4 tips for dividing stock options in a divorce

Property division is almost always a complex aspect of a divorce. Valuating and negotiating even simple assets can be confusing and contentious. You may have even more complicated assets, such as stock options. 

Stock options can result in significant payoffs, so you want to make sure you split them fairly. Here are a few key tips to consider when dividing stock options for your divorce:

1. Determine their value 

Evaluating the value of the stock options you have from a private company can be hard. No one can actually guarantee how much the stocks will be worth until they are sold. They are essentially promises without any real value. But a good legal and financial team can get an estimate by looking at the potential of the company. 

2. Do not neglect tax implications

This is a good rule of thumb for any type of property division, but especially for stock options. When you exercise stock options, you will have to pay taxes on any profits you make. Certain types of options come with significant capital gains taxes while others are subject to income tax. Factor all tax burdens into the equation as you work out your settlement. With a significant tax consequence, you may not want to fight so hard for stock options after all.

3. Fight for your fair share

If you decide that you want a significant portion of the stock options in the settlement, you must work with your attorney and financial planner to determine a fair share. On the other hand, if you do not want to receive any stock options, make sure you ask for something of equal value. 

4. Exercise options according to professional advice

If you know that you will be receiving stock options, put a plan together for how you will exercise them. Figure out whether you should exercise them as soon as possible to avoid any losses or hold onto them in hopes of future gains.