Laid Off……What About My Stock?
When a layoff hits, it’s easy to focus on the obvious questions: severance, healthcare, job search. But for many executives and tech professionals, one of the most overlooked—and most valuable—pieces of the equation is company stock.
What happens to your RSUs, stock options, ESPP shares, or restricted awards when you’re no longer on payroll?
Let’s break it down.
1. Know Your Vesting Cliff and Forfeiture Rules
Most companies stop vesting as soon as your employment ends.
Unvested RSUs are typically forfeited immediately.
Vested shares that have already settled in your account are yours to keep.
If you’re within days or weeks of a vesting date, it’s worth asking HR or your manager whether your layoff date can be extended—even briefly—to capture that final tranche.
Sometimes one extra week can mean thousands (or tens of thousands) of dollars.
2. Stock Options: The 90-Day Clock Starts Ticking
If you have Incentive Stock Options (ISOs) or Nonqualified Stock Options (NSOs), the key number is 90 days.
You generally have 90 days from your termination date to exercise vested options before they expire. Miss that window, and they’re gone.
But be careful:
Exercising ISOs after leaving may trigger the Alternative Minimum Tax (AMT).
If the company is private, you may face liquidity and valuation risks—owning shares you can’t sell.
A qualified tax advisor can help you decide whether to exercise, hold, or walk away.
3. RSUs and Taxes: The Timing Trap
If your RSUs vested before termination, they’re already taxable as ordinary income.
But if your company’s shares dropped in value since vesting, you could owe taxes on income you no longer have on paper.
This “phantom income” can sting, especially in volatile tech stocks. Selling shares to cover withholding or setting aside cash reserves can prevent a painful April surprise.
4. ESPP Shares: Still Yours, but Watch the Holding Period
Your Employee Stock Purchase Plan (ESPP) shares are yours to keep once purchased.
However, if you sell too soon—before the one-year (from purchase) or two-year (from grant) mark—you lose the favorable long-term capital gain treatment.
If cash flow allows, holding for the qualifying period can reduce taxes dramatically.
5. Severance and Equity Acceleration
Some companies offer accelerated vesting of RSUs or options in severance packages.
This can apply automatically in a layoff or “without cause” termination, or it may be negotiable—especially for senior executives.
Always review your employment agreement and equity plan documents before signing severance papers. Sometimes, you only have one chance to preserve years of potential equity growth.
6. Taxes After Termination
Leaving a job doesn’t just change your paycheck—it changes your tax planning landscape:
Withholding on severance may not match your actual liability.
Exercising ISOs could affect AMT for the year.
Selling vested stock may open tax-loss harvesting opportunities to offset other gains.
Integrating your layoff event into a broader tax strategy can turn what feels like a setback into a structured reset.
7. Don’t Go It Alone
Equity compensation is complex even in the best of times. After a layoff, it becomes urgent.
The difference between acting quickly and waiting too long can be five to six figures in lost value or avoidable taxes.
Work with an advisor who specializes in executive stock and tax planning—someone who can model your exercise scenarios, coordinate with your CPA, and translate plan documents into clear, actionable choices.
Final Thought
Losing a job can feel like losing control—but your equity doesn’t have to add to the chaos.
Handled strategically, your company stock can become the bridge to your next opportunity, not a casualty of your last one
