What Happens to Bonuses, Stock Options, and RSUs in a New Jersey Divorce?
New Jersey Judges typically divide bonuses, stock options, and restricted stock units (RSUs) as marital property when the reward is for work already completed during the marriage, even if the money arrives after someone files for divorce. Pay tied only to later work efforts usually stay with the employee. At Weinberg, Kaplan, & Smith P.A., our attorneys handle asset division disputes where the key question may be which months of effort a payout will cover.
Are Bonuses Earned During the Marriage Subject to Equitable Distribution in New Jersey?
In New Jersey, the marital estate continues to grow (or diminish) until a Complaint for Divorce is filed. In rare cases, a different “cut off” end date may be agreed upon instead of the Complaint date. In turn, a February bonus for last calendar year’s sales may still be shared after a January Complaint filing, because those sales previously closed and are therefore the result of the work effort during the marriage. A Court will likely look beyond the check deposit date. Details that may have weight include:
- The months of work that the bonus rewards;
- Written terms in the bonus plan; and
- Any rule requiring the employee to remain until the payout is received.
Judges may also consider recurring bonuses when calculating alimony and child support. Recent earnings records and a history of bonuses received can help establish the income relied upon for calculation of both types of support.
Stock Options and the Complaint Filing Date
A stock option gives an employee the right to purchase company shares at a fixed price in the future. Under N.J.S.A. 2A:34-23, the Court may divide property that either spouse acquired during the marriage. Whether an option is subject to division depends on more than its grant date. Options awarded after a divorce complaint is filed may compensate an employee for work performed during the marriage.
How Do New Jersey Courts Divide Unvested RSUs?
Restricted stock units are shares that a company delivers after you stay employed long enough or hit set goals. In M.G. v. S.M., 457 N.J. Super. 286, 199 A.3d 318 (N.J. Super. App. Div. 2018), the Appellate Division rejected the mechanical use of a marital coverture fraction for awards that vest after the complaint is filed, holding that approach wrongly presumes a marital component exists. Instead, courts ask whether the award was granted for effort already completed during the marriage or for work still to come after the complaint. However, there is a rebuttable presumption the award is divisible, and the employee-spouse must show it was meant to reward future performance to exclude any portion.
Once the marital share is known, a final settlement agreement should spell out how the other spouse receives such a share. Agreements often use one of these methods:
- Deferred distribution: The employee transfers the other spouse’s portion as each group of shares vests. Tax owed at vesting requires its own dedicated section.
- Offset: The other spouse takes more of a different asset, such as home equity, in place of future shares. Valuing unvested stock for that trade often takes a financial professional.
Leaving the job early can wipe out unvested units. Your agreement should say who bears that loss.
Protect Your Share of Equity Pay Before You Sign
Stock awards may not vest until years after a divorce, making clear settlement terms essential to protecting your share when they become available. Weinberg, Kaplan, & Smith, P.A. carefully reviews grant agreements and bonus plans for clients throughout Burlington, Camden, and Gloucester Counties, considering both current financial needs and future interests. Call (856) 795-9400 or contact us online to meet with our family law attorney before signing your settlement agreement on these important issues.