If part of your pay comes as shares, stock options or restricted stock units (RSUs), you have an asset that can be both valuable and genuinely complicated to deal with on divorce. Equity compensation is now common well beyond the boardroom – tech, finance, start-ups and senior professional roles all use it – and it does not behave like cash. It vests over time, may not be sellable yet, and can swing wildly in value. A prenup can set out how this kind of equity is treated, distinguishing what you brought into the marriage from what is earned during it. This guide explains why equity is tricky, what a prenup can do, and how to handle valuation and vesting fairly.
Why equity compensation is tricky
Several features make shares and options harder to deal with than ordinary savings:
- Vesting over time – awards often vest across several years, so at any moment some are yours and some are contingent on you staying.
- Illiquidity – unvested options or private-company shares may not be sellable, so their "value" is theoretical.
- Volatility – the value can rise or fall sharply between grant, vesting and any divorce.
- Timing – some grants relate to work done before the marriage and some to work during it, which affects how much is matrimonial.
What a prenup can do
A prenup can record how grants made before the marriage are treated, and set a fair approach to those that vest during it. A useful distinction is between awards that reward past work (arguably more separate, if the work predates the marriage) and those tied to future performance or retention (arguably more matrimonial, as they are earned during the marriage). Disclose your holdings, grant and vesting schedules and rough values in your financial schedule. See how the same asset is dealt with on divorce in a business in a divorce, and the wider point about future assets.
Valuation and fairness
Because values move and vesting is uncertain, note the valuation dates clearly and treat figures as snapshots (see how to value your assets). A review clause is particularly valuable here, letting you revisit the position as awards vest and values settle. A court keeps the final say and will ensure needs are met (see are prenups legally binding?), so a realistic, fair split of equity is far more durable than an attempt to keep all of it.
Get advice for significant equity
Where the equity is substantial, this is a good reason to take independent legal advice, and sometimes specialist tax or valuation input – the interaction of vesting, tax and company rules can be intricate. See also prenups for professionals and high-net-worth prenups.
Handling shares in a prenup
Handling shares in a prenup means addressing equity that vests over time and swings in value. Distinguish grants made before the marriage from those that vest during it, and within the latter, awards for past work versus future performance. Disclose holdings, vesting schedules and rough values, note valuation dates, and add a review clause – a realistic, fair split of equity is far more durable than trying to keep all of it.
Why an equity clause carries weight: Radmacher
A prenup dealing with equity compensation has force because of Radmacher v Granatino (2010), in which the Supreme Court held that a court should give effect to a freely made, fair agreement unless it would be unfair to hold the parties to it. A prenup is not automatically binding – the court keeps its discretion under the Matrimonial Causes Act 1973, and needs come first – but a fair, well-disclosed approach to shares, options and RSUs, agreed with independent legal advice on both sides and signed in good time, is exactly what a court will now respect. With equity, clarity is protection: because the value and vesting are uncertain, a clause that sets a clear principle removes a great deal of scope for later argument.
A worked example: RSUs vesting over four years
Imagine one partner is granted RSUs worth £120,000 shortly before the marriage, vesting a quarter each year over four years, with the vesting conditional on staying with the employer. Two years’ worth vests during the marriage. Are they separate or matrimonial? A sensible prenup might treat the award as largely matrimonial to the extent it is earned by work done during the marriage, because the RSUs reward retention and performance across those years – while a grant made purely to reward work completed before the wedding has a stronger claim to be separate. Recording that reasoning, plus the grant and vesting schedule, avoids a messy dispute later about which tranche belongs to whom.
Past-service versus future-service awards
The most useful distinction with equity is what the award is for. Some grants reward work already done – a sign-on award for your track record, say – and have a stronger claim to be separate if that work predates the marriage. Others are tied to future performance or simply to staying in the job (retention awards), and are more naturally matrimonial because they are earned during the marriage. Options add a further wrinkle: an option granted before the marriage but exercised during it, at a gain, mixes pre-marital and marital elements. A prenup that spells out how each category is treated – rather than lumping all “shares” together – is far more robust. See also prenups and future earnings.
Tax, company rules and getting advice
Equity is entangled with tax and company rules in a way ordinary savings are not. The tax treatment of options and RSUs on vesting or exercise, leaver provisions that can cause unvested awards to lapse, and restrictions on transferring shares in a private company all affect what an interest is really worth and whether it can be realised at all. Because of this, and because the sums can be large, significant equity is a clear case for independent legal advice and sometimes specialist tax or valuation input. See also prenups for professionals, prenups for the self-employed and high-net-worth prenups.
Founder shares and start-up equity
Equity is not only an employee benefit – for founders it can be the single most valuable and volatile thing they own. Start-up shares are a special case because they are usually illiquid and hard to value: a stake that looks worth very little on paper can become worth a fortune after a funding round or an exit, or can end up worth nothing at all. If you found or co-found a company before marrying, a prenup can record your founder shares as separate property while setting a fair approach to any increase in their value during the marriage – recognising that a spouse who supports the family while you build the business contributes to that growth. Founder equity also interacts with shareholder agreements, vesting schedules and investor terms, so the clause needs to fit the company’s own rules. Because the value can swing so dramatically, a review clause is almost essential, and this is firmly territory for business-owner and high-net-worth advice.
What happens if the company floats or is acquired
The moment illiquid equity turns into real money – an IPO, a trade sale or a secondary sale – is when the value that seemed theoretical suddenly becomes very real, and it often lands mid-marriage. A well-drafted prenup thinks about this in advance rather than leaving it to chance. It can distinguish the value attributable to work and awards from before the marriage – with a stronger claim to be separate – from the gain generated during the marriage, which looks more matrimonial, particularly where retention and future-performance awards vested along the way. It can also address the tax that a liquidity event triggers, since the headline proceeds and the after-tax figure can differ sharply (see prenups and tax). Because these events reshape a couple’s finances overnight, revisiting the agreement through a review clause once equity is realised keeps it fair and realistic – and far more durable than a fixed figure agreed years before anyone knew what the shares would be worth (see prenups and future earnings).
Shares in a prenup: FAQs
Does an equity clause carry weight after Radmacher?
Yes – a court can give real weight to an agreement that ring-fences shares or sets an equity split, provided it was freely made with full disclosure. It is persuasive rather than automatically binding (see are prenups legally binding?).
Are retention awards treated differently from sign-on awards?
Often – retention and future-performance awards are more naturally matrimonial, while awards for pre-marital work have a stronger claim to be separate.
Does the tax treatment of my equity matter for a prenup?
Yes – tax on vesting or exercise affects real value, which is why specialist advice is worthwhile for significant equity (see prenups and tax).
Are stock options and RSUs split in a divorce?
They can be – both the asset and its growth may be relevant (see a business in a divorce).
How do you value unvested shares?
Use rough values, note the date, and lean on a review clause (see how to value your assets).
Are shares granted before marriage protected?
A prenup can record that pre-marital grants are separate, while treating later vesting fairly (see matrimonial vs non-matrimonial property).
What about future share awards I have not been granted yet?
A prenup can set a principle for them; see prenups and future earnings.
Should I take specialist advice on equity in a prenup?
Yes, for significant equity – the tax and vesting rules are intricate (see independent legal advice).
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UK Prenup is not a law firm and does not provide legal advice. A prenuptial agreement in England & Wales is not automatically binding, and both partners should take independent legal advice before signing.