Restricted stock units (RSUs), stock options, and deferred compensation are common on the North Shore, and much of their value has not vested when a divorce is filed. In Massachusetts that does not put them outside the marital estate. The starting point is that the whole award is available for division. A coverture fraction reduces what is divisible only where the employee spouse proves the award was granted for work to be done after the marriage ends, and even then the fraction produces a number of shares that are available for division rather than an automatic split.
A compensation package that includes equity awards is not fully divided by looking at a current account balance. Unvested RSUs and stock options represent future value tied to continued employment, and Massachusetts has a specific analytical framework for splitting that value between spouses.
That framework is widely described backwards. The common summary is that a coverture fraction determines how much of an unvested award is marital. The actual rule starts in the opposite place, and for the spouse who does not hold the equity, the difference is worth a great deal of money.
What Makes Equity Compensation Different From Cash or Savings?
RSUs and stock options typically vest over a period of years, meaning the employee spouse does not own the shares outright until vesting conditions, often continued employment, are satisfied. An award granted during the marriage may not fully vest until years after the divorce is final.
That gap creates two separate questions that are easy to run together. One is what the award is worth, which nobody can answer with certainty while it remains unvested. The other is who earned it, which is a question about the marriage rather than about the stock market. Massachusetts answers the second question first.
Are Unvested RSUs and Stock Options Marital Property in Massachusetts?
Yes. The division statute, Massachusetts General Laws (G.L.) chapter 208, section 34, lets a court assign to either spouse all or any part of the estate of the other, "including but not limited to, all vested and nonvested benefits, rights and funds accrued during the marriage," and it goes on to name retirement benefits, military retirement benefits, pension, profit-sharing, annuity, deferred compensation and insurance.
Read that list carefully, because it does two different jobs for the three forms of compensation in this article. Deferred compensation is named in the statute itself. Stock options and RSUs are not. They arrive by a different route.
That route is Baccanti v. Morton, 434 Mass. 787 (2001), where the Supreme Judicial Court addressed for the first time whether unvested stock options can be part of a divisible estate. It held that they can. The statutory language covering "all vested and nonvested benefits, rights and funds" was broad enough to reach them, and an unvested option is no different in principle from an unvested pension benefit, which Massachusetts had already treated as divisible.
That reasoning did not depend on anything specific to options. It rested on the breadth of the statutory phrase, which is why RSUs are reached the same way: an RSU is unvested deferred equity, and section 34 speaks to nonvested benefits generally rather than to any one instrument. Whether an RSU is divisible is not seriously in doubt. How an unvested one should be apportioned is a different question, and a less settled one, which the next section returns to.
The husband in that case made the argument most people make on first reading the statute: his options had not vested during the marriage, so they could not have "accrued during the marriage." The Court rejected it. The statute permits judges to assign nonvested benefits, which shows that vesting during the marriage is not a requirement. Accruing and vesting are not the same thing.
A date worth knowing. The phrase "all vested and nonvested benefits, rights and funds accrued during the marriage" was added to section 34 in 1990, by chapter 467 of the acts of that year, at a point when equity compensation was becoming widespread. The statute was not drafted in ignorance of this kind of asset, which is part of why the Court read it the way it did.
Which Spouse Has to Prove What?
This is the part that is most often stated backwards, and it is the most useful thing on this page.
The default in Massachusetts is inclusion. An award is part of the estate, and it stays there unless someone takes it out. Baccanti places that job squarely on one side: the party challenging the inclusion of the options in the marital estate, which the Court noted will presumably be the employee who received them, carries the burden of proving that they were given for future services to be performed after the marriage ends. The same party also bears the burden of establishing that the other spouse did not contribute to their ability to acquire the award.
The Court explained why it allocated the burden that way. The person who received the grant is in a better position to obtain information about the circumstances behind it, so that person should have to produce it.
That allocation has not shifted in the twenty-five years since. The Appeals Court restated it in De Felipe v. Suwwan, 106 Mass. App. Ct. 158 (2025), in the same terms: the party challenging inclusion must prove both that the award was given for future services and that the non-employee spouse did not contribute.
Massachusetts is also broader than most states here. Many jurisdictions treat only property acquired during the marriage as divisible. Massachusetts declined to adopt that restriction. Options are treated like other marital property and can be considered part of the estate even where they were granted for services performed before the marriage began, because in this state property is divisible whenever and however it was acquired. Our guide to Massachusetts property division covers that all-property principle in general terms.
How the husband in Baccanti actually lost. He never argued at trial that his options were an incentive for future work, and he offered no evidence for it. He did not give the judge his employee stock option plan and did not testify about why the options had been granted. Having produced nothing, he could not meet the burden. His wife's financial expert had the same problem in reverse: without the plan document, the expert could testify only in general terms about how options vest and why they are granted. The grant paperwork is the evidence in these cases.
What Is the Coverture Fraction, and When Does It Apply?
Where the employee spouse does carry that burden, and the judge decides that some part of the award should be treated as separate, the award has to be apportioned. Most states use some version of a time rule. Massachusetts uses one too, modified to fit an all-property state.
The number of unvested shares is multiplied by a fraction. The numerator is the length of time the employee owned the award before the marriage was dissolved. The denominator is the time between the date the award was issued and the date it is scheduled to vest.
The modification matters. In most states the numerator starts at the date of the marriage, so a pre-marriage grant is partly carved out from the start. In Massachusetts it starts at the grant date, because premarital property is already part of the divisible estate.
The Supreme Judicial Court worked an example of its own, which is the clearest way to see what the formula produces.
| Step | In the Court's example |
|---|---|
| The award | 100 unvested shares of stock options |
| Issued | 3 years before the marriage was dissolved |
| Vesting | 2 years after the marriage was dissolved |
| Numerator | 3 years, the time the employee owned the options before dissolution |
| Denominator | 5 years, from issuance to vesting |
| The fraction | Three fifths |
| Result | 60 shares are subject to division. The remaining 40 belong solely to the employee spouse. |
Now read the last row again, because it is the step people skip. Sixty shares are subject to division. They have not been divided. The judge then assigns those sixty shares using the section 34 factors, the same length of marriage, contribution, station and needs analysis that governs the rest of the estate. The fraction sets the size of the pot. It does not say who gets what is in it.
The time rule is the exception, not the default. The Court was explicit that a time rule applies only where the party carrying the burden has established that the unvested options were given in whole or in part for future services to be performed after the marriage ends, and the judge then determines that a portion should not be included in the estate. If that showing is never made, there is nothing to apportion and no coverture discount at all. The Court also stressed that one formula will not work in every case, and that trial judges have broad discretion to modify the time rule or adopt a different method entirely.
For RSUs, the formula itself is less settled than the principle. Baccanti is a stock options case, and no Massachusetts appellate decision has yet divided unvested RSUs as marital property using this time rule. The Appeals Court has pointed the other way at least once: in De Felipe v. Suwwan, 106 Mass. App. Ct. 158 (2025), it upheld a judge who declined to use the Baccanti formula for a different equity instrument, on the ground that the formula was designed for the entirely contingent value of unvested stock options, and it expressly reserved whether the modified time rule applies to other forms of executive compensation. So treat the apportionment of unvested RSUs as an argument to be made on the facts of the grant rather than a calculation the law has already settled. The divisibility of the award is on much firmer ground than the method for slicing it.
When a judge is deciding why a grant was made, the plan documents, testimony from the employee or the employer, and expert testimony are all fair game, along with whether the award was meant to secure tax treatment, to induce someone to take a job, to keep them in one, to reward a completed project, or whether it was simply granted on a regular cycle.
How Is Unvested Equity Valued and Paid Out?
Valuing equity that has not vested, and in the case of stock options may not even be exercisable, requires assumptions about future value. There are two routes, and Massachusetts has a stated preference that gives way often in practice.
A present division is generally preferable, the principle the Court drew from its pension cases. But where a present valuation is uncertain or impractical, as it often will be with unvested equity, the better practice is to order that any future payment be divided if and when it is received, according to a formula fixed in the property assignment.
The trial judge in Baccanti took that second route, and the mechanics are worth knowing because they answer the questions people actually have.
- What gets shared is net gain. The order divided the gross proceeds less the purchase price and less the tax consequences to the employee spouse. Tax comes out before the split, not after.
- The employee cannot simply sit on the award. If the employee decided not to exercise vested options, the order required notice to the other spouse and allowed her to exercise her share through him.
- Exercising without selling does not close the door either. The implication of the order was that if the employee exercised but held the stock, he had to say so and let her sell her half of the shares.
- Both spouses carry the risk. That is the point of an if and when structure. Each shares in the rise or fall in the value of the asset rather than one of them being cashed out at a guessed number.
Does the Same Equity Also Count as Income for Support?
Often yes, and this is where the coverture fraction does a second job that surprises people.
Massachusetts has treated income realized from exercising stock options as gross employment income since Wooters v. Wooters, 74 Mass. App. Ct. 839 (2009), on the straightforward reasoning that it is part of a compensation package, appears on a W-2, and is taxed like other income. The policy concern was equally blunt: otherwise a person could avoid a support obligation merely by choosing to be paid in stock options instead of salary.
The Appeals Court applied the same logic to RSUs in Hoegen v. Hoegen, 89 Mass. App. Ct. 6 (2016), reversing a judge who had left RSU income out of a child support calculation. The father argued that because his former wife had waived all interest in his stock plan in their separation agreement, counting the income from it would be double dipping. The court did not need to decide whether her waiver was valid, because a parent cannot bargain away a child's right to support. A waiver of the asset did not waive the children's claim on the income.
The current rules now say this directly. The 2025 Massachusetts Child Support Guidelines, effective December 1, 2025, define income as gross income from whatever source and then list its sources. One of them is "income derived from stock options and similar incentives, excluding any income from the coverture portion allocated at the time of the divorce of the parties subject to this child support order."
This is why the fraction is worth getting right twice. The coverture portion allocated at the divorce is carved out of income for child support later. The same calculation that decides how much equity is divisible as property also decides how much of it is off the table as income when support is calculated. A fraction accepted casually at the divorce does not stay in the divorce. Where the same dollar is counted as both a divided asset and income for support, our article on double dipping in Massachusetts divorces covers the general analysis, which works differently for alimony than for child support.
The stock options entry was added to the Guidelines in 2021 rather than 2025. The commentary that accompanied it was careful to say that it does not change substantive law. It puts into the text a principle the courts had already settled: a person cannot avoid a support obligation by choosing to be compensated with stock options or by otherwise reclassifying income.
One distinction is worth keeping straight, because the cases are often cited loosely. Wooters and Ludwig v. Lamee-Ludwig, 91 Mass. App. Ct. 36 (2017), are alimony decisions. Hoegen is the case that carried the same anti-avoidance principle into child support. The principle holds across both, but alimony and child support are governed by different machinery, and the coverture carve-out quoted above belongs to the child support Guidelines alone.
What Goes Wrong in These Cases?
Two things, and both are avoidable.
The first is what the stated reason for a grant is worth. Because so much turns on whether an award was for past, present or future work, the employer's characterization carries real weight. The Supreme Judicial Court said plainly that judges should be aware of the potential for fraud in this area, and specifically of the possibility of collusion between an employee and an employer about the reasons behind a grant. Equity compensation and deferred bonuses are exactly where undervaluation and disclosure gaps appear, whether through oversight or intent. Our article on finding hidden assets in a divorce covers the wider pattern.
The second is imprecise drafting, and Jones v. Jones, 101 Mass. App. Ct. 673 (2022), is the cautionary case. A separation agreement gave a former spouse a percentage of "any manner of bonus." Years of litigation followed over whether proceeds from exercised stock options were a bonus. The Appeals Court held the phrase inherently ambiguous and made the practical point better than any summary can: the word bonus may have one meaning for the parties to the separation agreement, a second for the parties to the executive compensation agreement, a third for tax purposes, and a fourth for reporting and compliance.
A company may grant stock options, preferred stock, phantom stock, restricted stock units or other forms of executive compensation, and it is for the parties to define which of them the agreement covers and on what conditions. An agreement that names the instruments and says what happens to each is worth considerably more than one that gestures at a category.
Why Does This Deserve Specialized Attention?
Equity compensation, deferred bonuses, and complex compensation packages are where the analysis is least intuitive and the amounts are often largest. The framework rewards preparation on both sides. The spouse holding the equity needs the plan documents and a coherent account of why each grant was made, because without them the burden cannot be met. The spouse who does not hold it needs to know that the starting point is favorable, that a fraction is not automatic, and that a number accepted at the divorce will follow them into any later support calculation.
This is the kind of financial detail work that Brigantine Law is built around, and it is a natural extension of the forensic financial background our founding attorney brings to high-asset cases.
Contact Brigantine Law if your divorce involves RSUs, stock options, deferred compensation or a bonus structure, if you are being asked to accept a coverture fraction you do not follow, or if you need an existing agreement read before equity vests under it.
The statutory language above was verified against the text of G.L. c. 208, section 34 in the Massachusetts General Laws, the Child Support Guidelines provision against the 2025 Guidelines published by the Probate and Family Court, and the decisions cited against their published opinions, in September 2026. The Massachusetts law stated here was additionally confirmed in an independent accuracy review completed the same month.