If you’re a senior leader or tech executive, your compensation package can be one of the biggest drivers of your long-term wealth. RSUs [Restricted Stock Units], ESPPs [Employee Stock Purchase Plan], ISOs [Incentive Stock Option] , NSOs [Non-qualified Stock Option].
Equity starts to feel like an administrative task, or worse, a tax problem. Shares pile up while attention stays on building the company.
We think about it differently. Your equity is a tool, not a task. It can fund the things that matter most: a home, a sabbatical, a new venture, the freedom to make choices on your own timeline.
Here’s how we help clients turn that paper wealth into something real.
- The RSU Opportunity: A Diversification Tool
Think of vested RSUs the way you’d think of a cash bonus that happens to arrive as stock.
You pay ordinary income tax the moment RSUs vest. That sets your cost basis at the market price on the vesting date. Sell right away, and you generally avoid additional capital gains beyond what you already recognized at vesting.
This is an incredible opportunity to fund your active financial plan. By sweeping those vested shares directly into a diversified portfolio. Reinvest the proceeds into a diversified portfolio to reduce concentration risk while staying aligned with your long-term plan.
Ask yourself this: if my company paid me this same amount in cash today, how would I invest it? That question alone can clarify a lot.
- Planning for Taxes
Executives often hesitate to sell stock because they’re worried about the tax bill. With the right planning, that worry becomes manageable.
Understand your withholding. Employers typically withhold RSU taxes at a flat 22%, even when your real marginal rate runs higher. Adjusting withholding or making estimated payments now can save you a surprise later.
Give strategically. If you’ve held appreciated shares for more than a year, donating them to a Donor-Advised Fund may let you avoid capital gains tax while still claiming a charitable deduction, subject to IRS rules.
- Managing Concentration Risk
Holding company stock can make sense, especially when you believe in where the company is headed. The real question is how much concentration feels right to you. Many investors land somewhere between 5% and 10% of net worth, though the right number depends on your own circumstances.
Once you set a target, you can build a repeatable process for handling future vesting events. That process takes the emotion out of the decision, so you can stay focused on your career and the people who depend on you.
- Planning Opportunities for Startup Equity
Leaders at private or early-stage companies face a different set of choices.
Incentive Stock Options. Managed carefully alongside the Alternative Minimum Tax, ISOs may let gains qualify for long-term capital gains treatment instead of ordinary income tax.
Qualified Small Business Stock. If your company qualifies under Section 1202, you may be able to exclude up to 100% of federal capital gains, subject to limits and requirements. For founders and early employees, this can be one of the most valuable provisions in the tax code.
Bringing It All Together
Equity compensation doesn’t have to feel overwhelming. It represents real value, the value you’ve helped create through years of leadership and hard work.
With a thoughtful plan, a clear understanding of the tax implications, and a steady approach to concentration risk, you can turn that value into progress toward the goals that matter most to you.
Brian Lloyd and Justin Vlaanderen sat down to talk through RSUs, stock options, taxes, and concentration risk in our latest episode.
Watch the full conversation on YouTube for the big-picture view behind the strategies above.
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