For executives with RSUs, stock options, or an upcoming liquidity event, year-end is not just a calendar milestone. It is a series of deadlines that do not wait for January, and several of the decisions that matter most have to be made before the year closes.
RSU withholding often falls short
When restricted stock units vest, most companies withhold taxes at a flat statutory rate. That rate is frequently lower than the effective rate a high earner actually owes, which means the withholding at vesting does not cover the full liability. Executives who do not account for this gap can find themselves with an unexpected balance due, along with potential underpayment penalties. Reviewing your total vesting activity for the year, alongside your other income, is the only way to know whether an estimated payment or a withholding adjustment is needed before year-end.
Incentive stock options and AMT exposure
Exercising incentive stock options can trigger alternative minimum tax exposure even when no shares are sold. The spread between the exercise price and the fair market value at exercise is a common AMT preference item, and because the timing of an exercise is often within the executive’s control, it is one of the few year-end decisions where planning ahead can genuinely change the outcome. Modeling an exercise before December 31 versus waiting until January is a conversation worth having with your advisor now, not after the fact.
10b5-1 plans and cooling-off periods
Executives at public companies who want to trade under a 10b5-1 plan need to account for the mandatory cooling-off period between when a plan is adopted and when trading can actually begin. A plan put in place in November may not be active until well into the following year. If diversifying a concentrated position or managing liquidity around an IPO is on your radar for next year, the plan itself often needs to be set up before this year ends.
Deferred compensation elections
For executives with access to a nonqualified deferred compensation plan, elections for the following year’s compensation typically have to be made before that compensation is earned, which in practice means before year-end. This is an annual, use-it-or-lose-it window with no ability to revisit the decision once the deadline passes.
Bringing it together
None of these items exist in isolation. Withholding gaps, option exercises, trading plans, and deferred comp elections all interact with each other and with your broader tax picture. The right move for one may create a problem for another. This is exactly the kind of coordination our Wealth Management team handles for executives navigating equity compensation and liquidity events, and year-end is the natural checkpoint to make sure nothing falls through the cracks before the window closes.
File # 5990517