If you are a high earner in Arizona going through a divorce, your focus is not just on splitting the house or checking accounts. You are probably thinking about your stock options or restricted stock units (RSUs) and what happens to them once the proceedings begin. These matters are not always straightforward, and Arizona’s community property laws can further complicate them.
Why deferred compensation matters in property division
Arizona is a community property state, which means any assets you acquired during the marriage are split 50/50. However, this becomes more nuanced when it comes to RSUs or stock options, especially if they were granted during the marriage but will not pay out until later. The court often considers two key factors: When you received the grant and why.
If the company granted the stock based on the work you already performed while married, the court may include it in the division. If it was issued as an incentive to stay at the company in the future, that may count as separate property after the marriage ends. However, many grants are mixed. Thus, judges often split them based on what portion you earned before vs. after the divorce filing.
How Arizona courts evaluate value and timing
Courts take a close look at grant dates, vesting schedules and employment contracts to decide if the equity belongs to both spouses or just one. You should have the following ready:
- Grant documentation: Showing the intent behind the award
- Vesting schedule: Breaking down when ownership rights take effect
- Employment records: Explaining whether the award rewards past work or future service
Because these assets often increase in value over time, judges may apply formulas other community property states commonly use, such as the Hug or Nelson formula, to allocate future value proportionally. Arizona does not require this approach, but courts may still use it as a guide.
Planning ahead can protect your financial future
Unvested stock does not mean untouchable stock. Courts can and do assign value to deferred compensation, and they may scrutinize your equity if it is part of your income. Preparing your records now makes it easier to control the narrative and avoid giving up more than necessary. In divorce proceedings, precision beats assumptions every time.