Tech Worker Divorce: RSUs, Stock Options & Equity Division
When RSUs, stock options, and equity compensation make up a large share of your wealth, a standard 50/50 split ignores taxes, vesting risk, and concentration. Model the after-tax reality before you negotiate.
Financial challenges unique to tech worker divorce
Equity compensation creates complexity that most divorce calculators ignore. Vesting schedules, tax withholding rates, and concentration risk all affect the true value of what each spouse receives.
RSU Vesting Schedules and Tax Withholding
RSUs typically vest over 4 years with a 1-year cliff (25% at year 1, then quarterly or monthly thereafter). At vesting, RSUs are taxed as ordinary income — federal supplemental withholding is 22% on the first $1 million and 37% above $1 million, plus state taxes. Many tech workers are under-withheld and owe additional tax at filing. The after-tax value of RSUs is substantially less than the gross value shown in your brokerage statement.
Unvested Equity Is Still Marital Property
RSUs and stock options that have not yet vested are still subject to division if the grant was made during the marriage. Courts use a coverture fraction to determine the marital share. The challenge is that unvested equity may never vest — you could be laid off, the company could fail, or performance conditions might not be met. This uncertainty makes valuation difficult and the division method (if-and-when vs. present-value offset) a critical negotiation point.
Stock Concentration Risk
Tech workers often have a disproportionate share of their wealth in a single company's stock. If your employer's stock price drops 40% after the settlement is finalized, the spouse who received cash or diversified assets comes out ahead. Conversely, the stock could double. This concentration risk must be factored into settlement negotiations — a $500,000 RSU position in a single stock is not equivalent to $500,000 in a diversified index fund.
IPO and Pre-IPO Equity Complexity
Pre-IPO stock options and RSUs present unique challenges: the shares may have no liquid market, valuation requires 409A appraisals or recent funding round prices (which may not reflect true market value), and post-IPO lockup periods (typically 90-180 days) prevent immediate sale. If the company IPOs during the divorce, the valuation swing can be enormous. Timing the valuation date and managing lockup liquidity constraints are critical.
Multiple Equity Grant Types
Senior tech workers may hold ISOs (Incentive Stock Options), NSOs (Non-Qualified Stock Options), RSUs, PSUs (Performance Stock Units), and ESPP (Employee Stock Purchase Plan) shares simultaneously — each with different tax treatment, vesting schedules, and exercise windows. ISOs have a $100,000 annual limit and favorable capital gains treatment if holding periods are met (1 year from exercise, 2 years from grant). NSOs are taxed as ordinary income at exercise. Each type must be valued and divided separately.
What our calculator models for you
Every feature below is designed for the equity-heavy compensation packages common at technology companies.
RSU Vesting Schedule Projection
Model each RSU tranche with its vesting date and share count. See the after-tax value at each vesting event with 22% supplemental withholding (37% above $1M), plus state tax. Compare the gross value to the actual cash you receive after all taxes.
Coverture Fraction Calculation
Calculate the marital portion of each equity grant using the coverture fraction — months of marriage during the vesting period divided by total vesting period. See how the marital share changes based on the grant date, vesting schedule, and date of separation.
Stock Concentration vs. Diversified Assets
Compare the long-term wealth trajectory of keeping concentrated stock versus receiving diversified assets. The projection shows the impact of a 30% stock decline versus a 30% gain on your net worth, helping you evaluate the risk-adjusted value of your equity.
Year-by-Year Financial Projection
A projection through age 100 that models RSU vesting income, stock sales, capital gains taxes, alimony, and investment growth at 5% nominal return. See how your equity compensation timeline affects your financial trajectory.
Housing Affordability with Equity Income
Lenders typically require 2 years of RSU vesting history to count equity compensation as income. DTI analysis showing what you qualify for based on base salary alone versus base salary plus vesting income.
Settlement Fairness with After-Tax Values
Side-by-side comparison that values every asset on an after-tax basis — RSUs at the net-of-withholding value, stock with embedded capital gains at the after-tax sale value, and cash at face value. A $200,000 RSU grant is worth significantly less than $200,000 in cash.
Equity compensation types and how they are divided
Each equity type has different tax treatment, vesting mechanics, and division methods. Understanding the differences is essential to evaluating a settlement.
RSUs (Restricted Stock Units)
RSUs are the most common equity compensation at large tech companies. They vest on a schedule (typically 4 years) and are taxed as ordinary income at the federal supplemental rate of 22% (37% above $1M) plus applicable state taxes. At vesting, you receive actual shares (or their cash equivalent). The cost basis for future capital gains is the fair market value at vesting. RSUs granted during the marriage are marital property; the marital portion of unvested RSUs is determined by the coverture fraction.
Stock Options (ISOs and NSOs)
Incentive Stock Options (ISOs) receive favorable tax treatment: no tax at exercise if you hold the shares for 1 year after exercise and 2 years after grant (the spread is taxed as long-term capital gains at sale). However, the spread at exercise is an AMT preference item. ISOs are limited to $100,000 in value vesting per year. Non-Qualified Stock Options (NSOs) are taxed as ordinary income at exercise on the spread between exercise price and fair market value. California uses the Hug and Nelson formulas to determine the community share.
PSUs (Performance Stock Units)
PSUs vest based on performance metrics — revenue targets, stock price milestones, or relative TSR (total shareholder return). The number of shares that vest can range from 0% to 200% of the target grant depending on performance. This variability makes PSUs harder to value than time-based RSUs. Courts may use the target amount, a probability-weighted estimate, or defer division until the performance period concludes and the actual payout is known.
ESPP (Employee Stock Purchase Plan)
ESPPs allow employees to purchase company stock at a discount, typically 15% below the lower of the stock price at the beginning or end of the offering period. The discount is taxed as ordinary income. ESPP shares accumulated during the marriage are marital property. The tax treatment at sale depends on whether the holding period is met (1 year from purchase, 2 years from offering period start) — qualifying dispositions receive more favorable treatment than disqualifying dispositions.
Frequently asked questions
How are RSUs divided in divorce?
RSUs that vested during the marriage are marital property and divided like any other asset. Unvested RSUs granted during the marriage are also typically marital property. Courts use a coverture fraction to determine the marital share: months of marriage during the vesting period divided by total vesting period. Division can happen two ways: (1) if-and-when — the non-employee spouse receives their share of each tranche as it vests, sharing the risk of non-vesting; or (2) present-value offset — the unvested equity is valued today at a discount and the non-employee spouse receives other assets. The after-tax value (not gross) should be used — RSUs are taxed at 22% federal supplemental withholding plus state taxes.
What is the coverture fraction for stock options?
The coverture fraction determines what portion of a stock option or RSU grant is marital property. The numerator is the number of months of marriage during the vesting period, and the denominator is the total vesting period. For example, if options vest over 4 years (48 months) and you were married for 36 of those months, the coverture fraction is 36/48 = 75% marital. In California, the Hug Formula applies when options were granted for past services (coverture = marriage months during vesting / total vesting months) and the Nelson Formula applies when options were incentive for future performance (using a different calculation based on employment periods).
How are pre-IPO shares valued in divorce?
Pre-IPO shares have no public market price. Valuation methods include: the most recent 409A valuation (which companies obtain annually or after material events for tax purposes — note that 409A valuations are often conservative and may understate fair market value), the price from the most recent funding round (preferred share price, which may overstate common share value due to liquidation preferences), or a discounted cash flow analysis of the company. Courts may also apply a discount for lack of marketability (DLOM) since the shares cannot be freely sold. If the company is expected to IPO soon, the expected IPO price may be relevant.
What is the tax difference between ISOs and NSOs?
Incentive Stock Options (ISOs): no regular income tax at exercise, but the spread is an AMT preference item. If you hold the shares for 1 year after exercise and 2 years after grant, the gain is taxed as long-term capital gains (15% or 20%) at sale. ISOs are limited to $100,000 in value vesting per year per employee. Non-Qualified Stock Options (NSOs): the spread at exercise (market price minus exercise price) is taxed as ordinary income and subject to supplemental withholding. Any additional gain after exercise is taxed as capital gains. NSOs have no annual limit. In divorce, the tax treatment affects the after-tax value of each option type differently.
How does a post-IPO lockup period affect the divorce settlement?
After an IPO, employees typically face a lockup period of 90 to 180 days during which they cannot sell shares. This creates a liquidity constraint — you own shares with a known market value but cannot access the cash. The stock price may decline significantly during the lockup period (post-IPO lockup expirations are well-known selling pressure events). If the divorce settlement is being finalized during or near a lockup period, the illiquidity and price risk should be factored into the valuation. Some settlements include provisions for the division to be based on the actual sale price rather than a specific date's closing price.
Model the after-tax value of your equity
Enter your RSU grants, stock options, base salary, and settlement terms. See the after-tax value of each vesting tranche, the coverture fraction for each grant, and a year-by-year projection through retirement.
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