You negotiated hard for that package. The base salary was fine. What mattered were the RSUs vesting over four years, the stock options with a one-year cliff, and the deferred bonus tied to a milestone three years out. That is where the real money lives, and that is what made the job worth taking.
Now you are getting divorced, and your spouse’s attorney wants a complete accounting of every equity and deferred compensation award, with grant agreements, vesting schedules, and plan documents. The compensation that was supposed to fund your future is suddenly at the center of a property fight.
Executive compensation is the most complicated asset class in a Michigan divorce, and it is where inexperienced attorneys leave the most money on the table, in both directions. Over-disclose and you give away property that was never marital. Under-value the unvested awards and you risk a motion to set aside the judgment.
At Boroja, Bernier & Associates, we handle divorces for executives, physicians, founders, and senior professionals across Oakland County, Macomb County, Wayne County, and throughout Southeast Michigan, Central Michigan, and Mid-Michigan. This guide explains how Michigan courts actually treat RSUs, stock options, and deferred pay, and what high earners on both sides need to know before the first settlement conference.
Why Executive Compensation Is Different
A bank balance is a number. A paid-off house is a value minus the realtor’s commission. Executive compensation is neither. It is a bundle of promises, some conditional, some tied to future performance, some that vanish if the employee leaves before a vesting date.
Michigan is an equitable distribution state under MCL 552.401 and MCL 552.19, and the court’s job is to divide marital property in a just and reasonable way. That is clean when the asset is a house. It is hard when the asset is 4,000 RSUs vesting in quarterly installments over 38 months, with continued employment as a condition. Three questions drive every case: what portion of the award is marital, what is it worth, and how do you divide something the employer will not let the spouse receive directly?
Get those three questions right and the division is manageable. Get them wrong and one spouse walks away with far more, or far less, than a fair settlement would have produced.
Restricted Stock Units (RSUs)
RSUs convert to actual shares when they vest, usually over three or four years, sometimes with a one-year cliff. The key divorce question is whether a grant rewarded past work during the marriage or future work after the divorce. The answer is rarely clean: a grant issued two years ago for work expected over four years straddles both periods.
Michigan handles this with a coverture fraction, often called the time rule. The numerator is the time from grant to the end of the marriage; the denominator is the time from grant to full vesting. Apply that fraction to the shares or their value, and you have the marital portion. The rest is separate.
For example, a 4,000-share grant issued 18 months before the complaint is filed, vesting over 48 months, produces a coverture fraction of 18/48, or 37.5%. Of the 4,000 shares, 1,500 are presumptively marital and 2,500 are separate. The non-employee spouse typically receives half of the 1,500 marital shares, or 750, subject to the equitable distribution analysis. That is the mechanical part. The harder part is valuation and risk: what are 750 shares that vest over the next two and a half years worth today, and who absorbs the loss if the stock falls before vesting or the employee leaves and forfeits the shares? Those are negotiation points, not math problems.
Stock Options: ISOs, NSOs, and the Valuation Problem
Options are trickier than RSUs because they carry an exercise price. An RSU is worth whatever the stock is worth at vesting. An option is worth only the positive difference between market price and strike price. Incentive Stock Options (ISOs) can receive favorable tax treatment if holding rules are met; Non-Qualified Stock Options (NSOs) are taxed as ordinary income at exercise, as the IRS explains in Topic No. 427. That tax character matters, because the after-tax value to the recipient is often 25 to 40 percent below the gross value on paper.
Valuing unvested options is where attorneys make the biggest mistakes. Options with a strike price above the current market price have no intrinsic value but real time value, because the stock can rise. Forensic specialists use Black-Scholes or binomial lattice models to assign a present value; a simple market-minus-strike calculation badly undervalues the position.
There is also a transfer problem. Most plans prohibit transferring options to a non-employee, even a former spouse, and a QDRO does not help because option plans are generally not ERISA-qualified the way a 401(k) or pension is. The usual fix: the employee keeps the options, exercises them when vested, and pays the other spouse a share of the net proceeds under the judgment, with tight language on timing, taxes, and enforcement.
Deferred Compensation and Performance Bonuses
Deferred compensation covers a lot: executive bonus plans, supplemental executive retirement plans, phantom stock, long-term incentive plans, and multi-year performance awards. The marital-versus-separate question is the same as with RSUs, but the answer is less formulaic because the award turns on performance, not just time. A three-year bonus paying out six months after the divorce might be mostly marital, or mostly not, depending on the grant terms and the work timeline. Non-qualified plans also carry strict distribution rules under Internal Revenue Code Section 409A, so they are usually handled by contract language in the judgment, not a transfer order.
In our experience, the biggest mistake with deferred compensation is treating all of it as marital without reading the grant documents. When an attorney assumes first and reads later, the high-earning spouse loses money they did not have to lose.
Valuation Date: One of the Most Contested Issues
Michigan gives the trial court discretion to choose the valuation date that produces an equitable result, commonly the date of filing, separation, trial, or judgment. With volatile stock, that choice can move hundreds of thousands of dollars. The employee spouse argues for the earlier date to keep post-filing appreciation; the other spouse argues for the later date to share it.
The active-versus-passive appreciation rule matters here. Active appreciation driven by the owner-spouse’s effort during the marriage can become marital under Hanaway v. Hanaway, 208 Mich. App. 278 (1995). Passive, market-driven appreciation stays separate under Reeves v. Reeves, 226 Mich. App. 490 (1997). Post-filing appreciation of equity compensation is rarely cleanly passive, because executives keep driving the company’s performance, and the stock price often reflects it.
The Double-Dip Issue: When Compensation Is Both Property and Income
The same award can be divided as property and counted as income for spousal support. That is the double-dip problem. Michigan does not prohibit it automatically. Under Loutts v. Loutts, 298 Mich. App. 21 (2012), there is no bright-line rule; courts evaluate the issue case by case under MCL 552.23, and only when an attorney raises it with specific facts and evidence. This matters most when RSUs or options already divided as property later vest and generate income that gets counted again for support. Raise it early, or risk paying twice on the same asset.
Hidden Compensation, Undisclosed Grants, and Discovery
Not every executive discloses everything. Sometimes the omission is deliberate; sometimes it is a forgotten grant or a phantom-stock arrangement they never thought of as compensation. Red flags include a W-2 showing income that base salary and obvious bonuses cannot explain, tax returns with stock sales in years the executive claims no awards, an offer letter referencing components missing from the disclosures, and a lifestyle beyond the reported income.
Michigan’s discovery rules under MCR 2.301 allow interrogatories, requests for production, employer subpoenas, and depositions of HR or compensation-committee members, and a forensic accountant who specializes in equity compensation often finds what generalists miss. If undisclosed compensation surfaces after the judgment, MCR 2.612(C) allows a motion to set aside on narrow grounds and tight deadlines, but comprehensive discovery before the judgment beats cleanup after.
Costs and Timelines
Executive-compensation divorces are almost always contested and complex. At Boroja, Bernier & Associates, contested divorces with custody typically run $15,000 to $30,000 or more, and high-asset, high-conflict matters or those that also involve a business valuation can reach $25,000 to $75,000 or more. Michigan’s waiting periods still apply: 60 days with no minor children and 6 months with minor children under MCL 552.9f. In practice, these cases often take 9 to 18 months because of discovery, forensic valuation, and the negotiation of judgment language around future vesting.
Frequently Asked Questions About Dividing Executive Compensation in a Michigan Divorce
Partly. Unvested RSUs are marital to the extent they were earned during the marriage, measured with a coverture fraction comparing the time from grant to the end of the marriage against the time from grant to full vesting. The non-employee spouse typically receives half of the marital portion, subject to the court’s equitable distribution analysis under MCL 552.401 and MCL 552.19.
Generally no. QDROs divide ERISA-qualified retirement plans like 401(k)s and pensions. Most stock option plans are not ERISA-qualified, so the usual approach leaves the options in the employee spouse’s name and uses the judgment to allocate the net proceeds after exercise, with specific language on timing, taxes, and enforcement.
It depends on the deal and the grant agreement. Many plans accelerate vesting on a change of control; others require continued employment with the acquirer. The judgment should address acceleration, substitution, and conversion events directly, or the non-employee spouse may face arguments that the transaction wiped out their interest.
Underwater options, where the strike price exceeds the market price, still carry time value because the stock can rise, so courts do not treat them as worthless. A forensic expert assigns a present value using option-pricing models, and the parties negotiate how to handle future appreciation, whether by dividing the options, trading them for other assets, or splitting future exercise proceeds.
Possibly, though Michigan scrutinizes postnuptial agreements more strictly than prenuptial ones. Prenup enforceability is governed by MCL 557.28 and case law including Rinvelt v. Rinvelt and Allard v. Allard. For high earners who did not sign a prenup, targeted postnuptial planning is sometimes appropriate, but it requires specific advice from a Michigan family law attorney.
Speak With a Michigan Divorce Attorney
Executive compensation cases require attorneys who have actually handled them, not generalists who promise to figure it out. The grant agreements are contracts, the plan documents run 40 pages, and the vesting schedules interact with tax timing and performance triggers in ways that are not intuitive the first time you see them.
At Boroja, Bernier & Associates, we represent both executive and non-executive spouses, we know which forensic accountants survive cross-examination, and we draft the judgment provisions that prevent problems three years later. Our attorneys help executives, physicians, founders, and senior professionals in Macomb County, Oakland County, Wayne County, and throughout Southeast Michigan, Central Michigan, and Mid-Michigan divide executive compensation the right way.
Excellence is contagious, mediocrity is too. That is not a slogan. It is how we approach every executive divorce file that crosses our desk.
To schedule a consultation with the Michigan divorce attorneys at Boroja, Bernier & Associates, call (586) 991-7611, or schedule a consultation online.
About the Author
This article was written by Joel Bernier, Esq., a partner at Boroja, Bernier & Associates PLLC, admitted to the State Bar of Michigan in 2010 (Bar No. P74226). Joel focuses his practice on divorce and family law for Michigan families.
