Recently, the Illinois legislature revised the Illinois Marriage and Dissolution of Marriage to clarify how stock options are treated. After January 1, 2016, under Section 503(b)(3) of the IMDMA, all stock options received during a marriage and prior to a divorce are presumed to be marital unless a party can prove they were acquired by gift, legacy, or in exchange for non-marital property. Therefore, a court will allocate and divide the stock options (or their value) in awarding each party various property from the marital estate.
Courts understand that stock option's values may not be realized until years after a divorce is finalized. The new divorce laws instruct the courts to consider 1) the vesting schedule of an option; 2) the time between the granting of the option and the exercise date and 3) whether the option was granted as a reward for past performance, or whether it was designed to promote future performance or employment. It would be unfair for the court to award the husband a large portion of a stock option's value if the wife would have to work for a number years after being divorced to realize the options value.
As an illustration, a stock option awarded early in the marriage that is either exercisable at the time of divorce or shortly thereafter might be evenly divided, while a stock option awarded just prior to a divorce that is not exercisable for 7 years will probably be allocated mostly to the employee spouse to whom the option was awarded. Finally, the stock option's value will be compared to the value of other marital assets (e.g., the marital residence, retirement accounts, etc.) to help effectuate an equitable division of marital property.
Therefore, when stock options are involved, it is important for parties to engage a divorce attorney who is well-versed in corporate and related issues. If one of the parties works for the next Facebook, Google, or Amazon, the difference can mean millions of dollars.