Splitting Stock Options

Splitting Stock Options in a Divorce

Dividing property and assets in a divorce is complicated and often messy. Both spouses may bristle at the thought of losing assets or part of their financial nest egg. In complex divorces, couples may own stock options. These options are often difficult to divide fairly and can be a major source of contention in the divorce. If you own stock options and are considering a divorce, it is imperative that you speak to an experienced Barrington divorce attorney as soon as you are able. Your attorney will need to evaluate your finances, assets, and property to ensure that you receive a fair distribution of those assets in accordance with Illinois law. 

What are Stock Options?

Stock options are often offered by companies and corporations as a way to financially compensate their employees. These options give the employee the right to buy company stock at a set price in the future. The idea is that by locking in a rate now, you may be able to cash in for a greater profit in the future when the price of the stock increases. 

Restricted stock is similar, but employees must meet certain criteria and conditions before they can obtain those stock shares. These are often used in lieu of salary increases, bonuses, or extra financial incentives. 

When a couple decides to divorce, they must determine how to split these stock options. After all, they are part of the marital estate and should be accounted for. According to Illinois law, the court presumes that stock options granted during the marriage are marital property whether vested or non-vested. Even if you cannot determine their value, these options are marital property and are to be divided accordingly. 

How to Split Stock Options in a Divorce

When you are going through a divorce, you may not even realize that your spouse has stock options. After all, these will not show up on tax returns or other financial documents. Spouses may attempt to hide these assets during a divorce in order to avoid splitting them. As such, your attorney will need to make extra effort to determine whether or not your spouse is hiding assets, including stock options. 

Once your attorney uncovers stock options, the next step is to evaluate the worth of these options. To ensure that you receive equal financial compensation, the correct value of all stock options must be determined. Stock options and restricted stock are financial rewards based on a future implied wealth. However, this wealth is not guaranteed and is solely based on the company’s future ability to grow and develop.

Determining the value of stock options for a privately owned company is complex and difficult. This is because before the stock is sold, nobody knows their exact worth.  If the stock option is for a publicly-traded company, you can typically find their worth online. This is publicly disclosed information. If you are not vested in the stock yet, determining value can be even more difficult. 

As you can see, valuing stock options is tricky. Your divorce team will need to determine their worth based on a variety of factors, including the company’s potential, performance, and past stock prices. Once your team arrives at a financial value, you can make sure your settlement reflects that value. You can choose to share the stock options or you may choose not to split stock options. However, you will want to receive adequate compensation in the form of other assets. 

When splitting stock options, you will want to have a plan for exercising those options in the future and turning their potential into actual financial security. Often, this means cashing in stock options quickly. Before choosing what to do with your stock options, you should discuss your options with an attorney, as well as a financial professional. There are taxes associated with exercising stock options. As such, you will need to be aware of all possibilities and how they may affect your future. 

Contact Our Barrington Divorce Attorneys

If you are considering a divorce in Illinois, and you are uncertain how to divide assets, such as stock options, we can help. North Barrington, Waukegan, and Hinsdale can help you evaluate your assets, stocks, and debts to ensure that all marital property is divided fairly and in accordance with Illinois law. 

To learn more about divorce, division of assets, or parental rights, contact us immediately. Call (866) 390-0672 or fill out our confidential contact form for a free consultation with one of our experienced and compassionate Barrington divorce lawyers. We are proud to serve clients at our North Barrington, Waukegan, and Hinsdale offices. Call today!

Larry Manassa