Frequently Asked Questions

Q: What is executive equity compensation?

Executive equity compensation is the portion of your pay delivered as ownership in your company rather than cash—typically restricted stock units (RSUs), stock options (ISOs or NSOs), employee stock purchase plans (ESPPs), or performance shares. It can become a significant share of your total wealth, which makes coordinating its tax, timing, and diversification especially important.

Q: How are RSUs taxed?

RSUs are taxed as ordinary income when they vest, based on the share value on the vesting date—whether or not you sell. Any gain or loss after vesting is then treated as a capital gain or loss when you eventually sell. Because vesting can push you into a higher bracket, planning around the timing and your withholding is essential.

Q: When should I exercise my stock options?

The right time depends on the option type (ISO vs. NSO), the spread between your strike price and the current value, your tax situation, and your view of the company. For incentive stock options, exercising can also trigger alternative minimum tax (AMT). There's no universal answer—the decision should be modeled against your full financial picture, not made in isolation.

Q: What is the risk of holding concentrated company stock?

When a large share of your net worth is tied to a single company, your financial security becomes linked to that one stock's performance—and often to the same employer who pays your salary. Diversifying reduces that risk, but doing it well means balancing tax consequences, trading windows, and any holding requirements. A planned, gradual approach usually beats an all-at-once decision.

Q: What is alternative minimum tax (AMT) and how does it affect stock options?

AMT is a parallel tax calculation that can apply when you exercise incentive stock options and hold the shares past year-end. The "bargain element"—the difference between your strike price and the stock's value at exercise—can trigger it, creating a tax bill even though you haven't sold. Modeling AMT before you exercise helps you avoid an unexpected liability.

Q: How does equity compensation fit into my overall financial plan?

Equity should never be managed in a vacuum. Vesting income affects your tax bracket, concentrated stock affects your risk, and exercise decisions affect your cash flow—all of which connect to your retirement, estate, and investment strategy. Integrated planning coordinates these moving parts so your equity works with the rest of your financial life, not against it.

Q: Do I need a financial advisor for equity compensation?

Not everyone does—but as equity becomes a larger and more complex part of your wealth, the cost of a mistake (missed deadlines, avoidable taxes, overconcentration) rises quickly. A fee-only fiduciary advisor can model your options, coordinate with your tax professional, and build a strategy aligned only with your interests, since there are no products to sell.