Stock Options, RSUs, and Unvested Equity: What’s Divisible and When

Equity compensation has become a primary form of wealth for founders, executives, and the spouses who marry them. Stock options, restricted stock units, and similar grants raise a question Texas law answers with surprising specificity: When a grant straddles the marriage, either granted before marriage but vesting after marriage, granted during the marriage but vesting after divorce, or, rarely, granted before marriage and vesting after divorce, how much is separate property and how much is community? The answer turns on why the equity was granted and when it vests.

Vesting is not the whole story

Whether a grant is separate or community does not depend only on when it vests. Texas looks at whether the equity rewards past work, present retention, or future performance — and apportions accordingly.

The Core Problem: Grants That Straddle the Marriage

An equity grant has two key moments: the grant date and the vesting date, often years apart. A grant might be made before marriage but vest during it, or made during the marriage but vest after divorce. Because Texas characterizes property by reference to when the right to it is earned, equity that is earned partly before and partly during marriage is mixed in character and must be apportioned.

Texas Family Code Section 3.007

The Texas Family Code addresses stock options and restricted stock specifically. The statute provides apportionment rules that allocate a grant between separate and community property based on the relationship between the grant, the vesting period, and the dates of marriage and dissolution. The guiding principle is that equity granted as compensation for work performed during the marriage is community, while equity attributable to work before marriage or after dissolution leans separate.

Section 3.007 has been amended over time, and the way courts apply it to particular grant structures continues to develop. The statute is the starting framework; the precise calculation for your grants should be confirmed against the current version of the law and the documentation of each specific award.

Why the Grant Was Made Matters

The purpose behind a grant drives its characterization:

  • Reward for past performance. Equity granted for work already done is tied to when that work occurred. Work during marriage points to community.
  • Retention / golden handcuffs. Equity granted to keep an employee through a future vesting period rewards future service — service that may occur after divorce, pointing toward separate as to that portion.
  • Signing or inducement grants. Their character depends on what they actually compensate, which the grant documents usually reveal.

This is why the plan documents and grant agreements are essential evidence. They often state, directly or by structure, what the equity is compensating — and that drives the apportionment.

Valuing and Dividing the Community Portion

Once the community portion is identified, it has to be valued and divided. Unvested equity, options that are underwater, and shares subject to forfeiture all complicate this. As with startup equity, an if-and-when division — splitting the proceeds only as the equity vests and is realized — is sometimes the fairest way to handle awards whose ultimate value is unknown. These mechanics connect to the broader division of the estate.

Frequently Asked Questions

It depends on what they compensate and when that service occurs. Unvested equity can be partly community and partly separate when the vesting period spans the marriage and beyond. Texas apportions it under the Family Code rather than treating “unvested” as automatically excluded. The grant documents and vesting schedule drive the result.

Likely mixed. A grant made before marriage that vests during it often has a separate component (attributable to the pre-marriage grant and any pre-marriage service) and a community component (attributable to service during marriage). The apportionment formula under the Family Code sorts out the proportions based on the specific dates.

Common approaches include assigning the options to the employee spouse with an offset for the community share’s value, or an if-and-when structure that divides the net proceeds when the options are eventually exercised and sold. Tax treatment and the risk that options expire worthless factor into which structure is fair.

Holding options or RSUs that span your marriage?

The apportionment can swing tens or hundreds of thousands of dollars. Bring the grant documents and let’s run it correctly.

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This page provides general information about Texas law and is not legal advice for your specific situation. Reading it does not create an attorney-client relationship.