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Dividing stock options during divorce

On Behalf of | Sep 1, 2022 | Family Law & Divorce

When you’re a business professional, one of the benefits you may have received was stock options. Stock options give you a right to buy your own company’s stock for a set price. The idea is that you can buy these stocks at a set price even in the future, and that’s despite the fact that the stock will (hopefully) be worth more at that time.

With the right stock options in place, employees could purchase stocks and then sell them for a significant profit. This is an amazing way for employees to be a part of the company and own a portion of it while also knowing that they may be able to cash out for profits later.

Who gets stock options?

Lots of people have the option of buying into company stock, but not everyone does. It’s common to see people who work at start-up companies get the offer to buy stock options. Why? The company may not be able to offer them the salary they want or the benefits they would like, but the stock options might be more valuable in the long-term.

Stock options can have major payoffs. That’s why you have to think about how to handle them during your divorce and take steps to protect them.

How do you handle stock options during a divorce?

To start with, you have to evaluate how much those options are worth. During your divorce, you’ll want to know the value of the options when you purchased them as well as how much they’re worth at the moment. If you were not planning on cashing them out for several years, you may want to estimate their value, but prospective values may also not be helpful in terms of deciding how much they’re worth to your or your spouse now.

After you know their value, you may need to look into the cost of exercising those options or buying out your spouse’s share, if they are entitled to one. Depending on when the options were purchased, you may be able to minimize the risk of losing them during your divorce as you divide your assets.