Abstract
With the use of stock based compensation increasing, the compensation professionals, financial planners and employees involved in these plans need to understand the strategies that can be employed to maximize the benefits employees receive under these plans. The appropriate strategy for maximizing benefits depends on the plan design. There are numerous risks with stock based compensation plans. If employees are not aware of the risks, these types of incentive plans cause more harm than good. Some of the risks reviewed in this article are lack of investment diversification, income and estate tax payments and the decrease in net benefits that occurs when certain rules are not followed. This article summarizes many of the stock based compensation plans used by companies and includes information on when to exercise options and sell stock. It also reviews tax and investment strategies that can provide greater benefits for employees. The uses of charitable planning tools and their appropriateness for certain employees are also discussed.
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