What are Restricted Stock Units?

What are Restricted Stock Units?

If you are going through a divorce, you likely have many questions about the division of assets, such as stock. What are restricted stock units, and how are they divided during divorce? In this guide from Conniff & Keleher, we discuss what is a restricted stock unit and more.

What is a Restricted Stock Unit?

Restricted Stock Units (RSUs) are a type of stock-based compensation offered by employers in hopes of attracting and retaining employees. RSUs allow the employer to share the success of the company with employees. RSUs give an employee an incentive to remain with the company until the shares vest. RSUs also encourage optimal performance to help the stock price increase in value as much as possible. 

Basically, RSUs are a promise from the employer to issue stock after certain conditions have been met. Shares are “restricted” because they are subject to a vesting schedule based on employment length or performance goals. The benefit of RSUs is that even if the price of the stock drops after you are granted shares, RSUs always have some value unless the stock price hits $0.

Restricted Stock Units at the Time of Divorce

The division of stock can be challenging because the value of RSUs varies over time. The value of the stocks become fixed at the time a spouse decides to exercise his or her options and cash out or when the RSUs vest.

Determining the marital portion of RSUs can be quite a complicated process. The factors listed below may be used to determine what is considered marital property.

  • When the RSU award was granted
  • The vesting schedule of the RSU
  • Vesting criteria
  • The reason the RSU was issued

If RSUs are granted and vest during a marriage, it is easier to determine whether it is marital property.

Contact Conniff & Keleher Today

If you are going through a divorce and want the assistance of an experienced family law attorney who has your best interests in mind, set up a consultation with Conniff & Keleher today. We can help you with financial issues surrounding divorce, division of assets, and more. Reach out to us today for more information.

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