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What are restricted stock units and how can they affect your divorce settlement?

On Behalf of | Jun 29, 2021 | Divorce

Your spouse makes a very good living. While their base salary is high, you know that much of their compensation is in stock options, bonuses and commissions. You may not have given much thought to the details of how those are calculated and paid out. 

However, now that you’re getting divorced, you want to be sure that your spouse reports all of those sources of income and doesn’t postpone any of their payouts until after it’s final so that you aren’t able to get your rightful share. Their income affects not just property division but potentially how much spousal and/or child support they may be required to pay.

Depending on what your spouse does, their income structure could be very complex. That can make some portions of their income easy to hide by simply not listing them when you both disclose your assets and debts. 

Let’s look at just one type of income that many executives receive. It’s a type of deferred compensation called restricted stock units, or RSUs. How much they’re eventually worth depends on the overall company’s performance as well as an individual’s performance, contributions to the company and the length of their employment.

Why are RSUs used?

New companies that want to attract valuable employees but don’t have the assets to pay them the kind of salary they could make elsewhere may offer RSUs. If and when the company becomes highly successful and its stock price soars, those who got in on the ground floor and were given RSUs can do very well. 

However, RSUs won’t appear on a W-2 form or be reported as income when filing taxes until they’re vested. That can make them easy to hide if someone wants to. Nonetheless, if your spouse worked for the company during your marriage, you may be entitled to a portion of those RSUs or to claim something else of similar value.

How do you find “hidden” RSUs?

If you believe your spouse is being less than forthcoming about their RSUs or any other sources of income or assets, it may be wise to bring a financial advisor such as a Certified Divorce Financial Analyst (CDFA) on to your team. CDFAs can be extremely helpful in many ways if you are dividing considerable and/or complex assets. They typically work with family law attorneys to seek and reach the best possible agreements for their mutual clients.