In a Washington divorce, unvested Restricted Stock Units (RSUs) are not always fully community property or fully separate property. Courts usually look at why the employer granted the award, then decide what part, if any, belongs to the marital community.
Why did the employer grant the RSUs?
Washington follows community property rules for assets acquired during marriage. With unvested RSUs, the court often asks whether the award paid for work done during the marriage, encouraged the employee to stay with the company after separation or served both purposes.
That difference matters because RSUs tied to work performed during the marriage generally have a community property component. Awards granted mainly to keep the employee at the company after separation can still include both community and separate property, depending on how the vesting period overlaps with the marriage. The same document review often matters in high-value asset disputes between spouses because the grant agreement and stock plan can show what the employer intended.
Courts often use a time formula
When an RSU award serves more than one purpose, courts often use a time-based formula to divide it. The formula usually compares the months tied to the marriage with the full vesting period. Important records may include:
- Grant agreements
- Stock plans
- Vesting schedules
- Employment records
- Tax documents
These records help show what part of the award relates to the marriage and what part relates to future work. Under Washington community property law, property acquired during marriage is presumed to be community property. The spouse claiming an asset as separate property generally must prove that claim.
Tax treatment and timing can change the result
RSUs can create tax issues because the employee usually owes ordinary income tax when the units vest. That means spouses may need to focus on the net value of the award, not just the number of shares.
Couples may handle these awards through a buyout or by dividing the shares or proceeds later. Market changes can make either option harder to value. Dividing unvested RSUs without accounting for taxes can leave one spouse with less than expected. Before you agree to any division, reviewing the grant agreement, tax implications and timing issues with a Washington family law attorney can help you avoid accepting a buyout that undervalues the award.
