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Restricted Stock Units & Divorce

Amazon employs a large number of people in the Seattle, WA area. Amazon commonly pays its corporate and professional employees with Restricted Stock Units (RSUs). These are not to be confused with employee stock options (ESOs).

  • ESO: An employee can purchase stock at a later date (after being vested), but they will pay a discounted price. They may even buy it at the price the stock was at when they were hired.

  • RSU: An employee receives the shares at a future date after being vested so long as they remain employed by the company.

There is a critical distinction between the two, especially when considering how they can be divided during a divorce. The person who is being paid with RSUs may have to work at the company for years before receiving them. If they get divorced before or after this happens, are these considered assets or income? In terms of an ESO, the couple may not have purchased any or may not be able at the time of divorce or separation. This is why your attorney will likely use a completely different approach to them.

Classifying RSUs

During a divorce, the court and your attorneys will be working to divide the property, debts, and assets in a “fair and equitable” manner. Equitable does not automatically mean 50/50, but it doesn’t rule it out either.

Every asset and debt will be characterized as either community or separate property. A community asset is an item (like a house, car, furniture) that is purchased or acquired during the time of the marriage with income that was produced during the time of the marriage. It will be subject to equitable distribution. An example of separate property, is an inheritance, gift or property acquired before the marriage. There is a presumption that separate property will remain separate and not be divided.

Each person’s income will play a factor in determining child support and maintenance or spousal support. Each person’s financial needs versus their financial ability to pay support plays a significant role. For anyone who has RSUs the question remains, are RSUs an asset to be divided as property or income to be calculated for ongoing support?

The View Ridge Estate Planning & Family Law Solution

The law does not have a definitive answer for whether RSUs are income or assets. We must determine how to address RSUs on a case-by-case basis. This allows the attorneys at View Ridge Estate Planning & Family Law to work with their clients to approach the issue of RSUs by negotiating fair treatment and ensuring that there is no “double-dipping”.

In other words, does it make more sense to classify them as an asset or as income after seeing all the other relevant details of your divorce? It is important to answer this question early in any case involving RSUs. If you have any additional questions, contact our team of attorneys to schedule a consultation.

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