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What financial planning basics should you consider to maintain a healthy financial life? Join the conversation on common financial planning strategies on education, retirement, taxes and estate planning.



Improving Tax Results for Your Stock Option or Restricted Stock Grant, Part 3

Wrapping It All Up: Tax Strategies In this third and final part to our series on the taxation of stock options and restricted stock units (RSUs), we’ll outline some strategies you can use to achieve better tax consequences. While the list below is definitely not comprehensive, it does cover some impactful strategies. Remember that — based on the various types of taxes described in Part 1 of this series — through good tax planning, you may be able to achieve a 19.6% improvement in your federal taxation rate. This improvement represents the difference between the federal ordinary income tax at 39.6% and the long-term capital gains rate at 20%. Early-Stage ISO Exercise and Hold While this may seem like it […]

Improving Tax Results for Your Stock Option or Restricted Stock Grant, Part 2

Applying the Tax Law to Common Employee Stock Situations In the first part of this three-part series, we discussed the four main taxes relevant to individuals. Now we’ll apply that knowledge to show what taxes would be incurred in five common situations faced by employees who work for venture-capital-backed companies. 1: Angel Investment or Founder Stock For many start-up companies, the first money in comes from angel investors or the founders themselves in exchange for preferred and common stock, respectively. In exchange for cash, investors (perhaps through a limited partnership) and founders receive shares of stock. The capital gains holding clock starts with the purchase of these shares, and it stops upon disposition of the stock. The shareholder realizes a […]

Improving Tax Results for Your Stock Option or Restricted Stock Grant, Part 1

Silicon Valley is again abuzz with stock option fever (and the option’s cousin, restricted stock units) due to several years of very successful local IPOs — but along with financial success often comes anxiety about taxes. To help assuage its clients’ fears, Wealthfront has asked me to write a three-part series that outlines what tax rates apply to individuals, how different types of stock options and restricted stock units (RSUs) are taxed, and some strategies to achieve improved tax results. Part 1: An Overview of Personal Tax Rates If you’ve already filed your 2013 tax returns, you may have noticed that your tax rates went up quite a bit from 2012. This is likely true if you reported income in […]

The Post-IPO Dilemma: Hedging Your Stock

If your company recently went public and your stock price has gone up significantly then you’re probably wondering how you can hedge your position. Unfortunately there’s nothing you can do while you’re still in the 180-day lock-up period. Most lockup agreements have extremely detailed restrictions included, designed to prevent almost any form of market participation with a security.  It’s too long to reproduce anything but a sample here, but it typically begins like this: In consideration of the Underwriters’ agreement to purchase and make the Public Offering of the Securities, and for other good and valuable consideration receipt of which is hereby acknowledged, the undersigned hereby agrees that, without the prior written consent of each of [names of managing underwriters], […]

Making the Case for Financial Planners

There are a number of value-added services that can improve your financial future.  In the past we have written about the benefits of engaging a tax advisor and an estate planner. In this post we make the case for financial planners. We believe financial planning can make a huge impact on people’s lives. That’s why we have dedicated a number of our blog posts to the topic.  However we are aware that many people could benefit from having an expert to drill down further on the covered concepts.  That’s where a financial planner can really help. In our experience there are five primary areas where a financial planner can add value: Cash Flow & Budgeting Asset & Debt Management Helping […]

11 Questions to Ask When You Choose a Tax Accountant

If you are considering early exercising of a significant number of options or are thinking about selling options in the public market for the first time we highly recommend retaining a reputable tax accountant. We realize this means you will incur a fee, but it is highly justified given the risk you take on incurring significant unforeseen taxes if you don’t consult a great tax accountant.  It is not as easy to quantify the savings from hiring a tax accountant as it is from hiring an estate planner (see our recent post by Abe Zuckerman regarding Estate Planners), but it’s just as necessary. Like most people, you’re probably not sure how to choose a tax accountant.  Here are the top […]

The 14 Crucial Questions About Stock Options

Ask These 12 Questions About Your Options

In April 2012 I wrote a blog post titled The 12 Crucial Questions About Stock Options. It was meant to be a comprehensive list of option-related questions you need to ask when you receive an offer to join a private company. Based on the outstanding feedback I received from our readers on this and subsequent posts about options, I’m now expanding the original post a bit. I’ve done just a little updating and posed two new questions – hence the slight title change: The 14 Crucial Questions About Stock Options. Next time someone offers you 100,000 options to join their company, don’t get too excited. Over my 30-year career in Silicon Valley, I’ve watched many employees fall into the trap […]

When to Diversify Across Financial Advisors

Last month Wealthfront hosted an event that featured our chief investment officer, Burt Malkiel.  It’s wonderful to listen to Burt, because he discusses the markets with such clarity. Markets go up, and markets go down.  You can’t control them. As an investor, you should instead focus your efforts on the three things you can control that will make a difference:  Diversify your portfolio, minimize fees and minimize taxes. During our Q&A session, one of our clients asked Burt, “Does it make sense to diversify across financial advisors?” Burt’s answer was simple: “There is no real benefit to diversifying advisors if your advisor follows my advice of diversifying your portfolio across index funds that represent a variety of asset classes. Hiring […]

Eight Financial Planning Actions You Should Consider for the New Year

Many of our clients like to use the beginning of a new year to create a plan for their personal finances.  They often ask us what we think are the most important issues to consider.  We believe there are eight critical actions to focus on: Create an emergency fund Pay off high interest debt If you own a home don’t pay off your mortgage If you’ve yet to purchase a home determine how much home you can afford Set up a 529 plan for your kids Evaluate early exercise of your options Create a long-term investment account Avoid Angel Investments Create an emergency fund As you have read in many of our posts, we believe the first thing every young […]

How a Simple Estate Plan Pays for Itself

More than 50% of U.S. adults do not have even the most basic estate planning document; a Will. [1]  For adults without spouses, children or any significant assets, the lack of an estate plan may not significantly impact their surviving family, but for everyone else the costs of not having a simple estate plan are almost certainly greater than the cost of obtaining one.  In this post I’ll briefly explain what constitutes a “simple estate plan,” how much you can expect to spend on such a plan, and what fees, expenses, taxes (and headaches) you can avoid by having one. Although ancillary documents may be appropriate given the specific circumstances, a “simple estate plan” is generally understood to constitute the following […]