RSUs granted during marriage that vest during marriage: These are generally considered as marital or community property and would be divided according to the division of asset laws for your state. RSUs granted after a separation or a divorce are generally considered separate property.

Are unvested stock options marital property?

Stock options, both vested and unvested, are considered assets in a divorce that can be divided between the spouses. To do that, the employee and his spouse must agree on the current value of the stock options.

How is unvested stock handled in divorce?

No capital gains or losses are incurred at the time of divorce; the basis in the stock (the value at the time of vesting) stays with the stock. Unvested RSUs cannot be transferred between spouses in divorce—but they must be considered in divorce.

Are restricted stock units an asset?

RSUs give an employee interest in company stock but they have no tangible value until vesting is complete. The restricted stock units are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares is withheld to pay income taxes.

Are restricted stock units transferable?

Restricted stock is non-transferable and must be traded in compliance with special Securities and Exchange Commission (SEC) regulations. The restrictions are intended to deter premature selling that might adversely affect the company. Restricted stock is also referred to as “letter stock” and “section 1244 stock.”

Can you lose stock in a divorce?

Although there are many types of assets that can be scrutinized in a divorce, stocks and other financial assets can make up a large portion of the marital assets. But if those stock options were exercised during the marriage, they may be viewed as marital property.

What happens to stock options in a merger?

Like an IPO, M&As are also great news. There are two typical outcomes if you have employee stock options and an M&A occurs, the acquiring company can cash you out or give you company shares. If the acquiring company cashes you out, your outcome is simple: you receive cash and pay taxes on the gains.

What are the rights of a restricted share holder?

Restricted shares are awarded outright, and their owner has the same rights and privileges as any shareholder. They may receive dividends and vote at the annual meeting, for example. However, the shares may be vested, and the company may reserve the right to buy back unvested shares if the employee leaves the company.

What happens if a restricted stockholder leaves the company?

The risk of taking this election is that if the restricted stockholder leaves the company before the shares vest, the shares are forfeited, and taxes already paid are non-refundable.

Why are restricted shares awarded to insiders?

Insiders are often awarded restricted shares after a merger or other major corporate event. The restrictions are intended to deter premature selling that might adversely affect the company. An executive who leaves the company fails to meet performance goals or runs afoul of SEC trading restrictions may have to forfeit their restricted stock.

What’s the difference between stock options and restricted shares?

Stock options are the right to buy a certain number of shares at a certain price in the future, with the employee benefiting only if the stock price then exceeds the stock option price. Restricted shares are, as noted, an outright award of equity ownership in a company.