How Investments Are Divided During Divorce in Illinois

All stocks, bonds, mutual funds, and commodity accounts purchased or acquired during the course of the marriage are marital property unless proven otherwise. That means they will need to be allocated as well, but this can be difficult as the value of these assets can significantly fluctuate.
The new law tries its best to compensate for this difficulty by considering the vesting schedule of the stock, whether it was granted for “past present or future efforts” at a job, and the length of time between the grant of the option to when it can be exercised. This could mean a judgment under the law works on a “wait and see” model – also known as “deferred distribution”, meaning the option will be allocated up later down the road when it's exercised.

This might mean that a stock is determined to have “no value” until the time it's exercised, in which case a prorated amount would be paid out to the other spouse.

Deferred Compensation

Contrary to popular belief, stock options are not the only form of deferred compensation. Other such examples include performance-based compensation, bonuses, as well as paid time off and vacation. These forms of compensation should be considered a marital asset when it comes to dividing property considering they were awarded for work done during the marriage.

With regard to paid time off and vacation time, courts will only see these types of deferred compensation as marital property if the employee is likely to receive cash in lieu of using the time off. If the company will not pay the employee cash in exchange for the unused time off it should not be considered a marital asset.

Cash Deposit Accounts

Just like deferred compensation cash and cash deposit accounts (checking and saving accounts) should be split. This includes cash accounts that are only in one spouse's name.

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Frequently Asked Questions

What happens to investments in divorce?

Depending on the circumstances of your divorce investments will either go to one or between both parties. The court looks at what each party deserves based on the work they put into the marriage when dividing assets. That means that even if the investments are in one party’s name, the court can split them between the parties because both parties put work into the marriage.

Do you have to split investments in a divorce?

You do not have to split assets in a divorce. Parties first get the option to divide property on their own. If you can convince your spouse to let you keep your investments, you can. Often to keep your investments, you will have to give up something else of equal or similar value. And you also have to think about the future earnings of those investments.

Is my ex-wife entitled to my investments?

If you are already divorced, the other party is not entitled to any new investments or any growth of the investments that you kept in the divorce. If you are in the divorce process, the other party may be entitled to some of your investments. It depends on how much money they have and what other assets they are keeping.

Can my spouse take my stocks in a divorce?

Your spouse may get some of your stocks in the divorce. If they also have investments, then you could each keep your own. But if they don’t have investments or any other asset of similar value, you will have to give some of them up.

Should I cash out my 401k before divorce?

It is usually not a good idea to cash out your retirement before a divorce. If you want to do this, speak with an attorney or financial advisor first. If you cash it out ahead of time, you will be more likely to have to split it.

References: New Law