While software developers are among the professions with the lowest divorce rates, coming in at 20.3%, workers in the technology sector who divorce face specific challenges during the divorce process. From how to locate and divide assets to determining parenting plan arrangements with an often unpredictable work and travel schedule, a tech divorce can become complicated — and a high-conflict divorce — fast.
As one of the world’s largest and highest-paying tech hubs, the Seattle area is no stranger to tech divorces, including high-net-worth tech divorces. Below is a start on what you need to know about getting divorced when you work in the tech industry. If you are a C-level tech executive, software designer, management level in a tech company, a web developer, or work in tech at any level, we have you covered. Here are a few issues to think about if you are about to embark on a tech divorce or are involved in one now.
Stock Options and RSUs
One notable aspect of getting paid in the tech industry is that while many tech workers receive a salary, they may also receive equity in their company, pensions, IRAs, and severance packages. Compared to a salary, these are relatively illiquid, and the fair division of these assets may be difficult to determine. Furthermore, a common element of an employment package in the tech industry includes employee stock options.
Stock options and RSUs work differently than simply having shares in a company. According to Daily Capital, “[s]tock options and restricted stock units (RSUs) are two types of equity compensation that companies offer their employees.” In other words, stock options are agreements under which you contract to buy or sell shares of a company in the future at an agreed-upon price, known as a “strike price.” They vest according to a set schedule. RSUs, on the other hand, “are a type of restricted stock that’s granted to key employees based on a set vesting schedule or after they reach certain performance benchmarks.”
By way of example, a compensation structure may work like this. Suppose part of your compensation includes the award of stock options at varying intervals. At the time of each grant, a certain number of unvested shares is awarded to you. The employee does not purchase them or pay anything at this time. The options are assigned a strike price, which is usually the current market value at the time of the grant if the employer is a publicly owned company. Because the shares are unvested, the award is not considered “income” or taxed at the time of the award. For purposes of this example, let’s say the shares were assigned a strike price of $10 a share.
Over the course of time, and assuming the employee remains with the company, the shares “vest.” And meanwhile, the market price of the stock will usually change between the time of the grant and when they vest, either increasing or decreasing in value. Once the stock options vest, the employee has the choice of exercising the option.
Next, suppose the market value of the stock increases between the time of their grant and their vesting, and now shares are being publicly traded on the stock market at $20 a share. Once vested, the employee has the ability to exercise the option, meaning the employee can buy the shares at the agreed-upon strike price ($10 a share), sell them for the current value ($20 a share), and gain $10 in additional income (minus taxes) per share.
There is usually no requirement that the employee must exercise the options, but they can if they wish. But then suppose the market price of the stock has gone down to $5 a share by the time the options vest. It would not make sense for the employee to exercise them because the transaction would result in a net loss instead of extra income.
Stock option agreements are subject to various conditions, and upon leaving employment, unvested options have no value, and vested options normally expire unless exercised. So an employee could lose their unvested options if they were to get fired or quit during that period.
If the employee stays with the employer, stock options can have a significant potential value. If the company grows and perhaps goes public, the employee could, therefore, stand to make a significant profit by exercising their options.
Now, further suppose the tech employee’s marriage hits the skids at some point during all of this financial uncertainty, and divorce appears imminent. Due to the dependence on the tech company’s growth, volatility of the market, and illiquidity of stock options, stock option employment packages may pose hurdles in a Seattle divorce when calculating child support and alimony (called spousal support in Washington state) awards. There are special rules under Washington law that govern how stock options are valued for purposes of a divorce, including characterizing what portion is community property and what portion is considered separate property.
Similar issues could arise with RSUs, depending on when they vest. Also, RSUs may not be fully transferable until specific criteria are met. To help alleviate the confusion, it is wise to seek the legal expertise of a Seattle divorce and family law attorney who is familiar with the issues unique to a Seattle tech divorce.
Deferred compensation, including bonuses, can give rise to another set of complicated issues, many of which are rooted in timing and how they are awarded. For example, if a spouse receives a bonus for work they had done prior to the separation, then it would generally be considered community property. If, however, the bonus is an incentive to promote future work to occur following the separation or divorce, a Washington family court may deem it separate property.
Similarly, signing bonuses can become a source of contention as well. For instance, if a spouse is awarded a signing bonus at a tech company during the marriage but leaves that job after separation, the bonus is mostly likely community property because it was earned during the marriage. If the tech spouse then signs somewhere else after separation, a signing bonus at the new job would generally be considered separate property.
To further convolute matters, if the signing bonus is subject to a vesting period before being paid out, and the tech spouse switched companies before the vesting period at the first company was up and then were awarded a larger signing bonus in recognition of their unvested bonus at the first company, then the ex-spouse could argue potentially that they are entitled to a portion of the new bonus.
How Child Custody and Long Hours Can Affect a Tech Divorce
Formerly referred to as “custody,” today, Washington instead allocates the time children will spend with each parent by ordering a residential schedule or parenting plan. During their respective parenting time, each parent is responsible for their children. Long hours or travel for work will be taken into consideration by the court in determining a residential schedule or parenting plan that is in the best interests of the children.
While the court will want to maintain the children’s primary care parent as much as possible going forward, having one parent remain or become a stay-at-home parent after the divorce is rarely feasible. There is a general expectation under Washington child support law that each parent will need to take employment to contribute to their own support as well as their obligation to support their children. If daycare is needed to facilitate this, the cost will be proportionately shared by the parents.
With the two parents no longer sharing the same home, they may struggle to be awarded the residential schedule with the children they desire. As a result, you should consider working with an experienced attorney to develop parenting plan solutions specific to your work situation within the tech industry.
Relocation in a Seattle Tech Divorce
Part of upward mobility in the tech industry sometimes involves changing jobs, including relocation to a different city, state, or country. Relocating for work could greatly impact your children’s parenting plan and residential schedule. This is especially true if the relocating parent has the children more than 45% of the time under the existing schedule and wants the children to also relocate with them.
Be aware that in Washington state, there are strict notice requirements that must be observed before you can relocate the kids. Moreover, the other parent has the right to object and contest any desired relocation that would move the children out of their existing school district. Whether you intend to move out of the county, state, or country for your job, if you have children, you will want to consult with an experienced Seattle family law attorney for advice and assistance in your divorce case.
Managing Stress During a Tech Divorce
Getting a divorce under any circumstance can be a source of incredible stress. When that divorce is a tech divorce coupled with working in a competitive industry, long hours, and sometimes unpredictability because of the industry’s entrepreneurial nature, emotions can run high. Therefore, it is critical you practice self-care.
As a start, ensure you get enough sleep, exercise, and eat well, as well as save some time for personal pursuits while away from work. Find healthy outlets for your stress, and do not be afraid to lean on trusted family and friends, as well as a skilled Seattle divorce and family law attorney, for support during your divorce. We are here to help.
Find a Seattle divorce and family law attorney who understands the complex issues in a tech divorce.
At Elise Buie Family Law, our team of Seattle divorce and family law attorneys understand the complexities involved in a tech divorce. Whether you are at Microsoft, Amazon, Boeing, or one of the area’s many other well-known tech corporations or startups, our team has extensive experience negotiating divorces for tech professionals at all levels throughout the industry.
Empathetic yet strong, we are prepared to support you as we navigate together the issues unique to your situation. Call us today.