1. Home
  2.  | 
  3. Property Division
  4.  | Restricted Stock Units Vs. Performance Stock Units In Ohio Divorce

Restricted Stock Units Vs. Performance Stock Units In Ohio Divorce

Employer provided long term incentive programs can present significant challenges in the early stages of an Ohio divorce. These assets will need to be identified, and to the extent possible, valued.  They will also need to negotiate an appropriate way to share those assets once they divorce that is both equitable and achieves a measure of disentanglement. If a couple cannot work out this out a domestic relations court judge will decide what would be fair given their circumstances.

Higher-earning professionals, like executives, often negotiate compensation packages that include far more than just a salary with basic benefits. They may also receive certain forms of deferred compensation, including stock options. If you or your spouse have an employment contract that allows for restricted stock units (RSU) as a benefit of employment or performance stock units (PSU), what will you do with those assets during the property division stage of your divorce?

Understand the difference

Restricted stock units are a form of deferred compensation where a worker will receive a certain amount of stock as part of their employment arrangements.  It is akin to a delayed bonus in the form of stock. Complexities arise in addressing the division of this benefit due to a specific vesting timeline or delay involved in the transfer of the actual stock. Typically the only condition to the vesting of restricted stock is continued employment.

Performance shares of stock look similar, but are quite different. There are additional conditions to the award of this stock including, but not limited to, continued employment, employee performance, and company performance.  The key driver is typically employee performance – if the employee fails to reach crucial performance benchmarks for themselves or the company, they may not receive performance stock or may only receive a portion of it.

How are RSUs split in a divorce?

Given that the transfer of restricted stock units is typically a certainty, the biggest concerns for couples dividing such employment benefits will be putting an appropriate value on the stock and determining how much of it will be marital property. The couple then has to integrate that into their property division negotiations are provide the information to a judge to consider as they make decisions.  This type of arrangement requires determining the marital and non-marital share, as well as tax consequences.

Dividing PSU in a divorce

In some regards, dividing performance stock units is largely the same process as dividing RSUs. You have to figure out how much the stock is worth and how much of the stock is marital property.

However, there is another consideration. If a recipient’s performance or company performance falls short of expectations, they may not receive performance stock units for the last months of the marriage. More nuance and compromise may be necessary when negotiating the division of future payments, especially those tied to job performance. Learning more about Ohio divorce laws will help those with complicated assets preparing for divorce.


Member of the Findlaw Network, Links to Findlaw Directory