Use Commas

All kinds! We have clients with Restricted Stock Units (RSUs), Incentive Stock Options (ISOs), Employee Stock Purchase Plans (ESPPs), and more. They are all unique with different timelines, tax implications, and more. We will walk through all of this with you and ensure you utilize these asset in the best possible way.

Taxation depends on several factors: the type of stock, how long you’ve owned it, your personal tax situation, and more. We will help you find the balance between being tax-efficient and using your company stock productively toward your goals.

Company stock can be an excellent way to build wealth, but having a large portion of your investments or net worth at the mercy of one company is risky. We call this concentration risk – when your financial outcomes are heavily influenced by one large, concentrated investment in an individual company. In most cases, this is also the company who is responsible for your income. We help clients find the best, most effective ways to build wealth while also reducing this risk.

Maybe! The key is making sure you utilize your stock in a way that matches your goals. Many of our clients do sell their company stock quickly to avoid concentration risk and to fund their other goals. It really comes down to what you hope to accomplish with your money. Our financial planning process is designed to tackle this opportunity and help you do it in the most efficient way.

Selling versus holding stock can be a complicated discussion that includes risk preferences, taxes, and your overarching financial plan and goals. We will help you understand all these variables and assess the possible outcomes. If you do decide to hold the stock for a period of time, that may change the tax implications, and we’ll need to closely monitor the stock price to see how its performance impacts your personal financial trajectory.

A restricted stock unit (RSU) is an award of stock shares, usually given as a form of employee compensation. Because an RSU is given in the form of a grant, it is not fully realized until the shares have vested. As such, an RSU is an attractive way to recruit and retain talent. Once the shares are vested, you can transact them as you wish. The market value of your RSUs is included in your compensation.

Stock options commonly take the form of Incentive Stock Options (ISOs). These options offer the right (the option), but not the obligation, to purchase shares at a predetermined price in the future. This can be valuable if the price of the shares increases above the predetermined price. Additionally, you can get favorable tax treatment upon selling the shares. Shares are subject to a vesting schedule, meaning you cannot exercise them right away. Once the options vest, you can exercise them, meaning you buy the shares at the predetermined price. You can use your own cash to buy them, or utilize a cashless exercise, which does not require cash but uses some of your shares of stock to pay for the rest (thus reducing the number of shares you own). Upon exercise, you can choose to hold the shares if you wish or choose to exercise and sell all at one time. This decision depends on both tax consequences and your personal situation and goals. Options will eventually expire, meaning you have a limited window (e.g., ten years) to decide what to do with them. Non-qualified Stock Options (NSOs) offer a similar structure to ISOs but come with less favorable tax implications.

An employee stock purchase plan (ESPP) is a program distinct from direct compensation. It enables you to purchase your company’s stock, typically at a discount compared to its market value. Participation in an ESPP is optional, and you fund your contributions through payroll deductions using your personal funds. Despite this self-funded approach, ESPPs are often appealing due to the discounted stock price they offer.

Stock appreciation rights (SARs) are similar to stock options, giving you the right to buy a stock at a predetermined price. However, unlike options, SARs do not require you to acquire the original shares upon exercise. Essentially, SARs entitle you to the monetary equivalent of the stock’s appreciation over a certain period.

Performance shares are a form of equity compensation tied to achieving benchmarks or financial objectives. Think of these as RSUS linked to performance metrics.

Phantom stock does not offer any exchange of shares as you do not actually own any stock. Instead, you are entitled to cash compensation in the future determined by the stock’s performance. There is no favorable tax treatment here. The main benefit is that you can participate in the growth of the company and its stock through your compensation.