In re Marriage of Short (1995) established Washington's "time rule" for characterizing unvested stock options. The court looked at the ratio of time worked before marriage versus during marriage to determine what portion of unvested options might be considered community property.
This framework is particularly relevant for employees at Amazon, Microsoft, and other Washington-based tech companies where equity compensation can represent a significant portion of total pay. RSUs, ISOs, and NSOs that vest over multiple years may be subject to this time-based analysis.
A prenup can address how equity compensation is characterized as it vests, potentially simplifying what could otherwise become a complex tracing exercise. Your attorney can explain how the time rule might apply to your specific vesting schedule and grant dates.
RSUs vesting during marriage
Restricted stock units granted before or during marriage that vest over time may be partially characterized as community property based on the time rule.
Stock options (ISOs and NSOs)
Unvested options that span the marriage boundary may be subject to allocation between separate and community property interests.
Startup founder equity
Equity in a pre-marriage startup that grows during the marriage may raise characterization questions about appreciation and effort contributions.
Refresher grants
New equity grants received during the marriage for continued employment may be treated differently than pre-marriage grants.