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Question: How can I enter Restricted Stock Units (RSU) into Family Law Software?
Answer: Restricted stock units are promises by the employer to grant specified numbers of shares of stock to the employee in the future.
Typically, restricted stock units are granted over time, following vesting periods.
A restricted stock unit (RSU) may be forfeited if the employee leaves the company, violates securities act rules, and for other reasons.
Below are two approaches to entering restricted stock units into Family Law Software.
1. Assuming stock will be sold when received.
If the stock will be sold when received, then you can simply enter the anticipated value of the restricted stock units as a write-in line on the Wage-Like Income screen.
Click "more info" and enter the value expected to be received each year.
The value of RSUs is taxed as ordinary income when received, so entering the value as wage-like income does the correct thing for tax purposes as well.
If each spouse is going to be receiving value from the RSUs, then you would enter the Wage-Like Income for each spouse.
2. Assuming the stock will be retained when received.
If the employee is going to keep the stock and you would like to show the value of the financial asset, you need to make two entries.
a. Stock received.
1. On the Client Info > Assets & Debts screen, add a Cash & Investment for the restricted stock units.
2. Click "more info."
3. Click the link labeled "View/Edit annual value of this asset."
4. Override the values each year with the accumulated value you think the stock will have each year. (Overridden entries will appear in red.)
5. Enter a rate of dividend return for the asset.
6. Enter a rate of appreciation for the asset, which will apply starting after the last year you have overridden (manually entered).
b. Income recognized.
1. Enter the income expected to be received each year as Client Info > Income & Expenses > Wage-Like Income on the line "New spouse inc. (taxes only)." The effect of this is to enter taxable income without cash flow. (Cash flow would flow through to Accumulated Savings, and thus double count the entry.)
Property Division Implications
You also want to be able to reflect the tax impact on the division of property.
This FAQ explains how: