Are RSUs Granted Before Marriage Marital Property in New York?
If you received RSUs or stock options before the wedding and they vest after it, New York doesn't automatically treat them as yours alone, and it doesn't automatically treat them as shared. The answer depends on what the grant pays for (past work or future service) and how much of the vesting period falls inside the marriage. For couples where one partner has a multi-year equity package, that can decide who owns a large share of household wealth. Courts apply a fact-specific time rule, so the simplest way to get clarity is to list every equity award before the wedding and agree on its treatment in a prenup.
Key takeaways
- Under New York Domestic Relations Law § 236(B)(1)(d), property acquired before marriage is separate. Under § 236(B)(1)(c), marital property is property acquired during the marriage and before a separation agreement or the start of a divorce action.
- DeJesus v. DeJesus, 90 N.Y.2d 643 (1997), is the controlling framework: first classify the award as compensation for past services or an incentive for future services, then apply a time rule, then equitably distribute whatever is marital.
- No single formula in the cited New York cases covers a grant made before the wedding that vests after it. The outcome turns on the grant documents, the purpose of the award and the dates.
- A written prenup can designate how existing and future equity awards are treated (DRL § 236(B)(1)(d)(4) and (B)(3)), so you and your partner set the terms instead of a court's time-rule analysis.
- RSUs are taxed as ordinary income at vesting, and options can be worth zero if the market price is at or below the exercise price. Tax, valuation and transferability all change net value, and a New York attorney is the right resource for applying these rules to a specific award.
Are Unvested Stock Options Marital Property in New York?
They can be, in whole or in part. New York asks when the value was earned, not only when the award vests.
Domestic Relations Law § 236 draws the lines. Marital property is "all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action," regardless of whose name is on the title (DRL § 236(B)(1)(c)). Separate property includes property acquired before marriage, gifts and inheritances from someone other than your spouse, and property described as separate in a written agreement between you (DRL § 236(B)(1)(d)). Growth in separate property stays separate too, except to the extent it comes partly from the other spouse's contributions or efforts.
The statute doesn't mention RSUs or options. New York's highest court addressed them in DeJesus v. DeJesus in 1997. The court started from a presumption: all property, unless clearly separate, is marital, and the spouse who holds the award (the "titled spouse") carries the burden to rebut that.
The reasoning came from pension cases. In Majauskas v. Majauskas (1984), the court held that pension rights are marital to the extent they were acquired between the wedding and the start of a divorce action, even if they weren't payable yet. In Burns v. Burns (1994), it said a nonvested pension's value "cannot reasonably be deemed to accrue only at the particular point in time when vesting occurs." DeJesus applied the same idea to stock plans: value builds over time.
Identifying the marital share and dividing it are separate steps. Equitable distribution means fair, not automatically equal. In Caffrey v. Caffrey (2003), an appeals court upheld a 20% award where the spouses had kept their finances essentially separate. In DeGroat v. DeGroat (2011), a 50% split fit a long marriage with equal contributions.
Nearly all of this law comes from divorce litigation, because that's where courts decide these questions. A prenup lets the two of you answer them first.
How Are RSUs Granted Before Marriage but Vesting After Treated in New York?
It depends on what the award pays for. A grant made before the wedding starts on the separate side of the line, but the cited New York cases don't settle how much of it, if any, becomes marital when your work during the marriage is what makes it vest.
Step one: past work or future service?
DeJesus requires a court to decide, based on evidence, whether and to what extent an award compensates past services or acts as an incentive for future services. The court listed factors and said the list isn't exhaustive:
- Was the award offered as a bonus or as an alternative to fixed salary?
- Is the value or quantity of shares tied to future performance?
- Is the plan being used to attract key personnel from other companies?
The past-service rule
For portions that pay for past work, DeJesus uses a time rule to remove value earned before the marriage:
- Numerator: time from the later of (a) the start of employment with the company or (b) the wedding, until the grant date
- Denominator: time from the start of employment until the grant date
Read literally, this gives a marital share of zero for a past-service grant made before the wedding, because none of the pre-grant period falls inside the marriage.
The incentive rule
For portions meant to keep the employee working, the marital share is:
- Numerator: time from the grant date until the end of the marriage (the earlier of a separation agreement or the start of the divorce action)
- Denominator: time from the grant date until the plan matures, usually the vesting date
DeJesus involved a grant made during the marriage. The couple married in October 1979, and the employer granted the plans in November 1993. Applied word for word to a pre-wedding grant, the numerator would count months before the wedding as marital time, which sits uneasily with the statute's rule that pre-marriage property is separate. The cited cases don't say how a New York court would adjust the fraction. Treat this as an unsettled, fact-specific area, not a rule.
What the cases do show
- In Caffrey, options acquired before the marriage but exercised and sold during it were the employee spouse's separate property.
- In DeGroat, options granted before a 1991 marriage started as separate property. Once the proceeds were mixed into a jointly titled investment account and the husband couldn't trace them with "sufficient particularity," the whole sum was treated as marital.
The lesson from DeGroat: a pre-wedding grant can stay separate on paper and still become marital through commingling.
A vesting schedule alone doesn't decide it
The DeJesus plans required continued employment and were labeled "incentive" by the employer. The court still sent the case back because the record didn't show whether the employer was rewarding past work, retaining an officer, or both. It pointed to sworn testimony or documents from people who know how and why the plans came to be. DeJesus also left open how to split a single plan that serves both purposes.
How Does the DeJesus Time Rule Work in Practice?
Each vesting tranche gets its own fraction, and the end date is the earlier of a separation agreement or the start of the divorce action. Small shifts in timing change the marital share.
Take a hypothetical incentive grant made during the marriage. The grant is dated March 1, 2025, and one-third vests on March 1 of 2026, 2027 and 2028. A divorce action starts March 1, 2026. The numerator is one year for every tranche. The denominator changes with each vesting date.
| Tranche | Vesting date | Fraction (grant to end of marriage ÷ grant to vesting) | Marital share |
|---|---|---|---|
| 1 | March 1, 2026 | 1 year ÷ 1 year | 100% |
| 2 | March 1, 2027 | 1 year ÷ 2 years | 50% |
| 3 | March 1, 2028 | 1 year ÷ 3 years | 33.3% |
This shows the mechanics for a grant made during marriage. It is not how a court would necessarily treat a grant made before the wedding. Courts do apply it: in Caffrey, the appeals court held it was an error to call incentive options granted during the marriage separate just because they vested after the action began, and it ordered the DeJesus fraction applied.
The map below is simplified. It shows how the cited sources describe each situation, not how a court will rule on your award.
| Scenario | How the sources describe it | Key question to ask |
|---|---|---|
| Granted before marriage, pays for past work | Property acquired before marriage is separate (DRL § 236(B)(1)(d)(1)); the past-service rule, read literally, yields no marital share | Did any service the grant rewards happen after the wedding? |
| Granted before marriage, incentive for future work, vests during marriage | Not directly addressed by DeJesus; Caffrey treated pre-marriage options exercised during marriage as separate | How much of the vesting period ran during the marriage, and are proceeds kept traceable? |
| Granted during marriage, pays for past work | Marital to the extent earned during the marriage; past-service rule removes pre-marriage employment time | When did employment start relative to the wedding? |
| Granted during marriage, incentive, vests after the action starts | Partly marital under the incentive fraction (DeJesus, Caffrey) | What are the exact grant, vesting and commencement dates? |
| Granted after the divorce action starts | Falls outside the statutory definition of marital property, which stops at commencement | When was the grant made relative to commencement? |
Finding the marital share is not the end. Courts then divide it equitably, weighing factors such as the length of the marriage and each spouse's contributions, as the DeGroat court did.
RSUs vs. Stock Options: What Changes When Dividing Them?
RSUs and options reach value differently, so the same marital fraction can produce very different dollars. An RSU is an employer's promise to deliver a set number of shares on a future date. A stock option is a right to buy shares at a fixed exercise price (Investopedia).
| Feature | RSUs | Stock options |
|---|---|---|
| At vesting | Shares are typically deposited into a brokerage account; no action needed | Employee must exercise (pay the exercise price) and decide whether to hold or sell |
| How value is measured | Fair market value of the shares | Difference between exercise price and market price |
| Risk | Keeps value as long as the stock has value | Can be worth zero if the market price is at or below the exercise price |
| Taxation | Full value taxed as ordinary income in the year of vesting; no 83(b) election | Non-qualified options: ordinary income. Incentive stock options: may be ordinary income, long-term capital gains or alternative minimum tax |
| Before vesting | Restricted shares are non-transferable; no voting rights or dividends | Often subject to vesting and post-IPO sale limits |
The tax points for RSUs come from Investopedia's RSU guide.
New York cases describe several ways to divide unvested value:
- Pay as it vests. In DeJesus, the trial court had the employee spouse act as constructive trustee, holding the other spouse's portion and passing it on as shares vested.
- Present-value payout. Majauskas allowed distribution of the present value of the marital share, or a portion of each payment once benefits mature.
- Distributive award. DRL § 236 lets a court order payments in place of dividing the property itself, as a lump sum or in fixed amounts over time.
Tax and valuation dates change the numbers. Caffrey sent options back for "a clear valuation" with reasons for the dates chosen, and it required the court to consider tax consequences of dividing an IRA under DRL § 236(B)(5)(d)(10). A financial professional can model pre-tax and after-tax values for each tranche.
These mechanics are why equity awards are worth addressing in writing before they vest.
How Can a Prenup Address RSUs and Stock Options Before the Wedding?
A written prenup can classify equity awards as separate or shared, and New York's statute respects that choice. The definition of marital property applies "except as otherwise provided in agreement" under DRL § 236(B)(3), and separate property includes property "described as separate property by written agreement of the parties" (DRL § 236(B)(1)(d)(4)).
For couples, this turns an unsettled legal question into a shared decision. You both know how a four-year vesting schedule will be treated before the first tranche lands.
Options couples often discuss with their attorneys include:
- Treating grants made before the wedding, and the shares they produce, as separate property
- Designating a defined portion of future awards as shared
- Adopting a DeJesus-style fraction, with the dates and denominators spelled out
- Setting rules for unvested shares if employment ends, the company is acquired or awards are replaced
- Stating who bears the tax on vesting and exercise
- Keeping proceeds of separate awards in a separate account, given what happened in DeGroat
These are options to weigh together, not a recommended package.
Documents to gather for each award:
Restricted shares are non-transferable before vesting, so language that assumes shares can simply move to a spouse may not work. Drafting should say how value reaches each person.
Michael C. Cotugno, Esq., Managing Partner, Neptune Legal, puts it this way: "Meticulously defining assets and debts within a premarital agreement is not a limitation on your love; it is, fundamentally, a profound act of liberation."
You can list assets and talk through goals on your own, but you'll want a New York attorney to classify specific awards, draft the equity language and allocate taxes. Independent counsel for each partner is highly recommended for an enforceable prenup. Neptune offers a lawyer-led online prenup; when both partners use Neptune-network lawyers, each has an independent attorney, and each client chooses their own.
Timing matters after signing too. Under DRL § 250, the three-year statute of limitations for challenging a prenup is tolled until divorce papers are served or one spouse dies.
Frequently asked questions
Are RSUs granted before marriage separate property in New York?
They start out that way, since DRL § 236(B)(1)(d) treats property acquired before marriage as separate. The cited New York cases don't settle how much, if any, becomes marital when the RSUs vest because of work done during the marriage. Commingled proceeds can also become marital, as in DeGroat v. DeGroat (2011).
Are unvested stock options marital property in New York?
They can be, in whole or in part. Under DeJesus v. DeJesus (1997), options granted during the marriage are marital to the extent the value was earned during the marriage, even if they vest after a divorce action begins. A time rule sets the marital fraction.
What is the DeJesus formula and when does it apply?
For awards granted as incentives for future work, the marital share equals the time from grant to the end of the marriage divided by the time from grant to vesting. The end of the marriage is the earlier of a separation agreement or the start of the divorce action. A separate rule applies to awards that pay for past work.
Does a vesting schedule automatically make RSUs marital property?
No. The DeJesus plans required continued employment, yet the court still required evidence of whether they rewarded past work or encouraged future service before applying either time rule. The award's purpose and dates drive the result.
What happens to RSUs that vest after a divorce action starts in New York?
If they were granted during the marriage as an incentive, part is marital under the DeJesus fraction and the rest is separate. In Caffrey v. Caffrey (2003), the appeals court held it was an error to call such options entirely separate. Awards granted after the action starts fall outside the statutory definition of marital property.
Can a prenup classify RSUs and stock options as separate property?
Yes. DRL § 236(B)(1)(d)(4) treats property described as separate in a written agreement as separate, and § 236(B)(3) governs those agreements. Couples can classify existing and future awards, adopt a formula, or set rules for unvested shares.
How are stock options and RSUs divided once a marital share is identified?
Courts have used several methods: holding the other spouse's portion in constructive trust and delivering it as shares vest, paying a present-value amount, or ordering a distributive award paid as a lump sum or over time. The division is equitable, which isn't always 50/50.
What documents show whether an equity award was for past work or future incentive?
Grant agreements, vesting schedules, the company's equity plan and any statement of the award's purpose. DeJesus also pointed to sworn testimony or documents from people who know how and why the plan was created.
How do taxes affect the division of RSUs and stock options?
RSUs are taxed as ordinary income at vesting. Non-qualified options are taxed as ordinary income, and incentive stock options may be taxed as ordinary income, capital gains or alternative minimum tax. New York courts consider tax consequences when dividing property, as Caffrey required.
Written by
Ronke Oyekunle
Co-Founder & COO, Neptune
Reviewed by
Michael Cotugno, Esq.
Managing Partner, Neptune Legal · 30+ years practicing family law
Michael has been practicing family law for more than 30 years and as Managing Partner of Neptune Legal, he is widely recognized for his expertise in premarital agreements and estate plans. After spending the first two decades of his career handling family law litigation, he saw firsthand the emotional and financial costs couples often face when issues are not clearly addressed early on. This experience led him to focus his practice on helping clients proactively create thoughtful, well-structured agreements.