TL;DR: In California, RSUs, options, and founder equity that vest during marriage are presumed community property under Cal. Fam. Code §760, even when the grant predates the wedding. For grants that straddle the marriage, courts apply the Hug (Marriage of Hug, 1984) and Nelson (Marriage of Nelson, 1986) time-rule formulas. A prenup lets you set your own rule in advance instead.Your offer letter probably lists a base salary and, below it, the part that matters more: the equity. RSUs on a four-year vesting schedule, a cliff at month twelve, maybe some early-exercise options or founder shares in a company you helped start. For a lot of Bay Area couples, that grant is worth more than years of paychecks combined as equity comp sits on top of pay that is already high. So if you are marrying with a grant in hand, or marrying someone who has one, it is worth understanding what California does with that equity by default, and how a prenup lets you write your own rule instead. If you and your partner are early in your careers but expecting a big upside, our guide to a prenup for high earners is a useful companion to this one.
Why California's default rules hit equity hardest California is a community property state, and that default is the sharpest version of the rule. Nine states treat most assets acquired during marriage as owned 50/50 by both spouses, and California is the one where that presumption bites hardest for equity holders. Under California Family Code §760 , property acquired by either spouse during marriage is presumed to be community property, owned equally by both. What you owned before the wedding stays yours under §770, which defines separate property as anything acquired before marriage, plus gifts and inheritances.
Here is where equity gets complicated. The community property line is drawn at the moment property is acquired , and for vesting equity, "acquired" is not the grant date. It is the vesting date. So a grant you received before the wedding can still produce community property if the shares vest after you say "I do." California already has a plan for your equity. A prenup lets you write your own.
Vested vs. unvested: what's actually on the table The most-searched question here is whether unvested RSUs can be divided at all. They can. California courts do not automatically exclude unvested RSUs or stock options from division in a divorce. Both vested and unvested grants are property, and unvested equity is the trickier, higher-stakes category precisely because so much of its value is still ahead of you.
The table below shows how the default treatment shifts depending on when a grant is granted and when it vests.
Status
General California default treatment
Role of a prenup
Granted and vested before marriage
Separate property under §770
Confirms the classification, documents it for later
Granted and vested during marriage
Community property under §760, split 50/50
Can define it as separate or set a different split
Granted during marriage, vests after separation
Divided using a time-rule formula (Hug or Nelson)
Can set the characterization in advance and avoid the formula fight
Granted before marriage, vests during marriage
Partly community, partly separate; a time-rule formula apportions it
Can define how pre-marriage grants are treated when they vest
That fourth row is the one that surprises people. A grant issued before the wedding is not automatically all separate. If it vests while you are married, part of that value can be community.
The grant that straddles the marriage line When a grant is partly earned before marriage or before separation and partly during, California courts split it using a time-rule formula. There are two, and which one applies turns on why the company made the grant.
The Hug formula comes from In re Marriage of Hug (1984) 154 Cal.App.3d 780. It measures the community share from the start of employment to the vesting date, and it tends to apply to grants that reward past service or were used to attract you to the company. Because it reaches back to your hire date, Hug typically favors the community, meaning a larger slice goes into the shared pot.
The Nelson formula comes from In re Marriage of Nelson (1986) 177 Cal.App.3d 150. It measures from the grant date rather than the employment start date, and it tends to apply to grants meant to incentivize future work. Measuring from the grant date usually produces a smaller community share.
Neither formula is the last word. California trial courts have broad discretion to select an equitable method of allocating community and separate property interests in stock options that vest after separation. A judge can depart from either formula when the facts call for it. That discretion is part of why equity-heavy divorces are litigated so hard: the outcome depends on grant purpose, timing, and a judge's read of the facts. A prenup replaces that uncertainty with a rule you and your partner chose.
One reason timing matters this much: the date of separation is the cutoff in both formulas. Move that date by a few months and you can shift a meaningful chunk of an unvested grant between community and separate property. In an equity-heavy case, that few month window can be worth a lot, which is why the date of separation is often heavily contested.
Founder shares, cap tables, and a liquidity event If you started a company, the analysis gets more layered. Your founder shares, your position on the cap table (the ownership record listing who holds a company's shares, options, and equity, and in what percentages), and any growth in the company's value during the marriage can all draw community property claims.
Equity you were granted and that vested while you were married is generally community property under California law. And if you founded or grew a company during the marriage, the increase in its value can be community too, even when the entity itself started as your separate property. When a liquidity event arrives, an IPO or an acquisition, that community characterization attaches to a number that may be far larger than anyone imagined at the wedding.
This is where founders benefit most from acting early. A prenup can define founder shares and future grants as separate property before a liquidity event, while the company is pre-revenue and the conversation is lower stakes. Our deep dive on why prenups are essential for startup founders walks through the founder-specific framing in more detail. It is also worth understanding how separate equity can lose its separate character if it gets mixed with community funds; our guide to commingling and your California prenup covers that risk.
The equity types a prenup should name RSUs, options, and founder stock are not interchangeable. The tax code and your company's plan treat each differently, and a prenup that lumps them together leaves gaps. A well-drafted California agreement names each vehicle and says how it is characterized. Our national guide to a prenup for tech workers covers these distinctions in depth; here is how they map onto a California prenup.
Equity type
What it is
Default community-property risk during marriage
What a prenup can specify
RSUs
Restricted stock units, taxed as ordinary income at vest
High: value vesting during marriage is presumptively community
Characterize each grant, define how partially-vested grants are apportioned
ISOs (incentive stock options)
Non-transferable except by death under IRC §422
High if exercised or vesting during marriage
Assign characterization while respecting the non-transferability rule
NSOs (non-qualified stock options)
Options taxed as ordinary income at exercise
High: spread between grant and vest can be community
Set a characterization and valuation rule per grant
ESPP shares
Shares bought through an employee stock purchase plan, often at a discount
Community if purchased with earnings during marriage
Define whether ESPP purchases are separate or community
Pre-IPO founder shares / restricted stock
Equity in a company you founded or joined early
High: growth during marriage can be community
Define founder shares and future grants as separate before a liquidity event
The vesting cliff matters here too. A cliff is a date before which none of a grant is earned; on the cliff date a chunk vests at once and the rest continues over time. Where that cliff falls relative to your wedding or separation date can move a large piece of equity from one side of the line to the other.
What a California prenup can do here, and what it must follow A California prenup lets a couple set their own characterization and valuation rule for equity in advance, including grants that do not exist yet. You can decide that RSUs vesting during the marriage are separate, or that they are split on a schedule you both agree to, or that founder shares stay with the founder regardless of a liquidity event. You are writing the rule the court would otherwise supply.
To hold up, the agreement has to follow California's requirements. California prenups are governed by the Uniform Premarital Agreement Act, adopted at Family Code §1600 and following. The UPAA, in its original and updated forms, has been adopted by 29 states plus the District of Columbia, according to the Uniform Law Commission . The agreement must be in writing, backed by full financial disclosure, and the final draft must be delivered to both parties at least seven calendar days before signing, per Family Code §1615 . If the agreement waives spousal support, each party must have independent legal counsel under §1612. Our full walkthrough of the California prenup rules covers the 7-day delivery rule and disclosure requirements in more detail.
A prenup here is designed to keep your separate equity separate and to give both of you a clear, predictable rule. It cannot guarantee a particular outcome; enforceability is decided case-by-case. What it does is replace an expensive formula fight with terms you chose together, in advance, with full information.
Frequently Asked Questions Are unvested RSUs divided in a California divorce? They can be. California courts do not automatically exclude unvested RSUs or options. If a grant was partly earned during the marriage, courts apply a time-rule formula to split it between community and separate property, unless a prenup sets a different rule in advance.
What are the Hug and Nelson formulas? They are two California time-rule formulas for dividing unvested equity. The Hug formula (Marriage of Hug, 1984) measures from the start of employment and tends to favor the community. The Nelson formula (Marriage of Nelson, 1986) measures from the grant date. Which applies turns on why the grant was made.
Does my pre-IPO founder equity become community property if we marry? Equity granted and vested while you are married is generally community property under California law. Growth in a company you started during the marriage can be community too. A prenup lets you define founder shares and future grants as separate property before a liquidity event.
Why does the date of separation matter so much for RSUs? The date of separation is the cutoff in both time-rule formulas. Shifting it by a few months can move a large share of an unvested grant between community and separate property, which is why it is often heavily litigated in equity-heavy divorces.
Can a prenup cover equity I haven't been granted yet? Yes. A well-drafted California prenup can set how future RSUs, options, and grants will be characterized, even ones that do not exist on the signing date. For founders early in a company's life, this is one of the strongest reasons to sign one.
Is it too early for a prenup if my startup isn't worth much yet? For founders, early is often the ideal time. When a company is pre-revenue or pre-funding, its value is low and the conversation is simpler. The agreement you sign now can govern the upside you have not built yet.
Getting started with First If you hold equity and a wedding is on the horizon, a prenup is the clearest way to decide in advance how your RSUs, options, and founder shares are treated, before any of it vests or a liquidity event arrives. No hourly rates, no PDFs, no back and forth with attorneys. First was built for exactly this kind of planning, on your timeline and without the traditional law-firm price tag. When you're ready, you can start your prenup with First .
Whichever way you go, remember that California equity-division outcomes depend on facts like grant purpose and the date of separation, so it is worth confirming the current rules with a licensed California attorney before you sign.
Methodology The wage figures in this post come from the U.S. Bureau of Labor Statistics Occupational Employment and Wage Statistics program, covering May 2024, based on the national employer survey of wages by occupation. The statutory rules are drawn from the California Family Code as currently published by the California Legislature, and the division formulas from published California Court of Appeal opinions (Hug, 1984; Nelson, 1986).
Sources
California Family Code §§760, 770, 1600, 1612, 1615 : community property and separate property presumptions, UPAA framework, 7-day delivery rule, and spousal-support-waiver counsel requirement.U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics, May 2024 : median wages for software developers and computer and IT occupations.Uniform Law Commission : Uniform Premarital Agreement Act text and adoption record (29 states plus D.C.).In re Marriage of Hug (1984) 154 Cal.App.3d 780: Hug time-rule formula, court discretion over stock options vesting after separation, and divisibility of unvested options.
In re Marriage of Nelson (1986) 177 Cal.App.3d 150: Nelson time-rule formula measured from the grant date.
First is not a law firm. The information and tools provided by First on this site are not legal advice and not a substitute for the advice of an attorney.
California equity-division outcomes depend on facts including grant purpose and the date of separation. Enforceability is decided case-by-case; a prenup improves clarity and predictability but cannot guarantee any specific result. Confirm current rules with a licensed California attorney.
