Equity Compensation Analysis
From grants to gains, minus the guesswork.
Master Your Company Shares
Stock awards can turn paychecks into life-changing wealth, but they can also trigger six-figure tax bills or leave too much of your net worth tied to one company’s share price. Restricted stock units (RSUs), incentive stock options (ISOs), non-qualified stock options (NQSOs), employee stock-purchase plans (ESPPs), and 83(b) early-exercise elections each carry unique rules on vesting, taxation, and trading. Falcon decodes the fine print, models the tax ripple of every choice, and builds an exercise-and-sale roadmap so equity powers your goals instead of dictating them.
Where Equity Trips Up High Earners
- Alternative Minimum Tax exposure. A large ISO exercise can push income into the AMT zone, creating a cash-tax bill even if shares are never sold.
- Single-stock concentration. When employer shares become 30–50 % of liquid net worth, one earnings call can derail retirement timelines.
- Trading restrictions. Blackout periods, insider-trading windows, and 10b5-1 preclearance rules limit when you can act, raising the risk that taxes or market moves corner you at the wrong moment.
Our Four-Step Grant Game Plan
1. Grant census and vesting timeline
We catalog every award: grant date, strike price, vest schedule, expiration, blackout windows, and post-termination exercise rules. A color-coded calendar shows when decisions must be made months in advance.
2. Tax-impact simulation
Using your current and projected income, we model ISO exercises through AMT calculators, estimate withholding shortfalls on RSU vesting, and layer in foreign-tax credits for executives paid overseas. Scenarios reveal bracket cliffs before you hit them.
3. Diversification strategy
We design scheduled 10b5-1 sale plans that offload shares automatically once windows open. For executives who must retain a minimum holding, we evaluate collars or prepaid variable forwards to cap downside while preserving upside and deferring tax. Charitable donors may gift low-basis stock to a donor-advised fund, converting a tax problem into a deduction.
4. 83(b) decision tree
Early-exercise choices on pre-IPO or growth-stage company options are time-sensitive; the IRS gives thirty days to file. Falcon weighs current fair-market value, expected growth, and liquidity outlook to decide whether paying minimal tax today beats paying more on future appreciation.
Dual-Income Tech Household Tames AMT and Concentration
A software engineer and a product manager at the same public company each received large ISO grants. Combined, the unexercised options represented 48 % of their liquid net worth. Exercising in one year would have triggered $162,000 of AMT. Falcon’s plan:
- Exercise ISOs across two calendar years and pair each batch with same-day sales on half the shares to cover AMT.
- Establish a 10b5-1 plan selling RSUs quarterly within post-earnings windows.
- Gift $30,000 of low-basis stock to a donor-advised fund, offsetting ordinary income.
- Fund RSU proceeds into direct indexing to efficiently generate tax-loss harvesting that offset long-term capital gains when the ISO shares are eventually sold.
Concentration dropped to 22 % of net worth within fourteen months; all AMT credits were recovered in the subsequent two years. Actual results depend on share performance and tax law.
Why a Plan Beats a Panic
- Clear cash & tax forecasts. No more scrambling in April because vesting pushed you into a higher bracket.
- Controlled diversification. Automated sales or hedges reduce reliance on a single stock without violating blackout rules.
- Informed 83(b) choices. Early exercises only when the math favors you, not because a colleague said “everyone files.”
- Coordination with advisors. Falcon shares grant maps and sale schedules with your CPA and estate attorney to keep withholding, gifting, and beneficiary designations aligned.
Errors That Erode Equity Gains
- Failing to include projected AMT in the cash flow exercise plan.
- Holding too many post-IPO RSUs until the original grant date, losing capital-gain timing flexibility.
- Forgetting to increase payroll withholding on large RSU vests, leading to underpayment penalties.
- Missing the 30-day 83(b) deadline and locking in ordinary-income taxation at a future higher value.
Schedule Your Equity Strategy Review
Clarify your next vest or exercise. Schedule a complimentary assessment and receive a personalized grant map, tax-impact projection, and diversification plan before your next window opens.
Disclosure
Falcon Wealth Planning is a fee-only Registered Investment Adviser. Services begin only after a client signs an agreement and receives required disclosures. Equity compensation involves tax and market risk; consult qualified tax professionals.
