Sweat Equity: Securing RSUs and Company Stock in Divorce

Ever wonder if your tech executive spouse has compensation you don't fully understand? You're not alone. The modern divorce landscape has become increasingly complex as companies shift away from straightforward salaries toward sophisticated equity-based compensation packages.

In this essential episode, I tackle one of divorce's most misunderstood financial topics: non-standard compensation. I break down the mysterious world of RSUs (Restricted Stock Units), PSUs (Performance Stock Units), deferred compensation, and various bonus structures that often make up significant portions of total income in tech, finance, and corporate settings.

Through clear explanations and a compelling case study, I reveal how overlooking these assets can potentially cost you hundreds of thousands of dollars in your settlement. You'll learn the critical differences between vested and unvested equity, discover the five-point checklist for properly documenting these assets, and understand the tax implications that could dramatically affect their true value. I share a real-world example where my analysis helped secure a client over $250,000 in future payouts that were nearly left out of their settlement.

Whether you're just beginning the divorce process or already deep into negotiations, this episode provides the knowledge you need to identify potential hidden wealth and ensure your financial future isn't compromised by overlooking these increasingly common compensation structures. Don't leave money on the table – listen now to gain the clarity and confidence you need to make informed decisions about your financial future.

Schedule a free 30-minute consultation to see if divorce financial planning might be right for your situation – because understanding your finances today creates the freedom to build your tomorrow.

• https://calendly.com/roessler-jacki/30min?month=2025-07

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Chapters

• 0:00 Welcome to Divorce Rich Podcast
• 2:44 Understanding Non-Standard Compensation Types
• 5:45 How RSUs and PSUs Work
• 9:59 Five Point Checklist for Documentation
• 15:18 Real Case Study: $250,000 Recovery

Transcript

Speaker 1: 0:09

Welcome to the Divorce Rich Podcast. I'm your host, jackie Ressler. I've been a certified divorce financial analyst for 28 years, helping clients and their attorneys navigate the often complex and confusing financial issues in divorce. If you're in the process of, or considering, divorce, now is the time for you to take a deep breath and give yourself permission to find clarity on the financial issues you're facing. Rich means many things to many people. I believe the best definition of being rich is someone who has access to many resources. Along with my guests on this podcast, I will be bringing you a wide variety of information so that you can make sound and informed financial decisions for your financial future. Hey, if you're recently divorced or still in the middle of it, you already know that life can feel like it's been turned upside down and, let's be honest, the financial part it's overwhelming, confusing and often the last thing you want to deal with. That's why I want to tell you about the Independent Wealth Management Team at Center for Financial Planning. Their team of certified you want to deal with. That's why I want to tell you about the independent wealth management team at Center for Financial Planning. Their team of certified financial planners specializes in helping people just like you navigate life changes with confidence. Whether it's assessing your new financial circumstances, creating or updating your retirement plan or helping you adjust to the new normal, they'll work with you to get a clear, customized plan to feel in control and move forward with confidence. So if you're interested in working with a financial planner who you can trust to have your best interests in mind and you're ready to take the next step, visit centerfinplancom that's centerfinplancom and schedule a conversation. Center for Financial Planning live your plan. Securities offered through Raymond James Financial Services Inc. Member FINRA. Sipc. Investment advisory services offered through Center for Financial Planning Inc. Center for Financial Planning Inc. Is not a registered broker-dealer and is independent of Raymond James Financial Services.

Speaker 1: 2:29

Hi everyone and welcome back to the Divorce Rich Podcast. This is Jackie Ressler and I am doing a solo episode today on one of the most misunderstood and most critical, in my opinions, financial topics in modern divorce, which is non-standard compensation. I'm glad I'm doing this topic solo today because I have so much to say about this topic that I want to hog the mic and make sure I get all of that information out there to you. So when we're talking about non-standard compensation, think RSUs, psus, deferred comp and those sneaky little bonuses that show up once a year or even after your divorce is finalized, if you or your ex work in tech, finance or any big corporate setting. Really, this episode is essential listening for you, so let's get right into it. We all agree divorce is emotional, but your financial decisions shouldn't be. I'm Jackie Ressler, certified Divorce Financial Analyst. On this podcast, I help you make smart, informed choices about money during divorce so you can move forward with clarity and confidence. Not sure where to start? Let's talk. Schedule a free 30-minute consultation with me to see if divorce financial planning is the right fit for you. At the end of this episode, you can check on my show notes. There's a link for you to sign up for a free 30-minute consultation, because financial peace of mind is possible possible.

Speaker 1: 4:10

Let's start with what I mean by non-standard compensation. It's basically anything that's not your base salary, so this can include RSUs, which are restricted stock units, rsas, which are restricted stock awards, psus, performance stock units, stock options, deferred compensation bonuses, which can be both discretionary and performance-based, and then we also have phantom stock or employee stock purchase plans. I'm going to go and take a really deep dive today into RSUs and PSUs and we might cover some of these other topics another day, but RSUs and PSUs can make up a significant, even majority, portion of someone's total income, especially if they're in tech or a startup company, finance-heavy industries and, as all of you listeners probably are aware as I've mentioned it a few times, I'm in Michigan and all of the automotive companies here, the large employers. They have PSUs and RSUs that are granted on a pretty regular basis, and it's not just for the CEO of the company, it's for they're for management, sometimes not even upper level management. So it's a really important topic and something that should not be overlooked in your. So first I'm going to give a detailed explanation of what RSUs and PSUs are and then in the next segment, I'm going to talk about the context of those assets in a divorce and how they can be looked at.

Speaker 1: 5:44

So first let's talk about restricted stock units. Those are company shares that are granted to employees as part of their compensation, but they don't actually own them until they vest. So what does vesting mean? Vesting is the process over time of earning the right to keep a benefit like a stock, retirement contributions or bonuses, even over time. In simple terms, you don't fully own stock if it's an RSU, until it vests A good rule of thumb for divorce.

Speaker 1: 6:17

If the asset is vested it's generally considered marital, in other words part of the property to be divided. If it's unvested it also may be considered marital. That depends on the state you live in, whether you have had a prenup and what it says and the way that the benefit and the vesting schedule is structured. So these are complicated In divorce. Here's the bit of a kicker. If those RSUs were granted during the marriage but vessed after the divorce, are they still considered marital property? And again, that's going to depend on your state and how well your legal team understands this area. I'm going to talk a little bit more about that in a minute. I just want to go and explain a little bit more that an RSU again is free money.

Speaker 1: 7:08

So it is a promise by an organization to the worker that they will be awarded shares of the company at a future date the vesting date if specific requirements are met, and usually those requirements involve remaining employed by the company for a certain minimum time frame or maybe even attaining certain objectives for performance. Even with RSUs they always retain value if the stock has any value and you don't have to pay for them. So here's an example of how vesting might work. Let's say that you work for an employer and you're granted 500 RSUs. Your vesting schedule spans four years and 25% of the grant vests each year. So on the first anniversary of your grant date and on the same date over the subsequent three years, 125 shares vest.

Speaker 1: 8:00

Now let's add a layer of complexity PSUs or performance stock units. These are tied to company or personal performance metrics through the company. So that means if you're the employee that's granted PSUs one, you may never receive them and two, you may end up earning double if the company overperforms. So valuing PSUs in divorce requires both legal insight and oftentimes a financial advisor or financial expert, like a CDFA, because there's an element of speculation and risk and a CDFA is going to have a lot of familiarity hopefully the one that you choose in dealing with executive compensation in a divorce case and all the different ways that it can be treated.

Speaker 1: 8:49

So real, briefly, deferred compensation is another tricky area. These are funds set aside by an employer to be paid at a later date, usually for tax purposes, to spread out the employee's tax liability into another year, or again to encourage long-term retention, and some of these plans don't pay out for years. They may not be fully vested yet but, just like with RSUs, if it was earned during the marriage or partially earned, it may be considered marital property. So then we're talking about employee stock option plans, esop. That's another kind of deferred compensation. And then we have, last but not least, bonuses, and bonuses can also be complex. So is the bonus for this year's performance or is it for last year's performance? What happens if it hits after the divorce is finalized? The timing and the wording in your separation agreement matter a lot in this scenario. So, again, whenever there's bonus income involved, it might be short-term incentive compensation or long-term incentive compensation paid out as bonus. That's something that is very helpful to have a CDFA on your team.

Speaker 1: 9:59

So what's the first thing that you need to do about all of this? As always, the first thing you need to do is collect your information. So I'm going to give you a brief checklist that includes five different items. One get the documentation. You or your spouse need to disclose your full compensation plan, including not just statements from whoever the custodian is of those assets, but grant letters, vesting schedules and any other plan documents. You want to make sure that your attorney, that you ask your attorney if they've received that information and if they haven't, within the general financial disclosures, they're probably going to want to send a subpoena out to the employer. The second item on your checklist really is hire a CDFA and I know it sounds self-serving for me to say this, but you really need one in this scenario. If you or your spouse have RSUs, psus, executive compensation of any kind, really you need a CDFA, especially one who understands executive compensation and how it can be viewed either as property or income in a divorce case.

Speaker 1: 11:10

Number three is you need to analyze and consider the tax implications. Just because you get a piece of an RSU doesn't mean you're getting it tax-free. In some cases, the person who gets the asset pays all the tax and that needs to be accounted for. So with RSUs and PSUs in general, when they vest and or are delivered to the employee as stock that is the point that they become taxable income as ordinary income. So they become treated as taxable income in ordinary income tax brackets. You can tell that I have not had enough coffee yet. Today. My typical coffee maker, my boyfriend, who makes amazing coffee, is not here with me obligations.

Speaker 1: 11:53

So as far as the taxes go, rsus and PSUs are taxed as ordinary income when they vest. Generally, the company will withhold ordinary income tax and FICA from the award in the same way that they would withhold taxes from a regular paycheck. So in a lot of ways, this is really going to be treated as income. Your employer looks at it as income to you on the moment that it vests. So, within the context of your divorce, should that be treated as income for purposes of future child support and spousal support, or should it be considered as property to be divided if it's going to be vesting after the date of marriage? And the answer to that is, of course, unfortunately it depends, but we want to make sure that we are taking taxes into consideration and the correct taxes. The longer that you hold onto that stock, an RSU that's granted in 2020 would be taxed, let's say, upon the date that it invests, maybe in 2024. And if the employee hangs on to that stock and they sell it in the future, the capital gain or the profit on that will also be taxed at capital gains rate.

Speaker 1: 13:18

That you have a good, qualified CDFA involved in your case who understands executive compensation and the taxes that go along with that. The fourth item on your checklist of what you need to do if there are RSUs and PSUs awarded to either you or your spouse, is that the final settlement agreement language needs to be really carefully looked at. So a phrase like all assets vested or unvested, that's going to matter a lot. So, again, even if you're not working with the CDFA during the divorce process, when the final settlement, before it gets entered, it's a good idea to have a CDFA, take a look at it and make sure that that wording is kind of is actually going to effectuate what you think is going to happen. And again, this is why it's so important to have a good team, a good lawyer for that legal insight and a CDFA that really understands executive compensation. Another, the last item that you want to take into consideration when you are gathering all of your information is that you need to think and discuss with your attorney and your financial expert about the timing. So was the award made for past, present or future work? And that also can go into the determination on whether or not it's separate or marital property. Under the determination on whether or not it's separate or marital property. Again, this is complex and that's why you need to get all of the documentation. It's not enough just to get a statement that shows these are the shares that have been awarded and this is what's fully vested in even the vesting date. You really want to get a hold of the grant letters and the specific vesting schedules and any plan document that explains is this meant for past compensation as a reward, or is it to incentivize the employee in the future? And again, that is going to be a really key component here.

Speaker 1: 15:18

Okay, let's put this all together.

Speaker 1: 15:19

I'm going to give you a quick case study.

Speaker 1: 15:21

So this is an actual case of mine. My client's spouse worked at a tech firm with really heavy RSU compensation. In fact, half of his income in the previous tax year had come from vesting of RSUs. Now, during the divorce, only half of the shares granted had vested. The unvested ones were overlooked before I came on because the husband was saying well, it's not vested, I don't get to keep any of it. So 50% of zero is zero, she gets none of it.

Speaker 1: 15:50

Until they brought me in to analyze the grant letters, turns out a huge chunk of future wealth was on the table.

Speaker 1: 15:57

With the right financial insight and legal expertise, we negotiated a fair share of future RSUs based on a pro rata formula that would take into consideration the fact that the husband was going to be taxed on those at ordinary income and that one move secured my client over $250,000 in future payouts. The bottom line is that if you or your ex are getting paid more than just a base salary, don't leave money on the table. Non-standard compensation might sound like a boring topic, but trust me, when you're looking at six or seven figure stakes, it's anything but. Thanks for tuning in. If you found this helpful, please share it with a friend going through divorce and don't forget to subscribe for more episodes. Thank you so much for taking time out of your day to listen to Divorce Rich Podcast. If you like this podcast, please follow us on Apple or anywhere that you download podcasts and share this link with any friends or family that you think might benefit from this information.