Illinois divorce lawyer Russell D. Knight (https://rdklegal.com/stock-options-and-divorce-in-illinois/) of the Law Office of Russell D. Knight has recently published an enlightening article titled "Stock Options And Divorce In Illinois," focusing on the complex matter of dividing stock options during divorce proceedings in Illinois. This comprehensive piece aims to demystify the often misunderstood financial instruments and provide clear guidance for those navigating divorce.
Illinois divorce lawyer Russell D. Knight begins the article by addressing the notion of stock options and their perceived sophistication. He underscores the challenges they present in a divorce context, particularly when it comes to their division. "The term 'stock options' has a certain mystique," Knight writes, "but they are hard to divide in an Illinois divorce."
In the article, Illinois divorce lawyer Russell D. Knight explains that there are two main types of stock options: those used for trading stocks based on future value predictions, and employment-based stock options which are more commonly involved in divorce cases. He clarifies, "An option gives an investor the right, but not the obligation, to buy or sell a stock at an agreed upon price and date," adding that these short-term options are seldom divided in divorce due to their expiration before divorce finalization.
Employment-based stock options, however, are more relevant in divorce scenarios. These options are often offered by companies to their employees as a loyalty incentive, with a vesting period determining when the options can be exercised. Knight elaborates, "The period the employee waits until they can exercise the call is called 'the vesting period.' Until the day the call can be exercised, the options are considered non-vested."
The article describes the intricacies of valuing and dividing non-vested stock options in an Illinois divorce. Illinois divorce lawyer Russell D. Knight points out, “It just isn’t fair to say that non-vested stock options have no value. If the employee just keeps working at the company, those options will eventually have value.” He notes that Illinois law now treats non-vested stock options as marital assets, regardless of their current value.
Knight also addresses the practicalities of dividing stock options post-divorce. He explains that the non-stock option holding party must rely on the stock-option holding party to exercise and distribute the options according to the Marital Settlement Agreement, a process known as a "Constructive Trust."
Furthermore, the article discusses Restricted Stock Units (RSUs), another form of employee compensation similar to stock options but with guaranteed value upon vesting. Knight compares the two, noting, "The exact same principles are applied regarding restricted stock units and stock options when it comes to dividing these non-vested assets in a divorce."
Illinois divorce lawyer Russell D. Knight also touches on the implications of stock options and RSUs on maintenance and child support. He explains that these financial instruments are considered income when exercised, which can affect support calculations and necessitate future modifications.
Lastly, Knight poses a critical question: Are stock options really worth fighting over in a divorce? He highlights the potential complications and ongoing interactions between ex-spouses required to manage these assets. "Stock options are clearly a real hassle to effectively divide and distribute," he notes, suggesting that parties might consider alternative assets of similar value.
Those interested in gaining a deeper understanding of stock options, RSUs, and their impact on Illinois divorce proceedings are encouraged to read the full article by Illinois divorce lawyer Russell D. Knight. He can offer practical advice and legal insights to help individuals navigate these complex issues.
About the Law Office of Russell D. Knight:
The Law Office of Russell D. Knight is a respected family law firm based in Chicago, Illinois. The firm is dedicated to providing personalized and effective legal solutions tailored to the unique needs of each client. With a deep understanding of Illinois family law, Russell D. Knight and his team are committed to guiding clients through complex legal processes with clarity and confidence.
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