Asset Distribution in Divorce – Unvested Stocks and The Time Rule

Anne B. Bennette, Edmonds Lawyer

In a divorce action, the Court is required to distribute all assets and debts equitably (which does not necessarily mean equally).  The Court is also required to characterize the property awarded as either Separate Property or Community Property.

Unvested stock awards are awards that are granted months or years before they fully vest.  It is a right to receive a future asset.  If you are granted a stock award during the marriage, but it does not vest until after separation or divorce, is it community or separate property?

If the stock award is granted for past or present performance and was granted during the marriage, then it is community property.  However, if granted for future performance, then the calculation and characterization is a bit trickier. 

The Court will implement the Time Rule to determine the characterization and community value of those stocks.  When a stock award is granted for future performance and vests periodically, those vesting periods occur consecutively, not concurrently, so only the first stock for each stock award to vest will reflect a community effort.  The period of time between the commencement of the spouse’s employment and the date the parties were found to be living separate and apart is the numerator.  The denominator is the period of time between the commencement of employment and the stock’s vesting date.  Both are measured in months. 

Whether separate or community, those assets must still be divided in an equitable fashion. 

Our Family Law Group is available to assist you with all family law related matters including dissolutions, separations, support, and parenting plan matters. 

To learn more about Asset Distribution in Divorce – Unvested Stocks and The Time Rule, please contact Beresford Booth at or by phone at (425) 776-4100

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