Stock Options & RSU Division

Executive Compensation in Divorce

Stock options, restricted stock units (RSUs), and other forms of executive compensation present unique challenges in divorce. These assets may be partially community and partially separate property, and their proper characterization and division requires specialized legal knowledge and the application of specific California formulas.

The Hug and Nelson Formulas

California courts use two primary formulas for determining the community property share of stock options, depending on the purpose of the grant:

• Hug formula (In re Marriage of Hug, 1984): Used when options were granted primarily as an incentive for future services. The community share equals the number of options multiplied by the period from the date of grant to the date of separation, divided by the period from the date of grant to the date of exercisability.
• Nelson formula (In re Marriage of Nelson, 1986): Used when options were granted primarily as compensation for past services. The community share equals the number of options multiplied by the period from the start of employment (or the period being rewarded) to the date of separation, divided by the period from the start of employment to the date of exercisability.

What We Handle

• Characterization of stock options as community or separate property
• Application of Hug and Nelson formulas
• RSU vesting schedule analysis
• Deferred compensation plans
• Employee stock purchase plans (ESPPs)
• Phantom stock and stock appreciation rights
• Tax implications of option exercise and RSU vesting
• Constructive trust and accounting remedies

Our Approach

Rose Barsamyan has extensive experience handling cases involving complex executive compensation packages for professionals in entertainment, technology, finance, and other industries. We work with forensic accountants and financial experts to ensure that all forms of compensation are properly identified, valued, and divided.