Can I gift RSUs or unvested equity to a trust?

Usually not before vesting — plan documents typically prohibit transfer. Vested shares can generally be gifted, subject to company policy, insider trading rules, and any lock-up.

What happens to deferred compensation at death?

It is generally included in the taxable estate and remains subject to income tax when paid to beneficiaries. There is no basis step-up, so the same dollars can face both income and estate tax.

Is a GRAT useful for concentrated stock?

It can be well suited to a volatile, appreciating position: if the stock outperforms the required return, the excess passes to the next generation with little or no gift tax cost, and a failed GRAT largely just returns the assets.

How do executives avoid a forced sale to pay estate tax?

Liquidity planning: life insurance held in an ILIT, staged diversification through a written trading plan, and where eligible, deferral elections for closely held business interests.

Do trading windows and 10b5-1 plans affect estate planning?

Yes. Transfers, gifts, and trust funding all need to respect company policy and securities rules, so the timing of planning transactions should be coordinated with counsel and the general counsel's office.

← Legacy JournalEstate Planning · Executives

Concentrated Stock, RSUs, and Deferred Comp: Estate Planning for Executives

Equity compensation creates estate planning problems that cash does not: vesting schedules, trading windows, deferred comp elections, and a balance sheet dominated by one ticker.

March 19, 20269 min readBy Drew Jacobs, Esq.

The short answer

Executives with concentrated stock, RSUs, and deferred compensation face three problems at once: illiquidity, single-stock risk, and income tax that lands on the estate rather than being forgiven at death. Deferred comp and unvested equity generally cannot be gifted, so planning happens around them — gifting vested shares or appreciating positions into a GRAT or SLAT, coordinating 10b5-1 plans with liquidity needs, and making sure the estate has cash to pay tax without a forced sale in a blackout window.

Executive wealth tends to be concentrated, illiquid at the wrong moments, and governed by documents the executive did not draft. An estate plan that ignores the equity plan, the deferred compensation election, and the insider trading policy is not a plan — it is a set of forms.

Start with what you actually own

Equity compensation is not one asset class. Restricted stock units are a contractual right to future shares. Options are a right to buy. Performance shares depend on metrics that may or may not be met. Deferred compensation is an unsecured promise from your employer, payable on a schedule you elected years ago and usually cannot change.

Each behaves differently at death or incapacity, and each is governed by its own plan document. The first exercise is a written inventory: instrument, grant date, vesting schedule, expiration, and what the plan says happens on death, disability, or termination.

Know what the plan documents already decide for you

Equity plans frequently override intent. Unvested awards may be forfeited. Options may have a short post-death exercise window measured in months, and if nobody exercises in time, value simply disappears. Deferred compensation may pay out as a lump sum on death, landing in a single tax year regardless of what would have been efficient.

Read those provisions before drafting. A well-designed plan tells your fiduciary exactly which deadlines exist and who is responsible for meeting them.

Concentration is a planning problem, not just an investment one

When most of the balance sheet is one company's stock, the estate inherits both the upside and the sequencing risk. Trading windows, 10b5-1 arrangements, and insider status limit when shares can be sold — including for an executor who needs liquidity to pay administration costs or taxes.

The usual response is to create liquidity that does not depend on selling stock: an appropriately owned life insurance policy, a marketable securities sleeve held outside the concentrated position, or a plan for borrowing against assets rather than liquidating them at the wrong price.

Where trusts earn their keep

Two functions matter most for executives. First, a revocable trust holding vested shares and accounts keeps the estate out of probate and lets a successor trustee act immediately, which matters when deadlines are measured in weeks. Second, irrevocable structures can move appreciating equity out of the taxable estate before a valuation event — the operative word being before.

Timing is the whole game. Transfers made while a position is early, illiquid, or hard to value are materially different from transfers made after a run-up or an announced transaction. Whether any of this makes sense for you depends on your numbers, your state, and your tax position, and should be evaluated with your CPA.

State residency deserves its own review

An executive in New York faces a state estate tax with a cliff that can tax the entire estate once the exemption is exceeded by a margin. New Jersey has no estate tax but does impose an inheritance tax that depends on who inherits. Ohio imposes neither. Moving between our three states, or holding property in more than one, changes the analysis and sometimes the document set.

Coordinate the beneficiary paperwork

Retirement plans, deferred comp, employer life insurance, and equity accounts each carry their own beneficiary designation, and those designations control regardless of what the will says. In practice this is the most common failure we see in executive plans: careful documents undermined by a decade-old form naming a former spouse or an estate that should never have been named.

How we work on this

We build executive estate plans on a fixed fee, quoted before work begins, and coordinate with your CPA and financial advisor so the legal, tax, and investment plans point the same direction. Licensed in New York, New Jersey, and Ohio.

Questions we hear most

Can I gift RSUs or unvested equity to a trust?: Usually not before vesting — plan documents typically prohibit transfer. Vested shares can generally be gifted, subject to company policy, insider trading rules, and any lock-up.
What happens to deferred compensation at death?: It is generally included in the taxable estate and remains subject to income tax when paid to beneficiaries. There is no basis step-up, so the same dollars can face both income and estate tax.
Is a GRAT useful for concentrated stock?: It can be well suited to a volatile, appreciating position: if the stock outperforms the required return, the excess passes to the next generation with little or no gift tax cost, and a failed GRAT largely just returns the assets.
How do executives avoid a forced sale to pay estate tax?: Liquidity planning: life insurance held in an ILIT, staged diversification through a written trading plan, and where eligible, deferral elections for closely held business interests.
Do trading windows and 10b5-1 plans affect estate planning?: Yes. Transfers, gifts, and trust funding all need to respect company policy and securities rules, so the timing of planning transactions should be coordinated with counsel and the general counsel's office.

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