Is Your Equity Comp Getting a Fair Look?

More and more workers are benefiting from equity compensation, and it’s not just limited to the C-suite and senior executives. Mid-level employees often accumulate meaningful positions in their company’s stock. Many of these employees rarely receive guidance on what to do with this compensation, including potential concentration risks and tax implications. Those with options often delay the discussion until tax time in April. Accountants can help, but tax preparation season is often the wrong moment to first discover an equity comp decision that could have been made months earlier. 

The risk that matters most here is concentration. When a large share of your portfolio and your paycheck both depend on the same company, a rough patch for that business doesn’t just show up in your account statement. It can show up in your paycheck too. The goal is to separate the two deliberately and on a timeline that works for your family. 

Restricted Stock Units (RSUs) 

When your RSUs vest, that value is taxed as ordinary income, the same as your salary. There’s no income tax benefit to holding the shares afterward. Any further gain or loss is simply a new investment decision layered on top of income you’ve already paid tax on. Vested RSU shares deserve a fresh look: would you buy this stock today with cash, or would you rather diversify? 

Stock Options: Qualified and Non-Qualified 

If you hold Non-Qualified Stock Options (NQSOs), the tax bill arrives the moment you exercise, whether or not you sell. Because of that, most households exercise and sell on the same day when the goal is building a diversified portfolio. 

Incentive Stock Options (ISOs) work differently, and the tradeoffs are subtler. Exercising can trigger the Alternative Minimum Tax rather than regular income tax, and the size of that bill can surprise even a well-prepared household. Hold the shares long enough (over two years from grant, over one year from exercise), and the eventual gain qualifies for capital gains treatment. Getting this right means planning the number of shares and the timing across multiple years, not scrambling every April. Modeling this well in advance, and coordinating with your Wealth Planner and CPA, keeps tax season from bringing surprises. 

When You’d Rather Hold Than Sell 

Diversification isn’t the right answer for every family. Some households have real conviction in their employer’s future and choose to hold a larger position deliberately, accepting the tax and concentration tradeoffs because it reflects genuine belief in the business, not inertia. This is common among younger employees, who may carve out a smaller position for long-term upside while diversifying the rest. Wherever you land, it should be a choice made on purpose. 

For Executives: Structure Matters 

If you’re an executive at a public company, a 10b5-1 trading plan allows you to build a diversification strategy on pre-set rules, so you’re never second-guessing a trade based on information you’re not supposed to act on. If your company is still private, trust structures can help address the same concentration risk while also advancing your estate planning, particularly when a sale or liquidity event is still years out. 

The households who come out ahead here are the ones who start the conversation early. Reach out to your Wealth Manager before decisions become deadlines. 

Estate planning should also be family affair. As children reach adulthood, we encourage parents to help their children establish foundational legal protections in conjunction with a qualified estate attorney.  

Here is how estate planning priorities naturally shift across every decade.  

Ages 18-20s: Launching Legal Independence  

At age 18, a child becomes a legal adult in the eyes of the law. Parents who previously managed medical decisions, academic records, and bank accounts can be locked out.  

• Healthcare Proxy & HIPAA Release: Grants parents or trusted adults the legal authority to make medical decisions and access health records during a campus or medical emergency.  

• Financial Power of Attorney (POA): Enables a designated agent to manage bank accounts, sign lease agreements, or handle financial affairs if the young adult is abroad or incapacitated.  

• Beneficiary Designations: Setting transfer-on-death (TOD) designations on introductory bank or investment accounts ensures funds pass directly without court delays.  

Families with young adults in their late teens or 20s are encouraged to connect them with their wealth manager, who can help navigate these initial documents and establish early financial literacy.  

Ages 30s-40s: Asset Protection & Family Preservation  

These decades are typically defined by major life milestones: marriages, home acquisitions, business expansion, and children. The focus rapidly expands from basic legal protection to asset preservation and family care.  

• Prenuptial Planning & Asset Documentation: Entering a marriage with significant pre-existing assets or family business interests warrants open communication and clear documentation of separate property.  

• Guardianship & Wills: This is a vital step for parents of minor children. A will is the primary legal mechanism used to designate guardians. Without one, a probate court judge makes those custody decisions without insight into family values or dynamics.  

• Revocable Living Trusts: While a will directs assets after death, a revocable trust keeps the settlement process private, avoids costly probate delays, and allows for continuity of investment management. Because beneficiary designations on accounts override a will, aligning account titles with the trust is essential.  

Ages 50s-60s: Multi-Generational Planning & Healthcare Funding  

By their 50s and 60s, many individuals find themselves in the “sandwich generation” – simultaneously supporting adult children and assisting aging parents.  

• Parental Estate Reviews: Initiating a dialogue with aging parents regarding their healthcare proxies and powers of attorney can prevent severe administrative and medical crises down the road. Framing these discussions around care preferences rather than asset inheritance keeps the conversation constructive.  

• Long-Term Care (LTC) Funding: Before executing major wealth transfers to the next generation, individuals should secure their own future care plan. Utilizing dedicated investment allocations, real estate equity, or hybrid life and long-term care insurance policies helps protect core wealth from high healthcare expenses.  

• Strategic Wealth Transfer: When retirement projections demonstrate sufficient capital for lifetime needs, this window offers an ideal opportunity to implement tax-efficient gifting strategies and trust structures.  

Ages 70s & Beyond: Legacy Fine-Tuning  

In the 70s and 80s, the primary goals are clarity, simplicity, and enjoying accumulated wealth. However, estate plans in this phase often fall victim to outdated designations and administrative shifts.  

• Auditing Designated Fiduciaries: Individuals named years earlier as executors, trustees, or healthcare agents may no longer be suitable due to health changes, relocation, or a lack of capacity for administrative duties.  

• Trustee Domicile Considerations: Where a named trustee resides can significantly impact a trust. A trustee living in another state may inadvertently subject the trust to additional state income taxes or distinct legal frameworks.  

• Annual Exclusion Gifting: Leveraging the annual gift tax exclusion allows individuals to transfer wealth to children and grandchildren tax-free during their lifetime, providing the opportunity to see the positive impact of their generosity.  

Periodic Reviews Matter  

An outdated estate plan can be just as problematic as having no plan at all. Regular reviews ensure documents stay aligned with changing family dynamics, wealth milestones, and current tax laws. Contact your wealth manager to evaluate an existing plan or coordinate with an estate planning attorney.