Your Unvested Microsoft Stock (Or Other Employer Awarded Unvested Stock) Is Probably Community Property
Many employers award stocks to their employees subject to a vesting schedule. In some cases, these awards will not fully vest for 5 or 10 years. Microsoft is a prime example of such an employer in our region. Your unvested Microsoft stock may very well be community property, and the community may be entitled to some or all of those unvested shares. This is true even though this is property you do not yet have, and you may never acquire.
Why would your spouse be entitled to stock shares that only vest after you have separated, and which are contingent upon your own separate labor? While this may seem unfair at first blush, there is a specific rationale for this (and occasionally a specific formula applied) to determine how much of your unvested stock is community property.
If any of your unvested stock was awarded during the marriage, then at least a portion of that award is absolutely community property. Because that stock was awarded during your marriage, community efforts contributed to it even if it will not vest for years or, in fact, it may never vest. If you have a dissolution action pending or are separating from your spouse, those unvested shares are subject to terms of the automatic financial restraining order issued when your case is filed. This means you would need approval from your spouse prior to doing anything with those shares as they vest. This is true even if they vest two years after a divorce action has started but before your case is resolved.
If you (or your spouse) are entitled to unvested stock shares from an employer, ensure that you carefully examine those awards before deciding on property division.
The next blog post will address how the Court determines the value of your unvested stock.