Equity compensation in a Kentucky divorce Equity compensation in a Kentucky divorce

More than most people list on a first draft of their assets. Restricted stock units (RSUs) that vest over time. Incentive and non-qualified stock options. Employee stock purchase plan shares. Restricted stock, performance shares, phantom stock, and stock appreciation rights. In private companies, founder equity, profits interests, and unvested rounds of all of the above. If an employer promise turns into stock or stock-linked cash someday, it belongs on the list, whether or not it shows up on a pay stub or a tax return yet.

Generally, the portion earned during the marriage is. Under Kentucky's divorce statute, KRS 403.190, property acquired by either spouse during the marriage is presumed marital, and courts divide marital property in just proportions. An RSU grant is compensation for work; if the work happened during the marriage, the award it earned is marital in character, vested or not. The nuance is allocation. Awards often straddle the wedding date or the separation, granted before the marriage but vesting during it, or granted during the marriage but vesting after the case ends. Courts handle the straddle with time-based allocation, often called a coverture fraction: the share of the earning period that overlapped the marriage is marital, the rest is not. What the award was granted for matters too. Equity that rewards past performance leans marital when that performance happened during the marriage; equity granted to retain you for future years leans the other way. The grant documents usually hold the answer, which is why we read them instead of guessing.

Two basic paths. Value it now and offset it, or divide it if, as, and when it pays out. The offset approach trades the equity against other assets: you keep the unvested RSUs, your spouse keeps equivalent value elsewhere. Clean, final, but it requires valuing something that might never vest, and might be worth double or half by vesting day. The deferred approach divides each vesting event as it happens, marital share to each spouse, using the allocation formula. Less guesswork, more entanglement: the settlement has to handle taxes, delivery mechanics, and what happens if you leave the company or the company changes the plan. Volatile or private-company equity usually argues for deferred division. Stable, near-vested awards can support an offset. The wrong choice is making it by default.

Disclosure first. Grant agreements, plan documents, vesting schedules, and brokerage statements, for every award, not just the vested ones. Equity that never gets listed never gets divided, which is why thorough discovery matters on both sides of the table. Taxes second. RSUs are taxed as ordinary income at vesting; options have their own rules by type. A division that ignores withholding hands one spouse a phantom number. Settlements should speak in after-tax terms and say who bears which tax. Support third. Vesting equity is income in the real world, and it can figure into spousal and child support in Kentucky. But the same dollars shouldn't be divided as property and then counted again as income for support. Coordinating the property and support treatment, deliberately, in writing, prevents paying twice or collecting half.