dates, employment requirements, performance rules, and the reasons the employer granted the award.

The value of an RSU award may look easy to calculate, but the number shown on a statement does not always equal the amount the employee will receive. A unit often becomes one share of company stock after it vests, meaning that the employee has satisfied the required conditions. The share price can rise or fall before that happens. If the employer is a privately owned company, there may be no public market where the shares can readily be sold.

Some awards also depend on the company or employee meeting financial goals, and others do not pay out unless the company is sold or becomes publicly traded. Taxes reduce the amount ultimately received as well. When RSUs vest, the employer commonly withholds some shares or sells them to cover payroll taxes. A fair settlement should therefore explain whether the other spouse will receive a share of the units before taxes, a share of the stock actually delivered, or a share of the cash remaining after approved deductions. It should also identify the date used to measure value so both spouses understand the calculation.

The Texas Family Code requires a divorce decree to address the spouses’ rights in employment benefits and financial plans. An employer usually will not divide an RSU account directly between former spouses. As a result, the decree may award the account to the employee while requiring the employee to deliver an agreed share of the stock or sale proceeds to the other spouse when units vest. The order should identify every covered grant, the number of units involved, and the percentage or formula used to determine the marital share. It should also require the employee to provide account statements and notices showing when units vest, how many shares were withheld for taxes, and what was ultimately received.

Clear deadlines should state when shares, cash, or supporting records must be delivered. The decree should also explain what happens if the company changes the award, replaces it with another form of compensation, speeds up the vesting date, is purchased by another company, or ends the employee’s job. Dividing Restricted Stock Units in a Texas Divorce is less likely to lead to another legal dispute when both spouses can read the order and understand exactly what must happen.

Restricted stock units can be easy to overlook and surprisingly difficult to divide. One award may become available in several stages, and each stage may have a different community-property portion. If your marital estate includes RSUs, you should speak with an attorney familiar with Dividing Restricted Stock Units in a Texas Divorce before accepting an account value or signing a proposed decree. The skilled Dallas divorce attorneys of McClure Law Group help clients understand compensation plans and other complex marital assets, and if you retain us, we will work to pursue an outcome that protects your rights. Our primary office is located in Dallas, and we have a Collin-County office, which is located in Plano, where we are available to meet clients by appointment. We frequently represent parties in divorce cases in Dallas, McKinney, Fort Worth, Frisco, Rockwall, Irving, Richardson, and Garland. We also handle family-law actions in cities in Dallas, Denton, Rockwall, Collin, Tarrant, and Grayson. You can contact us by calling 214.692.8200 or by using our online form to arrange a meeting.