What Happens to Stock Options and Deferred Compensation in an Illinois Gray Divorce?

 Posted on March 25, 2026 in Adult Children and Divorce

If you are planning to divorce in 2026 and you or your spouse works in or recently retired from a corporate or executive position, there is a good chance that stock options, restricted stock units (RSUs), or a deferred compensation plan are part of your financial picture. Many people in their 50s and 60s have built up these benefits over a long career, and they can be worth a significant amount of money.

What surprises many people going through a gray divorce is that these assets do not simply belong to the spouse who earned them. Illinois law treats much of their value as marital property, even if the awards have not been paid out yet. Knowing how these assets are divided can make a real difference in your financial future. An experienced St. Charles Gray divorce attorney can help you make sure these assets are not overlooked.

What Are Stock Options, RSUs, and Deferred Compensation?

These are ways employers, especially larger companies, pay and keep good employees. Here is a quick breakdown:

• Stock options give an employee the right to buy company stock at a fixed price after a waiting period called a vesting schedule.
• Restricted stock units (RSUs) are company shares promised to an employee that are only handed over after they stay with the company for a set number of years.
• Deferred compensation plans let an employee delay receiving part of their salary or bonus until a later date, often at retirement.

All three can hold significant value, and all three raise complicated questions in a divorce.

Does Illinois Treat Corporate Benefits as Marital Property?

Under 750 ILCS 5/503, marital property includes all assets either spouse acquired during the marriage. The tricky part is that stock options and RSUs are often granted over several years, some of which may fall inside the marriage and some outside it. A court has to figure out which portion counts as marital.

Illinois courts use a formula called the "time rule" to do this. It looks at how long the award was being earned and what percentage of that time was during the marriage. That percentage is treated as marital property.

For example, if an employee received RSUs that vest over four years and two of those years were during the marriage, half of those RSUs may be treated as marital property.

Deferred compensation works the same way. The portion earned during the marriage is generally marital, even if the payments will not arrive until years later.

What Makes Corporate Benefits Harder to Divide in a Gray Divorce?

Stock-based pay makes up a large part of executive income. According to the Harvard Law School Forum on Corporate Governance, stock awards account for about 71 percent of total pay for many CEOs. This means assets like stock options and RSUs can be some of the most valuable property in a divorce, and they can be hard to divide for several reasons.

First, the value can be difficult to pin down. Stock options and RSUs are tied to a company’s share price, which can shift a lot between the time of the divorce and when the awards pay out.

Second, taxes on these benefits can be very complicated. Incentive stock options (ISOs) and non-qualified stock options (NQSOs) are taxed differently by the IRS, and that affects what each award is actually worth after a split.

Third, the timing of benefits becoming tangible income varies greatly. For someone nearing retirement, an award that pays out in three to five years is not the same as money you can use today. A good attorney will factor that into your settlement.

How Are Corporate Benefits Assets Actually Divided in a Divorce?

Different couples divide their assets in different ways. Some couples agree on an offset, where the spouse without the stock awards receives other marital assets of equal value instead. Others split the awards once they vest, using a court order that tells the employer to send a share to the non-employee spouse.

Either way, getting this right means taking a close look at plan documents, vesting schedules, and tax consequences. Missing or undervaluing these assets can leave one spouse with far less than they deserve.

Schedule a Free Consultation with a St. Charles, IL Gray Divorce Attorney

If you or your spouse holds stock options, RSUs, or deferred compensation and you are thinking about divorce, the Kane County gray divorce lawyers at Divorce Over 50 - Goostree Law Group are here to help. We will work to make sure every asset is properly identified and fairly divided. Call 630-634-5050 today to schedule a free consultation.