

In high-asset California divorces, stock options and restricted stock units (RSUs) often represent a significant portion of a spouse’s compensation. These forms of deferred compensation are common in the tech, finance, and biotech industries, and they can substantially affect the division of property, especially when the assets were granted during the marriage but do not fully vest until after separation or divorce.
Dividing stock options and RSUs during divorce is one of the most complex and contested financial issues in family law. These assets may appear on pay stubs or in employment agreements, but their value, character, and timing raise questions that require detailed legal and financial analysis.
This blog explains how California courts handle stock options and RSUs in divorce, how to determine whether they’re community or separate property, and what you can do to ensure a fair division.
Before diving into the legal framework, it’s important to understand what these assets are and how they function:
Stock Options: These give an employee the right to buy company shares at a fixed price (called the “strike price”) after a certain vesting period. If the market value exceeds the strike price, the employee can exercise the option and profit from the difference.
Restricted Stock Units (RSUs): RSUs are promises to grant actual company shares once certain conditions are met, typically after a set number of years or continued employment. Unlike stock options, RSUs do not require the employee to purchase the stock.
Both are designed to incentivize employee loyalty and long-term performance, often with vesting schedules that stretch across several years.
California is a community property state, meaning that all earnings and assets acquired during the marriage are presumed to be jointly owned. But stock options and RSUs challenge this presumption because:
They are earned over time, not at a single point
They often vest after separation, even if granted during marriage
Their purpose (past services vs. future incentive) can change their characterization
This creates a need to apportion the asset between community and separate property interests based on when it was earned and why it was granted.
California courts focus on intent and purpose when determining whether stock-based compensation is community or separate. The key question is:
Was the stock or RSU granted as compensation for past services performed during the marriage, or to incentivize future performance after separation?
If it was compensation for past services, it’s likely community property
If it was an incentive for future work, it’s likely separate property
In many cases, it’s both. The court must then allocate a portion to the community and a portion to the individual spouse.
California courts use formulas developed in key cases to divide deferred compensation. Two of the most common are:
Established in In re Marriage of Hug (1984), this formula is used when the options or RSUs were granted as compensation for past services.
Hug Formula:
Community property portion =
(Date of hire to date of separation) ÷ (Date of hire to date of vesting)
× Number of shares
This method allocates the community’s interest based on how long the employee was with the company before the separation, relative to the entire vesting period.
Example:
Developed in In re Marriage of Nelson (1986), this formula is more favorable to the separate property spouse and is used when the options or RSUs are granted as incentives for future services.
Nelson Formula:
Community property portion =
(Date of grant to date of separation) ÷ (Date of grant to date of vesting)
× Number of shares
This approach shortens the community interest to only the period after the stock was granted, rather than the full employment duration.
Courts use the formula that best matches the intent of the employer. In some cases, multiple formulas are used for different grants.
The Gillmore/Samuelson Formula is not a single, unified mathematical formula. It is a concept in California Family Law that represents the right of the non-employee spouse to begin receiving their community property share of a former spouse’s defined benefit pension immediately, even if the employee spouse chooses to continue working past their earliest eligible retirement date.
The Time Rule Formula establishes the community’s percentage interest in the entire pension benefit.6 This fraction is calculated as:
Example: If the husband worked for 10 years during the marriage out of a total of 20 years worked at the earliest retirement date, the community share is $10/20 = 50\%$.
Since California is a community property state, the non-employee spouse is entitled to one-half of the community’s share.7
Example: $\frac{1}{2} \times 50\% = 25\%$. The non-employee spouse is entitled to $25\%$ of the benefit.
The non-employee spouse’s percentage is applied to the monthly benefit amount the employee spouse would receive if they retired at their earliest eligibility date.
Example: If the benefit at the earliest retirement date is $\$4,000$ per month, the non-employee spouse’s immediate monthly payment is $25\% \times \$4,000 = \$1,000$.
The working employee spouse is then ordered by the court to pay this $\$1,000$ per month directly to the former spouse until the employee spouse actually retires and the pension plan begins making payments to the non-employee spouse (usually via a QDRO—Qualified Domestic Relations Order).
This right stems from two landmark California Supreme Court cases:
Many stock options and RSUs have “cliff vesting,” meaning no shares vest for the first year or two, and then a large chunk vests all at once. After that, the remainder may vest gradually.
Example Vesting Schedule:
25% after year one (cliff vest)
1/48 of total every month thereafter over four years
It’s critical to identify:
The grant date: When the employee received the right
The vesting schedule: When the stock becomes exercisable or owned
The separation date: The cutoff for community property accrual
Even if the shares vest after separation, a portion of the value may still belong to the community.
Stock options and RSUs are often unvested or illiquid at the time of divorce. Courts typically do not divide unvested shares directly, but instead:
Award a percentage of the shares to the non-employee spouse once they vest
Assign a value to the shares and offset with other assets
Defer division until vesting occurs, using a “time rule” or formula
Use a QDRO or other mechanism to divide upon sale
Valuation often requires input from financial experts who consider:
It’s essential to protect your interests by having a lawyer and, when appropriate, a forensic accountant review the terms and value of equity compensation.
Equity compensation often triggers complex tax consequences:
Stock options may result in ordinary income or capital gains depending on the type (NSO vs. ISO)
RSUs are taxed as ordinary income upon vesting
The spouse receiving the shares may incur tax liability when they vest or are sold
Divorce settlements should clearly specify who is responsible for tax consequences, and whether the employee spouse will sell shares on behalf of the other spouse or transfer vested shares directly.
These provisions must be carefully negotiated and clearly documented in the Marital Settlement Agreement.
Some of the most frequent—and costly—mistakes include:
Failing to identify all stock grants (review offer letters, employment agreements, pay stubs)
Assuming that only vested shares have value
Using the wrong formula or applying it inconsistently
Ignoring future vesting and its potential worth
Not accounting for tax treatment or deferral
Failing to provide for ongoing cooperation to divide shares after divorce
Given the stakes involved, stock compensation should never be treated casually in divorce. A misstep could mean leaving tens or hundreds of thousands of dollars on the table.
In many cases, dividing stock options and RSUs becomes part of a larger settlement negotiation. Spouses may agree to:
Offset equity compensation with other assets (e.g., home equity, retirement accounts)
In long-term marriages or when options are a key part of total compensation, this issue may dominate negotiations. Skilled legal strategy is essential to ensure you’re not undervaluing what could be your most significant marital asset.
Stock options and RSUs are valuable assets that deserve careful treatment in California divorce proceedings. Whether you’re the spouse who earned them or the one entitled to share in their value, understanding how these assets are characterized, valued, and divided can significantly impact your financial future.
California family law has clear—but complex—rules about how to divide deferred compensation. With proper legal representation and financial analysis, you can protect your rights, avoid unnecessary disputes, and reach a resolution that reflects the true value of what was earned during the marriage.
At Minella Law Group, we specialize in high-net-worth divorce and have extensive experience dividing stock options and RSUs. We work with financial experts, forensic accountants, and QDRO professionals to ensure our clients receive the full value they are entitled to.
📞 Call Minella Law Group today at 619-289-7948 to schedule a confidential consultation with one of our family law specialists. We’ll listen to your concerns, assess the situation, and create a clear strategy tailored to your goals.
📝 Prefer email? Fill out our online contact form and a member of our legal team will get in touch with you promptly.
Military divorce is usually considered to be significantly different from a non-military divorce. In order for any court to assert its jurisdiction over a military divorce, the Petitioner will have to serve the active member with a petition for the dissolution, as well as a valid summons. Because of this, if the service member in question is currently deployed overseas, the process of completing a military divorce can be somewhat challenging.
These differences generally make themselves known in the process of obtaining personal service, complying with rules and regulations set by the military, and dividing a military pension. Military divorce has special procedures that need to be followed especially if the member is active duty.
Divorce is not a simple process for anybody. Military divorce can be especially taxing within California because of the requirements the state imposes on service members that are deployed, living overseas or currently existing outside of the California jurisdiction. Parties who are considering divorce with an active duty military member will often benefit from learning more about the path that is ahead of them before they start this trying process.
If you are the Petitioner in the case and your spouse is a service member who has been deployed overseas, completing service becomes extremely difficult. The Servicemembers Civil Relief Act (SCRA) will be a factor in your case. SCRA will postpone or suspend certain legal matters that are pending in court while the servicemember is located.
The law states service members cannot be held responsible for not replying to a divorce petition when they are deployed, but it does not allow the military spouse to neglect the papers. If the service member fails to respond to the divorce, then the court may choose to appoint a reserve, civilian natural or active duty person as an officer of the court to serve the papers on their behalf.
The SCRA will appoint an attorney to located the military member and report to the court on his location and ability to participate in a divorce. During that time, there will be a stay in the case meaning the court cannot make any orders for support or division of assets. If you are in need of support and your spouse is not paying, you should immediately contact their command to enforce military regulations for family support. The court cannot make any orders while the stay is in place.
Recently, federal laws and regulations have undergone some changes that should make personal service much simpler for military couples with children when the spouse is stationed overseas. Regardless of the location of the spouse in active duty, uniformed service members and federal agencies will be required to take on the responsibility of facilitating the legal process.
Military assets, including military pension of the service member, are valuable, and can be divided between spouses much like the standard assets within a regular divorce case. However, it is necessary for both spouses within a military divorce to understand how the court deals with dividing military pensions. Not all service members will be entitled to a pension, it does depend on the years of service. If there is a pension, it will be divided by the time rule which looks at the length of service while married. The portion that was acquired during marriage wil be split 50/50.
There other assets that are only issues in military divorce that need to be give special care. There is the Survivor Benefit Plan (SBP) election that needs to be discussed. SBP needs to be ordered in order to be received and there are different levels of election, not all the elections will be covered by support payments. There is also the Servicemembers Group Life Insurance (SGLI) that needs to be divide.
There are assets that need to be divided in military divorces that are not present in a non-military divorce. It is important to understand what you are entitled to and what needs to be included in your divorce judgment.
California is a community property state, meaning all income earned and assets acquired during the marriage are generally split 50/50.
That includes military pay and pensions, but federal law affects how those are divided.
This federal law allows state courts to treat military retirement pay as marital property and divide it in divorce — but it sets specific rules:
The “10/10 Rule”: For the Defense Finance and Accounting Service (DFAS) to pay a former spouse directly, the marriage must have lasted at least 10 years, and those years must overlap with 10 years of military service.
Even if the 10/10 rule isn’t met, the California court can still divide the retirement — the payments just come from the service member directly, not DFAS.
VA disability benefits cannot be divided as community property, but they may affect the calculation of spousal or child support, since they count as income.
In order for the court to have the ability to properly divide a military pension, the court must have the military spouse’s legal consent, or legal residence within a state. A spouse simply being stationed within a state for a temporary period of time does not constitute residency. If the military member has maintained residency in a different state, California may not have jurisdiction to divide the military member’s pension. Consent of the spouse does not have to be verbally expressed, as long as the court has proper jurisdiction it has the ability to divide military retirement, regardless of the overall length of the marriage.
The Service Member Civil Relief Act (SCRA) is a federal law that protects active-duty service members from being disadvantaged in civil court proceedings while serving.
In divorce cases, this means:
The court can delay (stay) proceedings if military duties prevent participation.
A default judgment cannot be entered against a deployed or unavailable service member without ensuring they’ve had a fair chance to respond.
The service member may request a postponement of the case while on active duty or shortly thereafter.
These protections ensure fairness but can also make the process take longer than a civilian divorce.
Depending on the length of the marriage and overlap with service, former spouses may qualify for certain ongoing benefits:
| Benefit | Requirement | Details |
|---|---|---|
| Full TRICARE & base privileges | “20/20/20” rule: 20 years of marriage, 20 years of service, and 20 years overlap | Full military benefits continue until remarriage |
| Limited TRICARE (1 year) | “20/20/15” rule: 20 years marriage, 20 years service, 15 years overlap | Transitional coverage for one year post-divorce |
| Commissary/Exchange Access | Same as 20/20/20 rule | Retains privileges if criteria met |
If the marriage doesn’t meet these thresholds, the non-military spouse typically loses these benefits upon divorce.
••Minella Law Group Can Help••
A military divorce in California involves unique legal layers that go beyond standard family law. Understanding how state and federal laws interact — especially regarding jurisdiction, pensions, benefits, and deployment — helps both spouses protect their rights and plan their futures with clarity. We regularly represent service members and military spouses in San Diego and across California, ensuring fair, informed outcomes that respect both the service and the family.
📞 Call Minella Law Group today at 619-289-7948 to schedule a confidential consultation with one of our family law specialists. We’ll listen to your concerns, assess the situation, and create a clear strategy tailored to your goals.
📝 Prefer email? Fill out our online contact form and a member of our legal team will get in touch with you promptly.
Yes — both state and federal laws apply.
A military divorce is still a California divorce, but several unique federal statutes interact with state family law, making the process more complex.
SCRA (Servicemembers Civil Relief Act): Allows active-duty military members to pause or delay divorce proceedings if deployment or duty prevents participation.
USFSPA (Uniformed Services Former Spouses’ Protection Act): Governs how military retirement pay is divided in divorce.
Jurisdiction rules: You can often file in California even if you’re stationed elsewhere, depending on residency and military orders.
Service of process: Special rules apply if a service member is deployed or stationed overseas.
The result: Military divorce looks similar to civilian divorce, but it has additional layers that require a military-savvy family law attorney to navigate properly.
This is the #1 financial concern for military families.
Any portion of military retirement earned during the marriage is subject to division under California’s 50/50 community property rules.
A common misconception:
➡️ The “10/10 rule” does not determine whether a spouse gets part of the pension.
It only affects how the pension is paid.
If the couple was married at least 10 years, overlapping with 10 years of military service, DFAS will pay the former spouse directly.
If not, the service member must pay the marital share directly to the ex-spouse.
VA disability benefits are not divisible as community property, but they can be counted as income for:
Child support
Spousal support
TRICARE, commissary, and base privileges depend on the 20/20/20 or 20/20/15 rules.
SBP (Survivor Benefit Plan) elections must be made during the divorce to protect the former spouse’s pension share.
Because of these overlapping state and federal laws, military pension division is one of the most technical parts of a military divorce.
California law protects military parents — deployment alone cannot be used against you in custody decisions.
A parent’s absence due to deployment, mobilization, or PCS orders cannot be considered abandonment.
Any temporary custody change made because of military duty must be reversed when the parent returns, unless doing so would harm the child.
Courts encourage:
Virtual visitation (video calls, messaging apps)
Delegation of visitation to grandparents or close relatives
Detailed long-distance parenting plans
They may need to request temporary orders allowing the child to stay with a designated caregiver during deployment.
The move triggers a relocation (move-away) analysis, but courts recognize that PCS orders are mandatory, not voluntary.
Parenting a child with disabilities brings immeasurable love—and significant responsibility. When divorce enters the picture, California parents face an added layer of complexity: ensuring that child support provides meaningful care without compromising eligibility for public benefits.
This legal tightrope is especially critical in San Diego, where families rely on programs like SSI, Medi-Cal, IHSS, and regional center services to help cover care and support. Many parents are shocked to discover that a traditional child support order—while well-intentioned—can disqualify their child from these life-sustaining benefits.
The solution lies in creating a court-approved Special Needs Trust (SNT) that works in tandem with your child support obligations. At Minella Law Group, we guide families through this exact process—ensuring your divorce plan protects your child’s long-term financial stability and legal rights.
When a child has a significant disability, public programs often become a financial lifeline. These programs, however, have strict means-based eligibility requirements, meaning even modest increases in income or assets can render your child ineligible.
For example:
SSI (Supplemental Security Income) is reduced dollar-for-dollar based on income.
Medi-Cal imposes income and asset limits that can be unintentionally breached.
Regional center and IHSS services may be tied to SSI or Medi-Cal eligibility.
Now add child support: a regular monthly payment from one parent intended to help with daily needs. Seems helpful, right?
Not always. Direct child support payments count as unearned income in the eyes of the Social Security Administration (SSA). If those payments exceed a minimal threshold, they can immediately cut off eligibility for SSI—and, by extension, Medi-Cal and related services.
Without legal planning, child support payments that are meant to help your child can inadvertently become a legal and financial hazard. Here’s how:
Direct child support payments (to the custodial parent or the child) are treated as income to the child under federal law.
If the child is over 18 and receiving SSI, those payments can reduce or eliminate monthly benefits.
Once SSI is lost, Medi-Cal coverage may disappear as well, leaving parents responsible for expensive medical care or therapies.
This legal loophole blindsides many families during divorce—especially those who are unaware of how support orders interact with disability law.
Fortunately, California law allows a solution: structuring the child support payment so that it goes directly into a Special Needs Trust.
A Special Needs Trust (SNT) is a legally recognized tool that allows parents, relatives, or courts to set aside funds for a child with disabilities without jeopardizing that child’s eligibility for public benefits.
Funds can be used to supplement public benefits (not replace them), improving quality of life without triggering disqualification.
An appointed trustee—a parent, professional, or third party—manages distributions to ensure compliance with federal and state rules.
Courts can order child support payments to flow directly into the trust, protecting benefits while ensuring support is provided.
In divorce cases, this type of trust becomes the bridge between fulfilling child support obligations and preserving access to critical services.
California courts recognize the importance of preserving public benefits for children with disabilities. As a result, they allow and encourage the payment of child support directly into a court-approved SNT—but only if the correct procedures are followed.
At Minella Law Group, we draft compliant trust language, structure the child support order, and obtain court approval—all while guiding you through communication with relevant agencies.
The benefits of directing child support into a Special Needs Trust go far beyond legal compliance:
An SNT keeps your child eligible for SSI, Medi-Cal, and IHSS—programs that provide financial support, in-home care, therapies, and more.
The trust can pay for things public benefits don’t: therapy, equipment, camp, travel, technology, tutoring, and personal care items.
A trustee ensures funds are used appropriately and in the child’s best interest, reducing the risk of financial exploitation or mismanagement.
An SNT can accept other contributions—gifts, inheritances, lawsuit settlements—making it a powerful estate planning tool beyond child support.
By routing child support to an SNT, you meet your financial responsibilities without harming your child’s benefit eligibility.
In addition to SNTs, California families may also consider an ABLE account (Achieving a Better Life Experience) as part of their planning.
An ABLE account is a tax-advantaged savings account for individuals with disabilities, established under federal law and available in California. It allows eligible individuals to save and spend money without losing SSI or Medi-Cal eligibility—up to certain limits.
Both tools are powerful—but serve different functions:
| Feature | Special Needs Trust (SNT) | ABLE Account |
|---|---|---|
| Max Contribution | Unlimited | $17,000/year (2025) |
| Benefit Impact | Exempt from SSI/Medi-Cal limits | Up to $100,000 exempt for SSI |
| Control | Managed by trustee | Controlled by beneficiary or representative |
| Can Receive Child Support? | Yes | Not ideal (may be treated as income) |
| Use in Divorce? | Excellent for court-ordered support | Supplementary tool only |
📌 Conclusion: Use an SNT for court-ordered child support. Use an ABLE account as a supplemental savings tool for day-to-day independence.
Disability and family law are state-specific—but implementation is local. In San Diego County, judges, regional centers, and Medi-Cal eligibility offices each have unique practices and expectations.
Our team at Minella Law Group:
Knows how to work with San Diego County Health and Human Services
Maintains relationships with regional centers and probate court administrators
Has crafted SNT and child support structures for a wide range of families—from autism spectrum to complex medical needs
Having local counsel who speaks the language of both family law and disability law can make the difference between benefit protection and benefit loss.
A standard child support order may unintentionally hurt the child it’s meant to protect. Without careful planning, your child could lose access to SSI, Medi-Cal, or IHSS—placing the burden of care and medical expenses back on your family.
With proper legal strategy—including a court-approved Special Needs Trust—you can protect your child’s public benefits while fulfilling your support obligations.
Divorcing with a disabled child means making hard decisions. Don’t make the mistake of overlooking how child support interacts with public benefits.
At Minella Law Group, we help San Diego families:
📞 Call Minella Law Group today at 619-289-7948 to schedule a confidential consultation with one of our family law specialists. We’ll listen to your concerns, assess the situation, and create a clear strategy tailored to your goals.
📝 Prefer email? Fill out our online contact form and a member of our legal team will get in touch with you promptly.






