Executives rarely stay with one company for an entire marriage. By the time a divorce is filed, an executive may hold vested shares from a first employer, unvested options from a second, and RSUs plus a “make whole” grant from a third. Each award has its own grant date, vesting schedule, plan document and tax treatment. In a Texas divorce, each one has to be analyzed on its own.

This guide walks executives and spouses in Houston, Katy, Cypress, Sugar Land and Spring through how to inventory, characterize and divide equity from several employers.

Start with a complete inventory

For every employer, past and present, gather:

• Each grant agreement or award notice
• The equity plan and prospectus
• Current statements from each stock plan administrator or broker
• Vesting schedules and, for performance awards, the metrics and periods
• Any Rule 10b5-1 trading plan and the company’s trading window rules
• Offer letters showing sign on grants, replacement awards and repayment terms

Missing a single grant can shift the division by a large amount. In Texas, both spouses also have disclosure obligations in discovery, and an undisclosed award can lead to serious consequences.

Characterize each grant separately

The Texas time rule in Family Code section 3.007(d) applies grant by grant, and tranche by tranche under section 3.007(e). An old award from a prior employer might span the date of marriage, while a new one may be entirely within the marriage. Averaging them together produces the wrong answer. See The Time Rule for the formulas.

Replacement and “make whole” awards

When an executive leaves a job, unvested awards are typically forfeited. A new employer often grants replacement equity or cash to make up the loss. These awards raise a characterization question: are they pay for future work at the new company, or compensation for value earned at the old one?

The answer can turn on the offer letter, the award terms, and when each was granted. If the replaced awards were largely community property, the non-employee spouse may argue the replacement carries the same character. If the new award requires years of future service, the employee spouse may argue for a larger separate share. Documents created at the time of the job change are often the best evidence.

Sign on bonuses that must be repaid if the executive leaves early raise a related issue. See signing bonuses in high profile Texas divorces.

Each plan has its own rules

Every plan sets its own transfer restrictions and procedures for court orders. Some allow transfers of vested options or shares to a former spouse; many prohibit transfers of unvested awards. Public company insiders may also be limited by blackout periods and trading plans. Because no single form works for every plan, the decree may need award specific provisions, and it helps to contact each plan administrator before the decree is finalized.

When direct transfer is not possible, the usual approach is for the employee to hold the former spouse’s share and deliver shares or proceeds after each vesting or exercise, with clear notice and timing terms.

Watch the tax stacking

RSUs vesting at one company, NSO exercises at another, and bonus payouts can all land in the same tax year as ordinary income. Exercising ISOs can also create alternative minimum tax exposure. When a settlement assumes certain sales or exercises will fund an equalization payment, model the combined tax effect first. Our post on the tax implications of dividing executive compensation explains each award type.

Common situations

• A move from a public company to a startup. Public shares are easy to value; startup options are not. See our guide to pre-IPO equity in divorce.
• A merger during the marriage. Awards may convert into acquirer equity or accelerate under change in control terms.
• An ESPP at each employer. Shares from several ESPPs may sit in different brokerage accounts with different basis records.
• Deferred pay left behind. Prior employers’ deferred compensation may still be paying out.

Work with a Houston executive divorce lawyer

Chidi Anunobi is Board Certified by the Texas Board of Legal Specialization, holds an M.B.A. from Carnegie Mellon University, and spent a decade as a consultant at KPMG before practicing law. We help executives and their spouses build a complete equity inventory and divide it accurately in high net worth divorces.

Our office is at 1415 North Loop West in Houston. We serve Katy, Fulshear, Cypress, Sugar Land, Spring, The Woodlands, Richmond, Missouri City, the Heights and all of Harris, Fort Bend and Montgomery Counties. Call 832-538-0833 or contact us. Our executive compensation guide covers each award type in more depth.

Frequently asked questions

Is equity from a previous employer divided in a Texas divorce? Yes, to the extent it is community property. Each grant is analyzed on its own dates.

How are replacement grants from a new employer treated? It depends on whether the grant compensates value lost at the prior job or future work at the new one. The offer letter and award terms matter.

Can every plan transfer shares to a former spouse? No. Transfer rules vary by plan. When a transfer is not allowed, the employee usually delivers the former spouse’s share after vesting or exercise.

This article is general information, not legal advice.