Are Unrealized Stock Options Divided in an Illinois Divorce? 

 Posted on January 25, 2022 in Divorce

In many cases, Illinois divorce courts treat stock options as marital property for the purposes of dividing assets in a divorce. The Illinois Marriage and Dissolution of Marriage Act explicitly states that when stock options have been given to a spouse during the marriage, they are marital property - whether they are unrealized or whether their value is even knowable. 

If stock options are marital property, they must be divided equitably in a divorce. This presents some complications, not only because of the difficulty in ascertaining stock option value but because the proceeds of the stock options must be allocated to each spouse when they are exercised. If you anticipate dividing stock options in your Illinois divorce, read on. 

Options for Dividing Unrealized Stock Options

There are essentially two options for dividing the value of unrealized stock options. First, the court can wait to divide the stock options until they are exercised in the future; or, the court can divide the option during the divorce and make spouses wait to receive their portion until the option is exercised. Courts and spouses may also want to receive some other marital property of equal estimated value, although this can be something of a gamble as the value of an unrealized stock option is difficult to estimate. 

When deciding how to allocate the stock option, courts will determine whether all or some of the stock option is marital property, how long it will be before the stock option is realized, and whether a spouse who owns the stock option will have to continue to work after the divorce to earn the stock option. 

Once a stock option is divided between spouses, the owner of the option can decide when and if to exercise it. In the past, when spouses have gone to court to try to force the stock option holder to exercise the option, the court has refused. Although a spouse may be entitled to part of the profits of an exercised stock option, he or she will have to wait until the spouse who owns the option decides to exercise it; before then, the stock option is not considered marital property. 

Should We Let the Court Divide Our Stock Option? 

It can be difficult to predict exactly how a court will divide stock options, as the division is essentially at the court’s discretion. It is always preferable, therefore, for a divorcing couple to try to agree to a division of marital property between themselves whenever possible. Both spouses are more likely to be satisfied with the arrangements than if a court makes a decision on their behalf. 

Contact a DuPage County Marital Asset Division Lawyer

At The Stogsdill Law Firm, P.C., we have helped many divorcing couples find an equitable division of assets, even in very complex situations. You can call us today to schedule an initial case review with one of our experienced Wheaton, IL marital asset division attorneys. Contact us at 630-462-9500. 

Sources: 

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?DocName=075000050HPt%2E+V&ActID=2086&ChapterID=59&SeqStart=6200000&SeqEnd=8675000 

https://www.naspp.com/Blog/February-2016/Dividing-Stock-Compensation-in-Divorce