A stock chart and a paycheck stub beside wedding rings

In a Kentucky divorce, stock options, restricted stock units, bonuses, and deferred compensation earned during the marriage are generally marital property under KRS 403.190, even if they vest or pay out later. Wise & Associates represents executives and their spouses in Jefferson Family Court in dividing equity and deferred compensation.

This guide explains how executive compensation is treated in a Kentucky divorce. For representation, see our high-asset divorce lawyer in Louisville page.

The Starting Point: KRS 403.190

Kentucky presumes that property acquired by either spouse during the marriage is marital, and marital property is divided in just proportions, which is not always 50/50 (KRS 403.190). The question for executive compensation is not just when it pays out, but when it was earned and what it rewards.

Stock Options

A stock option is the right to buy company stock at a set price after a vesting date. In a divorce, the key questions are:

  • When was it granted? Options granted during the marriage are likely to be marital at least in part.
  • What does it reward? A grant can reward past work, future work, or both. The grant documents and the employer's plan often answer this.
  • Is it vested? Vested options can be valued and divided now. Unvested options may still be partly marital even though they cannot be exercised yet.

A common way to find the marital share of an unvested grant is a time-based fraction: the part of the vesting period that falls during the marriage, divided by the whole vesting period. How a court applies that method depends on the plan terms and the evidence about what the grant rewards.

Restricted Stock Units (RSUs)

RSUs are shares the employer promises to deliver when they vest. The same questions apply: when were they granted, what do they reward, and how much of the vesting period fell during the marriage. RSUs are taxed as income when they vest, so their value for division should account for tax.

Bonuses and Commissions

  • A bonus earned for work performed during the marriage is generally marital, even if it is paid after the spouses separate or after the petition is filed.
  • A bonus for work after the divorce is generally the earning spouse's own.
  • Bonuses also count as income for child support and maintenance. The Kentucky child support guidelines include bonuses in gross income (KRS 403.212).

Delayed or reduced bonuses during a divorce are a common warning sign of hidden income. See hidden assets in a Kentucky divorce.

Deferred Compensation and Retirement Plans

Deferred compensation, 401(k)s, and pensions are generally marital to the extent they were earned during the marriage. Qualified retirement plans are divided by qualified domestic relations order (QDRO). Nonqualified deferred compensation plans often cannot be divided by QDRO, so the settlement may give the other spouse other assets of equal value or a share paid when the plan pays out.

How Equity Is Divided

  • Offset: the employee spouse keeps the equity, and the other spouse receives other assets of equal after-tax value.
  • Deferred distribution: the employee spouse holds the other spouse's share and exercises or sells it when it vests, paying the proceeds and tax as the order directs.
  • Transfer: some plans allow a transfer of options or shares to a former spouse. Many do not.

Why Tax and Plan Terms Matter

Options and RSUs carry built-in tax when exercised or vested, and plan rules can forfeit unvested awards if employment ends. A settlement that ignores tax or forfeiture risk can give one spouse much less than the face value. Have a CPA review the tax effects before you sign.

What to Gather

  • Every grant agreement and the equity plan document
  • Vesting schedules and recent equity statements from the plan administrator
  • Bonus plan documents and the last three years of bonus and commission history
  • Deferred compensation plan documents and statements
  • Pay stubs and W-2s showing equity income

A Simple Example

Suppose a spouse received a grant of RSUs that vests over four years, and the divorce petition is filed two years into that period. Under a time-based fraction, about half of the grant could be treated as marital and half as the employee's separate property, before considering what the grant actually rewards. The marital half would then be divided in just proportions under KRS 403.190, and the settlement would address who pays the tax when the shares vest. Real cases turn on the grant documents, so the numbers can come out differently.

Common Mistakes

  • Valuing options or RSUs at face value without accounting for tax
  • Ignoring forfeiture if the employee spouse leaves the company
  • Missing grants made shortly before or after separation
  • Forgetting that bonuses also affect child support and maintenance

Executive Pay and Maintenance

Equity and bonuses affect more than property division. When a court decides maintenance, the question is need and ability to pay (KRS 403.200), and a spouse's total compensation, including bonuses and equity that vest regularly, bears on ability to pay. The same award should not be counted twice, once as divided property and again as income for support, so settlements need to say clearly which grants are divided as property and which future compensation is treated as income.

How Wise & Associates Handles Executive Compensation

Wise & Associates reviews the grant and plan documents, works with valuation experts on the marital share and after-tax value, and drafts settlement terms that address vesting, forfeiture, and tax. Founder Christopher Wise also manages a real estate investment firm and a commercial lending advisory practice, and the firm's attorneys have handled hundreds of high-asset and business-owner cases.

Executive Compensation in a Kentucky Divorce: Key Facts

Frequently Asked Questions

Are unvested stock options marital property in Kentucky?

They can be, in part. Options granted during the marriage are likely to be at least partly marital, depending on when they were granted and what they reward.

Is a bonus paid after separation marital in Kentucky?

Generally yes, if it was earned for work performed during the marriage.

How are RSUs divided in a Kentucky divorce?

By finding the marital share of each grant, then offsetting with other assets, holding the shares for the other spouse until vesting, or transferring them if the plan allows.

Do bonuses count for child support in Kentucky?

Yes. The Kentucky child support guidelines include bonuses in gross income.

How much does an executive compensation divorce cost at Wise & Associates?

High-asset divorces start with an upfront flat fee between $1,500 and $5,000. Outside experts are billed separately by the expert.

Related Reading

Talk to a Louisville High-Asset Divorce Lawyer

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Wise & Associates, Louisville: 303 Middletown Park Pl, Suite G, Louisville, KY 40243 · (502) 618-0000 · Book a free phone consultation

For executive compensation in a divorce, see our high-asset divorce lawyer in Louisville. Wise & Associates quotes the upfront flat fee in a free phone consultation. See pricing or book a free phone consultation.

Attorney advertising. This article provides general information, not legal advice. Reading it does not create an attorney-client relationship. Prior results do not guarantee a similar outcome.