With employee stock plans, the company offers the employee company stock, like stock options or restricted stock units, as part of the employee’s compensation. The company offers these benefits to attract talent and encourage employees to invest in their company’s growth. If their company does well, they do too.
The employee receives the stock in an award called a grant, and doesn’t get all the stock at once. Usually, the stock is given over a four year period in equal amounts. The process of receiving or earning the shares over time is called vesting. Only when the shares vest does the employee actually own the shares. For most of these benefits, the employee spouse pays the taxes automatically when the shares vest.
Figuring out which shares are community and which are separate does not solely depend on the date the grant was given to the employee. If the grant was given during the marriage, the shares that vested during the marriage are community but a portion of the unvested shares, which vest after the date of separation, will be community and some will be separate. Only if the grant was received after the date of separation will all the shares in that grant be the employee’s separate property.
For the community shares that do not vest until after separation, the employee spouse is only required to give one-half of the community shares to the non-employee spouse after it vests. Since each spouse needs to be responsible for the taxes on his or her portion, the couple will need to divide the tax obligation equally. You will have to file the right tax forms to do this. If you or your spouse has unvested shares, reach out to a divorce professional like an attorney-mediator or forensic accountant to help you with the calculation and the tax allocation.
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