Stock options and RSUs in a Colorado divorce.
Equity awards are often the hardest asset in an executive's or founder's divorce to classify and value. They may not be vested, may not be exercisable, and may be worth very different amounts by the time they pay out. This guide explains the general framework Colorado courts use. It is general information, not advice about your awards.
The awards themselves
Stock options
An option is a contractual right to buy company shares at a fixed price (the exercise or strike price) during a set period. Options often vest over time, and a grant agreement may say vesting stops when employment ends. Incentive stock options and nonqualified stock options are taxed differently.
Restricted stock units (RSUs)
An RSU is a promise by the employer to deliver shares, or their cash value, when vesting conditions are met. Until then, the employee usually holds no shares. Shares delivered on vesting are generally taxed as ordinary income at that time, and employers commonly withhold some shares for tax.
Restricted stock and other awards
Restricted stock is actual stock issued subject to forfeiture or transfer limits. Performance shares, employee stock purchase plans and private-company profits interests each have their own terms. The label matters less than what the award documents actually say.
The Colorado framework
In a Colorado dissolution or legal separation, the court sets apart each spouse's separate property and divides the marital property, without regard to marital misconduct, in the proportions it finds just after considering the relevant factors listed in the statute. Property acquired by either spouse during the marriage is presumed to be marital, subject to listed exceptions such as gifts and inheritances, and property is valued as of the date of the decree or of the hearing on property if that comes first. See C.R.S. § 14-10-113(1), (2), (3) and (5).
The first question is whether an award is property at all, or only an expectancy. In In re Marriage of Balanson, 25 P.3d 28 (Colo. 2001), the Colorado Supreme Court held that vesting is not the deciding test. An employee stock option is property for dissolution purposes only when the employee has an enforceable right to it, and the court looks to the terms of the contract granting the options to decide that. Under that opinion, options granted for past or present services can be property when granted even if they are not yet exercisable; options granted in consideration for future services are not property until those services have been performed.
If an award is property, the next questions are whether it is marital or separate, what it is worth, and how to divide it. Awards granted before the marriage, or after a decree of legal separation, raise their own issues, and an increase during the marriage in the value of a separate asset can itself be marital under C.R.S. § 14-10-113(4).
Why the grant documents matter. Because the Colorado Supreme Court tied the analysis to the enforceable rights in the grant contract, the plan, the grant agreement and any employment or offer letter that explains why an award was made are usually central evidence. The same questions about what an award was for and what rights it carries are typically examined for RSUs and other awards.
Common ways to divide equity
- Value now, offset with other assets. The awards are valued and the other spouse receives other property of equal value. This gives certainty but requires a valuation of awards that may never pay out.
- Divide as the awards pay out. Shares or proceeds are shared when awards vest or are exercised, under a formula set in the decree or agreement. This shares the risk but keeps the former spouses financially connected.
- Mixed approaches. Some awards are offset and others are shared later, depending on how certain they are.
Many plans do not allow awards to be transferred to a former spouse, so a later-division approach usually needs the employee spouse to hold awards for the other and to handle exercise, sale and tax withholding under clear written terms. After-tax value, blackout periods and the possibility of forfeiture all bear on what a fair division looks like. A tax professional should model the numbers for your situation.
Documents to gather
- The equity plan, every grant agreement and any amendment
- Offer letters, employment agreements and any separation or change-of-control terms
- Brokerage or equity-portal statements showing grants, vesting, exercises, sales and withheld shares
- Pay stubs and W-2 forms showing equity income, and recent tax returns
- For private companies: the capitalization summary you were given, any recent valuation provided to employees, and transfer restrictions
Sources
Statute text: C.R.S. § 14-10-113, Colorado Revised Statutes 2026, Title 14, published by the Colorado Office of Legislative Legal Services (Title 14 text; 2026 C.R.S. titles on leg.colorado.gov).
In re Marriage of Balanson, No. 99SC811, 25 P.3d 28 (Colo. May 29, 2001), modified on denial of rehearing June 25, 2001. Opinion text from the Colorado Judicial Branch: coloradojudicial.gov opinion file 99SC811.
This page is general information about Colorado law as of October 2026. It is not legal, tax or financial advice, and it does not predict the outcome of any case.