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What is a stock option and how might it affect divorce?

Some professionals and executives who work in the Rockford area may receive what are called "stock options" from their employers. These options can prove to be a valuable benefit and can be subject to a great deal of controversy in a divorce or legal separation.

As the name implies, a stock option is a legal right for a person, usually a high-ranking employee, to purchase stock in the employer's company for a set price, which is called the "strike price." The option is usually good for a range of time.

A person can make money on a stock option by using it to buy valuable corporate stock for a substantial discount. By way of example, let's say an employee receives a stock option to buy 100 shares of company stock at $100 a piece for a total of $10,000. The stock option offers a great deal if, at the time the employee exercises it, stocks are trading at $200 a share, or $20,000 for 100 shares. On the other hand, the option has little value if stock prices have fallen below $100 over time.

Putting a value on a stock option can be difficult since there are a number of moving parts to the process. Nevertheless, stock options may be considered marital property during the course of a divorce or permanent legal separation.

As such, getting the right dollar value on these assets is crucial, as it can mean the difference between a fair property settlement and someone's getting the short end of the stick.

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