TL;DR: For tech employees, equity often outweighs base pay, and in nine community property states, stock that vests during marriage is presumed jointly owned. A prenup lets you classify RSUs, ISOs, NSOs, ESPP shares, and pre-IPO equity as separate or shared property up front, instead of relying on court formulas like California's Hug and Nelson time rules to sort it out later.If you work in tech, your offer letter probably tells the real story in the fine print. The base salary line is the smaller number. The equity grant, refresh cadence, ESPP enrollment, and (if you're early enough) the founder shares are where the potential wealth actually lives. According to the U.S. Bureau of Labor Statistics , the median annual wage for software developers was $133,080 in May 2024, and the broader computer and IT occupations group had a median wage of $105,990, more than double the all-occupations median of $49,500. Those are the headline numbers before equity even enters the room.
That gap between paycheck and total compensation is exactly why the prenup conversation hits differently for tech workers and their partners. The legal default rules in your state weren't written with four-year vesting cliffs, IPO lockups, or AMT exposure in mind. A prenup is how you and your partner replace those defaults with rules you both wrote on purpose.
Why equity changes the prenup conversation For most couples, the prenup discussion is about salary, savings, maybe a house. For tech couples, the centerpiece is usually a stack of grants on a vesting calendar, plus whatever the company is worth on the day someone files. Senior tech compensation often runs two to three times base salary once stock grants and bonuses are included, according to industry compensation analyses drawing on Levels.fyi self-reported data. At top companies and at senior levels, base salary can represent only 40 to 60 percent of total compensation, or more.
The consequence is structural: in a tech household, the prenup decision is a decision about how to treat your largest asset class. If you're new to the topic itself, our prenup primer is the right place to start. This post assumes you know what a prenup is and want to know how it handles equity.
A quick primer on what you actually own Equity at tech companies comes in a few flavors, and the prenup treats them differently because the tax code and the company plan do. Restricted stock units (RSUs) are a promise of shares delivered on a vesting schedule, taxed as ordinary income at vest. Incentive stock options (ISOs) are tax-advantaged options that, if held long enough, qualify for capital gains treatment but can trigger alternative minimum tax (AMT) at exercise. Non-qualified stock options (NSOs) are the more common option type, taxed as ordinary income on the spread at exercise. Employee stock purchase plan (ESPP) shares are discounted shares bought through payroll deductions, with their own qualifying-disposition holding rules. Restricted stock and pre-IPO founder shares are equity in a private company, often subject to vesting, transfer restrictions, and rights of first refusal.
Vesting is the schedule under which you earn the right to receive or exercise equity you were granted, typically tied to continued employment over a set number of years. Each instrument vests on its own clock, and each has its own tax moment. For a deeper dive on the equity instruments themselves, Carta's explainer on stock options is a clean reference. For the tax side, the IRS guidance on stock options (Topic No. 427) is the primary source.
What happens to your equity without a prenup Two systems govern marital property in the United States. Community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin) treat most assets acquired during marriage as co-owned 50/50. Alaska, Tennessee, South Dakota, Kentucky, and Florida offer opt-in community property trusts, but they default to equitable distribution unless a couple affirmatively elects otherwise. Every other state, plus D.C., uses equitable distribution, which divides marital assets "equitably," and "equitable" doesn't always mean "equal." The Uniform Law Commission's Uniform Premarital Agreement Act shapes how most states recognize prenups, though each state adds its own procedural requirements on top.
For tech equity, the hardest case is the grant that straddles the marriage line: stock granted before or during marriage that vests after separation. Without a prenup, courts have to decide what portion of an unvested grant is marital property and what portion is separate. Most jurisdictions apply some version of a time-based formula, and California has two of the best-known ones.
System
States
Default rule
What changes with a prenup
Community property
AZ, CA, ID, LA, NV, NM, TX, WA, WI
Assets acquired during marriage are co-owned 50/50
Couples can reclassify equity as separate property
Equitable distribution
All other states + D.C.
Marital assets divided "equitably," not necessarily equally
Couples can define what "equitable" means in advance
How California courts split unvested equity: the Hug and Nelson time rules California courts apply the Hug formula when stock options were granted primarily to attract or retain the employee and reward past services, though courts have broad discretion to adapt the formula to the facts of each case, drawing on In re Marriage of Hug , 154 Cal. App. 3d 780 (1984). The Hug numerator runs from the date of hire to the date of separation; the denominator runs from the date of hire to the date of first exercisability. The result is a fraction of the grant that belongs to the community.
The Nelson formula, from In re Marriage of Nelson , 177 Cal. App. 3d 150 (1986), applies when the grant was meant to incentivize future services. The Nelson numerator runs from the date of grant to the date of separation; the denominator runs from the date of grant to the date of first exercisability. Because the Nelson clock starts later, it can allocate a smaller share to the community and a larger share to the employee spouse.
In practice, a court has to decide which formula applies before it can even start dividing. The employer's grant documentation, the timing relative to a promotion, and testimony about the purpose of the grant can all factor in. A prenup can replace both formulas with your own rule, written in advance, in language you and your partner both understand. Courts are not limited to the Hug or Nelson formulas. California law gives trial courts broad discretion to fashion whatever apportionment method is most equitable under the facts, which is one reason a prenup that specifies your own rule can be valuable.
What a prenup can actually do for tech equity A well-drafted prenup is designed to do several things at once for equity-heavy couples. First, it classifies each category of equity as separate or marital property, including grants you already hold and grants you haven't received yet. Second, it can set the valuation methodology for unvested or illiquid equity, which matters a great deal when one of you holds private-company shares with no public market price. Third, it can allocate tax responsibility for the events your equity creates, including AMT exposure on ISO exercises, ordinary income on RSU vests and NSO exercises, and the timing of qualifying versus disqualifying dispositions on ESPP shares.
Before you start drafting, pull these documents together: your offer letter, the equity plan summary, all grant notices (initial and refreshers), the company's stock plan document, and any 409A valuation you've received. Your spouse should have the same picture. A prenup that classifies equity without naming specific grants is much harder to enforce than one that ties to documented grants by ID, date, and share count.
Instrument
What it is
If granted before marriage
If granted during marriage
Common prenup approach
RSUs
Promise of future shares on vest
Separate, with possible community share to the extent the vesting period overlaps with the marriage
Marital/community in whole or in part
Classify as separate, or define formula for marital share
ISOs
Tax-advantaged employee stock options
Separate, but watch exercisability overlap
Marital/community in whole or in part
Classify as separate; address AMT responsibility
NSOs
Non-qualified stock options
Separate, but watch exercisability overlap
Marital/community in whole or in part
Classify as separate; address ordinary-income tax at exercise
ESPP shares
Discounted shares from payroll deductions
Separate
Marital/community in whole or in part
Classify by purchase date; address qualifying-disposition timing
Pre-IPO / founder stock
Restricted equity in private company
Separate
Depends on grant timing, appreciation, and active vs. passive growth
Designate as separate; address post-IPO appreciation and dilution
There's one thing a prenup cannot do, and it's worth saying clearly: it cannot override IRS rules or your company's plan documents. To qualify for long-term capital gains treatment on ISO shares, the sale must occur more than two years after the grant date and more than one year after the exercise date, per IRS Topic No. 427 . No prenup changes that. What a prenup can do is decide, between the two of you, who carries the tax bill when those events happen. Our overview of what a prenup can and can't do goes deeper on these limits.
Pre-IPO and founder equity: the high-stakes edge case If you're a founder, an early employee at a venture-backed startup, or someone holding meaningful pre-IPO restricted stock, the prenup conversation deserves extra attention. Pre-IPO equity is illiquid, hard to value, and often comes wrapped in restrictions that public-company equity doesn't have: voting rights tied to specific share classes, rights of first refusal that limit who can hold shares, transfer restrictions written into the company's bylaws, and dilution risk through future funding rounds.
Today you hold a grant on paper that might be worth nothing or might fund the next thirty years of your life. A court ordering a transfer of pre-IPO shares, or ordering a valuation built on a 409A appraisal that's months or years stale relative to the company's actual trajectory, can damage the cap table and limit a founder's ability to operate the company. 409A valuations are designed to set strike prices for option grants, not to value shares for a divorce settlement, and they often understate fair market value by significant margins. A prenup is designed to pre-decide these questions, so neither you nor your partner is at the mercy of a generic court process to value something that may or may not have a market.
The prenup can also designate pre-marriage shares, options, and founder stock as separate property. It can address how grants received after the wedding are treated. It can spell out how any post-IPO appreciation or dilution will be allocated, and how a future liquidity event will be valued. Equity also tends to change over time through refreshes, secondaries, and acquisitions, which is why we wrote a separate piece on what happens if circumstances change after you sign .
Frequently asked questions Do I need a prenup if I have stock options or RSUs? You don't need one, but if equity is a meaningful share of your compensation, a prenup is the most direct way to control how it's classified in divorce. Without one, state default rules (community property in nine states, equitable distribution elsewhere) decide for you, and unvested grants can become contested even when neither partner expected it.
Are RSUs considered marital property in a divorce? In most states, yes, at least the portion attributable to work performed during the marriage. RSUs granted and vested during marriage are typically marital or community property. RSUs granted during marriage that vest after separation are usually split between marital and separate portions using a time-based formula, unless a prenup says otherwise.
What are the Hug and Nelson formulas? They are two California time-rule formulas courts use to divide unvested stock options or RSUs. The Hug formula, used when a grant was primarily intended to attract or compensate an employee for past services , tends to favor the community share. The Nelson formula, used when a grant incentivizes future work, tends to favor the employee spouse. Neither formula is mandatory; courts retain broad discretion to modify the approach based on the facts. A prenup can replace both with your own rule.
Can a prenup protect pre-IPO startup equity? Yes. A prenup can designate pre-marriage shares, options, and founder stock as separate property, and can pre-decide how post-marriage grants and any IPO-driven appreciation will be treated. This is particularly valuable for founders, where voting rights, rights of first refusal, and dilution concerns make a court-ordered transfer risky.
Does a prenup change how my stock is taxed? No. A prenup cannot alter IRS rules: ISOs, NSOs, RSUs, and ESPP shares are taxed under their statutory frameworks regardless of what your agreement says. What a prenup can do is allocate responsibility for taxes (including AMT on ISOs and ordinary income at RSU vesting) between you and your partner.
Should we use a flat-fee online prenup or work with two attorneys? For a couple with significant equity, attorney involvement on both sides is the minimum bar. Online platforms that include independent attorney review for each partner (First's Lawyer Review and Bespoke packages) deliver that, typically at a fraction of the cost of engaging two separate firms hourly. Pure DIY is rarely the right call when equity is in play, and a flat-fee structure removes the negotiation-inflation problem that hourly billing creates.
Working with First on a tech-equity prenup For couples where equity is the centerpiece of net worth, this is the scenario First's Lawyer Review package was built for: independent attorney review for each partner, a flat fee, and an end-to-end timeline measured in weeks, not months. No hourly billing, no separate-firm retainers, no surprise changes. And if you have a combined net worth over $3 million, our Bespoke package is a perfect fit for the complexities you may face.
If you'd like to gather your equity documents before talking to an attorney, our prenup checklist walks through what to pull together. If you're already married and the equity conversation is coming up now rather than before the wedding, the right next step is to consult with independent legal counsel about a postnuptial agreement.
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.
Tax treatment of equity compensation depends on individual circumstances, IRS rules, and state law. Consult a qualified tax advisor before making decisions about exercise, sale, or transfer.
Sources U.S. Bureau of Labor Statistics, Software Developers, Quality Assurance Analysts, and Testers : median annual wage of $133,080 (May 2024) for software developersU.S. Bureau of Labor Statistics, Computer and Information Technology Occupations : median wage of $105,990 for the IT occupations group versus $49,500 all-occupations medianIRS Topic No. 427, Stock Options : ISO and NSO tax treatment, AMT exposure, and ISO qualifying-disposition holding periodsUniform Law Commission, Uniform Premarital Agreement Act : state framework for recognizing prenuptial agreementsCalifornia Family Code §1615 : requirement that the final draft be delivered to both parties at least seven days before signingCarta, Stock Options Explainer : plain-language reference on stock option typesIn re Marriage of Hug , 154 Cal. App. 3d 780 (1984): time-rule formula for past-performance grantsIn re Marriage of Nelson , 177 Cal. App. 3d 150 (1986): time-rule formula for future-incentive grants
