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Dealing with stock options during divorce

More and more employers in Michigan, and elsewhere, are offering their employees stock options. While this can be a potentially valuable asset for you and your family, it can make for a more complex asset division should you decide to divorce. At The Law Offices of Lorrie J. Zahodnic, P.C., we often consult with people who have stock options and are unsure how a divorce may affect them. In this post, we will discuss how these options may be handled during property division.

In general, stock options are a type of compensation package. These options establish a set price at which you may be able to purchase stock in the company you work for at a future date. The thought is that you will be able to later sell your cheaply purchased stock for a significant profit.

With regards to the division of marital property in a divorce, stock options pose some unique challenges. This is because they cannot typically be liquidated in the same way that other assets may be. Additionally, it can be difficult to determine the value of these options due to factors, including the uncertainty of a business’ future and volatile market conditions.

Before beginning the property division process, it can be helpful to determine the probable worth of your, or your spouse’s, stock options, Forbes reports. This can help you to predict whether the stock is likely to be of minimal value, or if it is likely that it will be highly profitable. Based on these assessments, stock options can then be divided in much the same way as a 401(k) or a retirement plan. Since the state of Michigan divides property based on the rule of equitable distribution, it is possible for you, or your spouse, to retain your stock options. In these cases, the other person may receive a cash settlement or other assets to offset the value of the stock options.

For more information about how your separate and marital property may be divided in your divorce, please visit our property division page.

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Lorrie J. Zahodnic

"I will hold you up until you can stand on your own two feet."

Lorrie J. Zahodnic, P.C. has provided skilled and compassionate legal guidance to Michiganders in family law matters for over 20 years.

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