Stock options and restricted stock units (RSUs) are valuable assets. During a divorce, these assets can be a point of significant contention.
In New Jersey, the law treats these items as property. If either spouse earned them during the marriage, they may be subject to equitable distribution.
New Jersey’s equitable distribution rules
New Jersey follows equitable distribution rules. This means the court divides property fairly, but not always equally. The court considers when each spouse received stock options or RSUs. If a spouse received them during the marriage, the court may consider them marital property. If the grant occurred before the marriage or after separation, they may count as separate property.
The court also considers the reason for the grant. Some companies give stock options or RSUs as a reward for past work. Others give them as motivation to stay with the company in the future. If the company gave them for past work done during the marriage, the court may divide them between both spouses. If the company gave them for future work, the court may decide they are not part of the marital estate.
Stock options and RSUs often come with vesting schedules. This means the employee must stay at the company for a certain number of years before gaining full ownership. The court may divide only the portion that has vested or that will vest due to work done during the marriage.
Dividing the stock assets
Courts in New Jersey may use formulas to divide these assets. The most common is the coverture fraction. This method compares the time the employee worked during the marriage to the total vesting period. The result helps the court decide how much of the asset belongs to the marriage.
In some cases, the court may award the non-employee spouse a share when the asset pays out. This avoids tax complications and allows the employee spouse to keep control over the shares. The non-employee spouse would receive payment once the stock vests or gets exercised.
Understanding how New Jersey treats stock options and RSUs can help both spouses prepare for property division. Clear records and grant details often make this part of the divorce easier to resolve.
