Prenups and Equity Compensation: RSUs and Options

What a Premarital Agreement Can Cover Under California Law

Family Code section 1610(a) defines a premarital agreement as "an agreement between prospective spouses made in contemplation of marriage and to be effective upon marriage." In plain terms, it is a written contract two people sign before the wedding that sets their own rules for property and certain other matters. It must be in writing and signed by both parties (Family Code section 1611), and it takes effect on the wedding day (Family Code section 1613). Family Code section 1500 confirms the larger point: the property rights the law prescribes for spouses "may be altered by a premarital agreement or other marital property agreement."

The list of subjects appears in Family Code section 1612(a). Parties to a premarital agreement may contract with respect to all of the following:

• "(1) The rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located."
• "(2) The right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property."
• "(3) The disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event."
• "(4) The making of a will, trust, or other arrangement to carry out the provisions of the agreement."
• "(5) The ownership rights in and disposition of the death benefit from a life insurance policy."
• "(6) The choice of law governing the construction of the agreement."
• "(7) Any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty."

For equity compensation, the phrase that does the heavy lifting is "whenever and wherever acquired." It means the agreement is not limited to what a person owns on the day of signing. A grant made five years into the marriage is still "property" the agreement can address. Section 1610(b) reinforces this by defining property broadly as "an interest, present or future, legal or equitable, vested or contingent," including "income and earnings." An unvested RSU is exactly the kind of future, contingent interest that definition describes.

A postnuptial agreement, sometimes called a postmarital agreement, is the counterpart signed after the wedding by people who are already married. It can deal with similar property questions, but the premarital agreement statutes discussed on this page are written for agreements made before marriage, and a postnup has its own separate requirements.

How California Treats RSUs and Stock Options Without a Prenup

Under Family Code section 760, "Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property." Community property is property the two spouses own together, and in a divorce the court generally divides the community estate equally (Family Code section 2550). Separate property, by contrast, belongs to one spouse alone. Family Code section 770 includes in separate property everything a person owned before marriage, gifts and inheritances received during it, and the rents, issues and profits of that property. Family Code section 771 treats earnings after the date of separation as separate property.

Restricted stock units (RSUs) are a promise from an employer to deliver shares once certain conditions, usually continued employment, are met. Stock options are a right to buy shares at a set price, often after a waiting period. Both are typically compensation for work. When a grant was made and fully vested before the wedding, it is generally the employee's separate property, because it was earned and owned before the marriage began.

The harder cases are grants that straddle the wedding date or the separation date. A grant made before the marriage that vests during it, or a grant made during the marriage that vests after separation, was earned partly inside the marriage and partly outside it. California courts generally handle this by apportionment, meaning they split the grant into a community share and a separate share. The usual approach is time-based: the court looks at how much of the period over which the grant was earned fell during the marriage, compared with the whole earning period, and treats that portion as community property.

That sounds tidy on paper. In practice, it often is not. A person with several overlapping grants, a one-year cliff (a first vesting date before which nothing vests), performance conditions, and refresh grants each year can end up with a separate calculation for every tranche. Different readings of when a grant was "earned" can lead to different results. Without a prenup, those default rules apply, and the spouses are left to resolve the questions, by agreement or in court, at a moment when they may be least able to agree on anything.

What a Prenup Can Do With RSUs and Options

For someone looking at a long vesting schedule, this is the section that matters most: a premarital agreement can replace the default apportionment with rules the couple writes for themselves.

Under Family Code section 1612(a)(1), the agreement can state that RSUs or options held by one person, whether granted before or during the marriage, remain that person's separate property. It can also go the other way and treat some or all of the equity as community property, or split it on terms the couple chooses. Because the subsection covers property "whenever and wherever acquired," the agreement can reach equity the parties expect in the future, including grants from employers neither of them works for yet.

Under Family Code section 1612(a)(3), the agreement can set the "disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event." For equity, that means it can say what happens to grants that are still unvested on the date of separation, what happens if the marriage ends by death rather than divorce, and what happens on other events the couple names. Section 1612(a)(2) adds the right to manage and control property, which allows the agreement to address who decides when to exercise options or sell vested shares.

The agreement can also deal with appreciation. Equity can grow sharply in value during a marriage, and a prenup can state whether that growth stays with the separate-property owner or is shared. In the same way, it can address the income and proceeds that come from equity, such as dividends and the cash from selling shares, and whether those remain separate or become community. Clear terms on proceeds can matter as much as terms on the shares themselves, because once sale proceeds land in an account, their character can become harder to follow.

Enforceability: What California Requires for a Valid Premarital Agreement

An equity clause is only as useful as the agreement it sits in. Family Code section 1615 sets out when a premarital agreement is not enforceable, and those rules apply the same way to an agreement about RSUs as to one about a house or a savings account.

Under section 1615(a), the agreement is not enforceable if the party challenging it proves either that they did not sign it voluntarily, or that it was unconscionable (so unfair as to shock the conscience) when signed and, before signing, that party did not receive "a fair, reasonable, and full disclosure of the property or financial obligations of the other party," did not voluntarily and expressly waive further disclosure in writing, and did not have, or reasonably could not have had, adequate knowledge of the other party's finances. Unconscionability is decided by the court as a matter of law (section 1615(b)).

Section 1615(c) adds a strict rule about voluntariness. An agreement is deemed not voluntary unless the court finds, in writing or on the record, all of the following:

• The challenging party was represented by independent counsel when signing, or, after being advised to seek independent counsel, expressly waived that representation in a separate writing. That advisement must be made at least seven calendar days before the final agreement is signed.
• For an agreement signed on or after January 1, 2020, the challenging party had at least seven calendar days between first seeing the final agreement and signing it, "regardless of whether the party is represented by legal counsel" (section 1615(c)(2)(B)). Nonsubstantive amendments that do not change the terms do not restart that period.
• If unrepresented, the party was fully informed of the terms and basic effect of the agreement and the rights being given up, was proficient in the language used, received that explanation in writing before signing, and signed a document confirming who provided it.
• The agreement and related writings were not signed under duress, fraud, or undue influence, and neither party lacked capacity.
• Any other factors the court deems relevant.

Lack of a lawyer does not by itself make the agreement unenforceable. The statute allows a written waiver of counsel, but it surrounds that waiver with its own requirements.

Limits on What a Prenup Can Do

Family Code section 1612(b) states that "The right of a child to support may not be adversely affected by a premarital agreement." Whatever the agreement says about equity, it cannot reduce a child's right to support.

Section 1612(c) places conditions on spousal support terms. Any provision about spousal support, including a waiver, is not enforceable if the party it is enforced against was not represented by independent counsel when the agreement was signed, or if the provision is unconscionable at the time of enforcement. Having a lawyer does not save a provision that is otherwise unenforceable. This matters for equity holders because a person who expects large equity income may also want to address support, and those terms are tested at the time of divorce, not only at signing.

The list in section 1612(a) is about property and the parties' own rights and obligations, and section 1612(a)(7) excludes matters that violate public policy or a criminal statute. Arrangements for children's custody and visitation do not appear on that list. Beyond these limits, under section 1615 an agreement is not enforceable if the challenging party proves it was unconscionable when signed and that, before signing, they did not receive a fair, reasonable and full disclosure, did not waive further disclosure in writing, and did not have, or reasonably could not have had, adequate knowledge of the other party's finances.

Drafting Considerations for Equity Compensation Clauses

Precision comes first. An RSU and a stock option are different instruments: an RSU converts to shares when it vests, while an option gives a right to buy shares at a set price, which must then be exercised. They are taxed differently and vest differently, so an agreement that lumps them together as "stock" can leave room for argument about which rules apply to which grant.

Future grants raise their own drafting question. Section 1612(a)(1) allows the agreement to cover property "whenever acquired," but the words of the clause still have to reach the grants the couple has in mind, including refresh grants, grants from a later employer, and replacement awards issued after a merger.

Disclosure is part of the same work. Because section 1615(a)(2) ties enforceability to "a fair, reasonable, and full disclosure of the property or financial obligations of the other party," each party's existing grants, vesting schedules, and grant agreements belong in the financial disclosure exchanged before signing. During the marriage, spouses also owe each other the fiduciary duty of "the highest good faith and fair dealing" in transactions between them (Family Code section 721).

Plans also change. Companies amend equity plans, accelerate vesting on an acquisition, convert grants into a buyer's stock, or cancel unvested awards when someone leaves. A clause written around one static schedule can fit badly after any of those events. After marriage, the agreement can be amended or revoked only by a written agreement signed by both parties (Family Code section 1614). This mix of family law and equity mechanics is one reason each party benefits from counsel who understands both.

Where San Diego County Family Law Cases Are Filed

If a premarital agreement is ever enforced or challenged in a San Diego County divorce, the case is heard in the Superior Court of California, County of San Diego. The court assigns family law cases to one of four divisions by ZIP code under its ZIP Code List (ADM-254):

• Central Division: Superior Court of California, County of San Diego, Central Courthouse, 1100 Union Street, San Diego, CA 92101.
• North County Division: Superior Court of California, County of San Diego, North County Regional Center, 325 South Melrose Drive, Vista, CA 92081.
• East County Division: Superior Court of California, County of San Diego, East County Regional Center, 250 East Main Street, El Cajon, CA 92020.
• South County Division: Superior Court of California, County of San Diego, South County Regional Center, 500 3rd Avenue, Chula Vista, CA 91910.

Most family law cases from the ZIP codes the list assigns to a division are filed in that division. Wherever the case is filed, the agreement is read under California law, which is the only law this site's guidance covers.