What you need to do
Key steps to consider, what to watch out for, and ways advisory firms can help you understand how to make the most of your equity.
Decide to Exercise, Sell, or Forfeit
Depending on whether your shares have vested, the types of options or grants, and your tax bracket, there may be a few trigger points at which it makes more sense to exercise vs. sell vs. forfeit a certain number of shares.
Calculate Tax Credits
Equity events can have an impact not only on your current year’s taxes but in future years as you receive rollover credit or spread the realized gains out over several tax years.
- Inaccurate calculation of equity value
- Under-budgeting for taxes
- Having too much concentrated risk in your portfolio
Evaluate tradeoffs between any payout options presented as part of the deal (equity exchange vs. cash) and at what timing (now vs. later).
File taxes strategically over multiple years in order to maximize the value of your shares and minimize the potential tax consequences.
Trust & Estate Firms
Founders and Investors
Consult an attorney if your equity makes up a large percentage of ownership in the company and/or if you anticipate there may be significant long-term appreciation.
Transferring to a Trust
Transfer your company stock to a trust while the market value is lower and you could significantly reduce any gift transfer taxes and/or reduce your tax liability now and later if donated to a charitable trust.
Financial Advisory Firms
Decide how to invest a lump sum of cash received from the sale and plan to gradually diversify away from a concentrated stock holding to reduce your investment risk.