What Happens to My Stock Options if I Pass Away Before Retirement in Florida?
If you pass away before retirement, your vested stock options should pass seamlessly to your named beneficiaries or your personal estate. However, this may not apply to unvested stock options. In addition, the exact mechanisms depend entirely on your company’s unique stock option plan. Learn more by speaking with an experienced estate planning attorney in St. Petersburg.
Are Your Stock Options Vested or Unvested?
As you probably know, vested stock options are “earned” and fully owned by the employee. Stock options only become vested once the employee fulfils certain requirements, such as serving the company for a set period of time. Many stock options are also tied with specific performance milestones. Once earned, the employee has the right to purchase those vested stock options at a predetermined price.
Unvested stock options have the potential to be earned. The company dangles this “carrot” in front of the employee to entice them to stay or meet performance goals. Unvested stock options are not yet “earned.”
If your stock options are vested, they should form an important part of your estate plan, particularly if they are worth a considerable amount of money. If they are unvested, your death may terminate them entirely. As a result, your beneficiaries will not receive these unvested stock options, and you do not need to implement them into your estate plan.
Check Your Employer’s Stock Option Plan
Of course, there are always exceptions. Depending on the specific terms of the stock option plan, your death may trigger a clause that turns your unvested options into vested options. Sometimes, the board of directors has the ability to vest unvested options on a discretionary basis. In other cases, part of the shares may become vested based on how long the employee served the company before passing away.
The key takeaway here is that you should not assume that your loved one’s unvested share options are worthless. If you are a new employee at a company and you have many years ahead of you before your options become vested, you should also consider the estate planning implications. Even if you’re a young professional with your entire career in front of you, it still makes sense to consider what might happen to those options if you pass away unexpectedly.
Adding Stock Options to Your Estate Plan Should Be Easy
You should find it easy to add your stock options to your estate plan. A simple option is to create a beneficiary designation for your stock options. Once you die, the options will pass to your chosen beneficiary without triggering probate. You can also add your stock options to an existing Will or trust. Most high-earning corporate officers should strongly consider trusts for overall estate planning efficacy.
Can a St. Petersburg Estate Planning Lawyer Help Me?
Stock options represent some of the most rewarding benefits for corporate employees, particularly high-ranking corporate officers. However, many employees do not consider what might happen if they pass away before retirement age. Consider discussing your unique circumstances with an experienced estate planning attorney in St. Petersburg. Drude Tomori Law serves residents of St. Petersburg, Sarasota, Bradenton, and Lakewood Ranch.
Source:
nceo.org/what-is-employee-ownership/stock-options-restricted-phantom-sars-espps