Equity Compensation in Divorce: Dividing RSUs, Stock Options, and Deferred Pay

Michael DiFalco, Founding Partner | Aiello & DiFalco LLP

Michael DiFalco is a founding partner at Aiello & DiFalco LLP, a Garden City, New York matrimonial and family law firm whose published guidance covers the division of stock options, restricted stock units, and deferred compensation in New York divorces. In fifteen years of matrimonial practice, he has handled hundreds of divorce, equitable distribution, custody, and support matters through hearings, trials, and appeals, and he has been featured nationally on the treatment of retirement accounts during and after divorce.

• Education & Credentials

Michael earned his J.D. from St. John’s University School of Law in 2010 and was admitted to the New York bar in 2011.

• Recognition & Leadership

Michael was named Young Matrimonial Attorney of the Year by the Matrimonial Committee of the Nassau County Bar Association and has been selected to the New York Super Lawyers Rising Stars list every year from 2014 through 2025. He has also been recognized in Long Island’s Best Lawyers: Ones to Watch in Family Law since the designation’s inception.

• Professional Involvement

Michael is a former Chair of the Young Lawyers Section of the New York State Bar Association and has held multiple leadership positions within the Nassau County Bar Association. A sought-after speaker on matrimonial and family law, he has presented continuing legal education programs and published articles on family law issues, including the tax implications facing newly divorced couples.

• Experience

Michael’s practice concentrates on divorce litigation and settlement, equitable distribution of complex marital assets, child custody and support, mediation, and prenuptial agreements, of which he handles numerous each year. His financial commentary includes a featured discussion in WealthUp’s The Weekend Tea on dividing ERISA-governed retirement plans, 401(k)s, and pensions in divorce and on updating beneficiary designations once a judgment is entered. He represents clients throughout Long Island and New York City from offices in Garden City and Brooklyn.

SESSION 1 – Classifying and Valuing RSUs, Stock Options, and Performance Shares in Divorce | 12:00pm – 1:00pm

This session examines the threshold classification and valuation issues that arise when RSUs, stock options, and performance share units appear in a marital estate. Attorneys will learn how community property and equitable distribution states diverge on treating unvested awards, how to select and apply the correct coverture fraction formula, and how to choose among Black-Scholes, intrinsic value, and deferred distribution approaches for different award types. Attendees leave with a framework for auditing discovery, selecting valuation methodology, and addressing the growing complexity of performance-contingent awards.

BREAK | 1:00pm – 1:10pm

SESSION 2 – Transferring and Taxing Divided Equity Awards After a Divorce Decree | 1:10pm – 2:10pm

This session covers the mechanics of transferring equity compensation awards pursuant to a divorce decree, including the choice between constructive trust and actual transfer, the federal tax framework governing each award type, and the drafting provisions necessary to avoid common errors. Attorneys will learn how IRC § 1041, Rev. Rul. 2002-22, Rev. Rul. 2004-60, and § 409A apply to RSUs, NQSOs, ISOs, and nonqualified deferred compensation divided in divorce. Participants leave with the ability to identify transfer mechanism constraints, allocate tax obligations correctly in decree language, and avoid doubletaxation and § 409A penalty traps.