How Are Employment-Based Stock Options Valued and Divided in an Illinois Divorce?

 Posted on March 02, 2022 in Kane

Getting divorced means addressing multiple complex issues, including the division of marital assets and debts. For some couples, asset division is a straightforward process. However, the greater a couple’s complex and high-value assets, the more complicated asset division during divorce becomes.

If you or your spouse own stock options or restricted stock and you plan to divorce, it is important to understand how these unique assets are typically dealt with. Educating yourself is a great first step in protecting your financial interests during divorce and avoiding costly mistakes. Additionally, make sure to work with a skilled divorce lawyer experienced in complex property division matters.

Are Stock Options and Restricted Stock Considered Marital Property?

Marital property belongs to both spouses and typically includes any assets or debts acquired during the marriage. Non-marital property belongs solely to one spouse. The first step in addressing stocks in a divorce is determining ownership of the stock assets. Per Illinois law, stocks options, restricted stock, and similar benefits granted to a spouse during the marriage are considered marital property – regardless of whether the stock was vested or non-vested.

Usually, stock options that an employee receives before his or her marriage are non-marital property belonging only to that spouse. However, if a stock option rewards job performance that took place during the marriage, the stock option may be considered marital property. If stock options or other benefits are marital property, both spouses are entitled to an equitable share of the asset’s value. Illinois judges consider how a stock option was acquired, the incentives involved in the stock option, and when a stock is exercisable when dealing with stock options during divorce.

Valuing Stock Options for the Purpose of Divorce

Another huge hurdle to overcome during asset division involving stocks is identifying the value of the stock. Unlike a car or home, the value of a stock option is not easy to estimate. If the stock option was offered by a publicly-traded company, the court may use the same valuation method used by the employer who granted the stock option. The court may then compensate the non-employee spouse for his or her share of the stock option with marital property of equivalent value. Alternatively, the non-employee spouse may be awarded an interest in the stock options when the vesting period is over. There are tax advantages and disadvantages associated with different property division approaches, so it is best to seek personalized advice from a skilled divorce lawyer about how to handle stock options during divorce.

Contact a Kane County Property Division Lawyer

If you are getting divorced and you or your spouse own stock options or other complex assets, contact MKFM Law for help. Our knowledgeable St. Charles divorce attorneys can help you value and divide stock options, restricted stock, and other hard-to-value assets. Call 630-665-7300 for a free consultation.

Source:

https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm