Wealth Planning with RSUs, RSAs and Stock Options

Via webinar yesterday, three of LNWM experts explained why now is a good time to re-assess equity compensation (both vested and unvested) and how to make that part of your life plan. Kristi Mathisen (Managing Director, Tax & Financial Planning), Conrad Gehrmann (CFO) and Chief Client Services Officer Scott Butterfield explained the mechanics of equity comp before launching into a multi-faceted discussion about strategies for tax-efficient selling, transferring, and aligning equity comp with life goals. (Coincidentally, Scott’s column on equity comp appeared yesterday in 425 Business magazine.)

Kristi, Conrad and Scott presented four main reasons why 2021 is a good time to strategize about concentrated equity positions in company stock:

  1. Equity valuations (in public and private markets) are at or near all-time highs
  2. Taxes on long-term capital gains could rise significantly for upper-income households
  3. The Federal estate tax exclusion is high – nearly $12 million per person ($24 million for married couple); this is the most that can be transferred to others during a lifetime or upon death and not be subject to federal estate taxes
  4. WA State estate tax starts at about $2.2 million

Because you might be busy earning equity comp, not to mention living your life, it’s easy to not do anything and let RSUs, RSAs or stock options vest and just sit there. While on “auto-pilot,” you might be tempted to overestimate the value of your equity comp, thinking an employer’s stock is not going to drop significantly while you own it. Or you might underestimate, by not taking all that equity into account as you go about making major life decisions. Just as problematic, you could end up selling chunks of equity comp based solely on news headlines or just to keep taxes to a minimum. In any of these scenarios, there is no long-term plan guiding what you do with your equity comp. And that can seriously hamper you attaining your goals and ambitions. Equity comp is a major asset that needs to be managed to fit in with your life plan.

Make Equity Comp Part of Your Life Plan

Kristi, Conrad and Scott suggested these key things for taking control of equity comp:

  • Know your goals for the stock you retain
  • Consider various types of insurance (life, disability) to lessen risk while unvested
  • Take advantage of estate and tax planning to maximize the value of equity comp to you, your family, and your community.

View our webinar on equity comp.    
Read Kristi Mathisen’s paper on equity comp.