A divorce in Texas can be grueling to endure, especially if you have built up significant wealth during your marriage. Certain assets, like equity and stocks, can be difficult to handle during the split. You may not know exactly what to do with them or how to divide them up, if at all. It may be vital for you to hire a high-asset divorce lawyer to help you understand the process of dividing startup equity and stock compensation in a Travis County divorce.
It’s understandable to be in the dark regarding the state’s high-asset divorce laws until they directly affect you. At Heinrich Christian, PLLC, we have over 25 years of experience handling high-asset divorce cases just like yours. We understand what you’re going through, and we can help.
Divorce in Travis County
Divorce cases in Travis County, both high-asset and not, are handled in the Travis County District Court, located in Austin at the Travis County Civil and Family Courts Facility. Divorce is fairly common in the Austin area and in Texas more broadly. In 2023, Texas’s divorce rate was 2.1 cases per year per 1,000 residents.
If your assets are at risk in your divorce, having a lawyer in your corner can be useful. Travis County’s median household income from 2020-2024 was $99,611, compared to the US median of $80,734.
Because of Austin’s status as a startup hotspot, questions about startup equity can be especially pertinent in divorce cases. In 2024, almost 500,000 applications for new businesses were filed in Texas, according to the Austin American-Statesman.
Community Property Laws in Texas
Under Texas’s community property laws, most assets that are gained during marriage are legally considered marital, or community, property and subject to a “just and right” split between both spouses. Community assets can include startup equity and various types of stock compensation, such as stock options and RSUs.
However, because the date of acquisition of startup equity and stock compensation provided by employers can be difficult to intuitively pin down due to the nature of vesting schedules, Texas law dictates specific time-rule formulas to determine the portion of equity or stock compensation granted before or during marriage that should be considered marital property.
These formulas are intended to find how much of the stock and equity vested during the marriage, as that is the only amount subject to asset division. The calculations can be confusing to understand, but a Travis County high-asset divorce attorney can help.
Methods for Dividing Stock and Equity in a Texas High-Asset Divorce Case
When it comes to dividing stock, equity, RSUs, and similar financial assets, there are three main methods used in Texas. These assets are only up for division if the court deems them community property. These methods include:
- Asset offset. The employee spouse keeps the startup equity and stock compensation. They then give the non-employee spouse other marital assets of equal value, such as real estate holdings, personal property, or even cash outright. As long as the value of the marital property equals the equity value under the time rule, it doesn’t really matter what you give them.
- Deferred distribution. The non-employee spouse is given a percentage of the net proceeds or shares as the stock compensation vests, or when the startup either liquidates or goes public. When that happens, the employee spouse provides the other with their share of the gross.
- Constructive trust. The employee spouse holds the other spouse’s share of the stock compensation or equity until a structured arrangement where the other spouse’s divided share is held in trust until payout, at which point the non-employee spouse receives their share. This leaves the non-employee spouse’s money financially entangled, which may not be a desirable option in some cases.
FAQs
What Assets Are Untouchable in a Texas Divorce?
In a Texas divorce, any property that is legally deemed separate property is not subject to asset division of any kind. Separate property belongs solely to the spouse who owned that property before the marriage began, as well as any inheritances, gifts, or personal injury payouts intended for one spouse. It’s important that you maintain thorough documentation to avoid your separate property being combined with marital property.
How Are Stocks Typically Split During a Divorce in Texas?
In Texas, stocks are split the same way that all other community property is split. However, if the stock was first acquired before marriage, or if it was acquired during marriage but required the employee spouse to continue to be employed after the marriage was dissolved, the stock must first be divided by the time rule to determine exactly how much of it is marital property. Stocks can be a complex asset to divide, so the court takes that division very seriously.
How Common Is a 70/30 Split in a Texas Divorce?
In a Texas divorce, a 70/30 split is rare. Texas is a community property state, which means all marital assets are supposed to be divided fairly in the event of divorce. That doesn’t necessarily mean that every split is going to be 50/50, but the court tries to be as fair as possible. Unequal splits like a 70/30 split generally only happen under specific circumstances like severe one-sided fault or a private agreement.
Should I Hire a Divorce Lawyer?
Yes, it’s often a good idea to hire a divorce lawyer for a high-asset divorce. Enduring a divorce alone, especially a contested one involving high-value assets, can be stressful, overwhelming, confusing, and costly. Protecting yourself and your assets should be your main priority, and hiring the right high-asset lawyer can be the most important decision you make for your case. Investing in your future financial health is often worth it.
Hire a High-Asset Divorce Lawyer Today
Dividing your startup equity and stock compensation with your soon-to-be-ex can be frustrating and very stressful, especially if you have to calculate exactly how much is eligible for asset division. At Heinrich Christian, PLLC, we can assist you with your divorce case in multiple ways.
Contact us to speak with members of our legal team about what you need. Our office is conveniently based in Round Rock.
