To factor them into her plan, you need to understand how options work, how they’re taxed, and what will happen to them when she dies. There are almost as many stock option plans as companies that offer them. A stock option is an agreement between your client and her employer that gives her the right to purchase company stock at some future date, at a price determined at the time of the agreement. 20 per share what happens after stock options expire the options are granted.
There’s usually a waiting, or vesting, period between when the options are granted and when your client is eligible to exercise them. Companies may have elaborate evaluation matrices, and link vesting to performance. When your client is granted options, there are no immediate tax implications, Friedman notes. FMV at the time the options are granted.
20 for her to qualify for the tax deduction. The deduction is meant to incentivize employees to help businesses grow and to raise stock prices. People tend to think stock options can make them rich. But not all plans are created equal, and some aren’t even that attractive, notes Bernard Pinsky, a partner at Clark Wilson LLP in Vancouver. He says plan documents typically aren’t overly complicated, so in most cases it isn’t necessary to get help from a lawyer.
But clients have to read the plans, because there may be terms they won’t like. In most cases, an executive has absolutely no control over what the stock option plan says. Most company plans are written in stone, but executives with bargaining power may have an employment agreement that provides a greater benefit than what the plan offers. Multiple tax scenarios can arise on death, depending on whether your client’s exercised some, none or all her options, and how her company’s plan treats unvested options.