Stock Options, RSUs and Executive Compensation in a French-American Divorce

Family law · 3 min read · By Olivia Uzan

For executives and tech professionals, the biggest number on the personal balance sheet is often not salary, or even the house, but equity: stock options, restricted stock units, and, for those in private equity, carried interest. This compensation is powerful, complex, and, in a French-American divorce, genuinely tricky. Getting it right can mean the difference of a seven-figure sum.

The French rule on stock options

French law draws a careful line for stock options granted during a marriage under a community regime. In simple terms: the right to the options is treated as personal to the executive who earned it, but if the executive exercises those options, and acquires the actual shares, before the marital regime is dissolved, those shares fall into the shared pot. Timing, in other words, is everything. Exercise a day before dissolution and the shares may be shared; leave the options unexercised and the analysis changes.

RSUs, vesting, and the calendar

Restricted stock units add their own wrinkle because they typically vest over several years. The key questions mirror the American ones: was the grant made during the marriage, and when does it vest relative to the end of the marriage? U.S. community-property states such as California use time-based formulas to apportion equity that was granted during the marriage but vests afterward. French practice similarly focuses on when rights crystallized relative to the dissolution of the regime. Because the two systems slice time differently, coordination is essential to avoid either double-counting or leaving value on the table.

Carried interest: the frontier

Carried interest, the fund manager’s share of investment profits, is one of the least-charted areas in French divorce. There is no settled French rulebook specifically for “carry.” It is not the same as salary, bonus, or ordinary share ownership: its value may depend on fund performance over several years, and it may be subject to vesting provisions, hurdle rates, clawback, transfer restrictions, and its own tax consequences. In some cases it may never pay out at all. That makes it difficult to value in divorce proceedings, because it is often both uncertain and illiquid. French courts, lacking dedicated carry rules, are likely to reason by analogy from equity-compensation principles and the timing of when value was earned during the marriage. Expect argument, not certainty.

Illiquidity: the value you cannot spend

The recurring problem with equity is that it can be worth a fortune on paper while producing no cash to divide. Pre-IPO shares, unvested RSUs, and carry that only pays out years later all raise the same question: how do you fairly compensate a spouse today for value that may, or may not, materialize tomorrow? Solutions include deferred sharing “if and when” the value is realized, offsetting the equity against other assets, or a present-value buyout, each with different risk and tax profiles.

The tax trap for American executives

Here is a fact that catches many by surprise: the United States taxes its citizens on their worldwide income no matter where they live. An American executive in Paris remains on the hook to the IRS. Equity compensation can be taxed in France, taxed in the U.S., or both, with the France-U.S. income tax treaty and foreign tax credits working to reduce, but not always eliminate, double taxation. Certain French social charges, notably, are not always creditable in the U.S. A division that ignores the after-tax reality can be wildly unfair to one spouse.

Consider Priya. A dual-national fund principal living in Paris, she holds vested RSUs, unvested RSUs, and carried interest in a fund that will not mature for years. Her French counsel and U.S. tax advisor work together: the vested shares are valued and offset against other assets, the unvested RSUs are apportioned by timing, and the carry is handled through a deferred, “if and when realized” formula, so Priya is not forced to pay out cash she does not yet have.

Equity is where cross-border divorces are won or lost. Contact us for a confidential, tax-aware review of your compensation.

This article is general information and not legal advice. For guidance on your specific situation, please consult a qualified lawyer.