Kestrel Bay Retirement Advisors equity compensation planning: sell the right shares first

Which grants and dates does equity compensation planning cover?

Each award is taxed at a different moment, and that's the first thing the plan pins down. RSUs are taxed as ordinary income at vest. The spread on a nonqualified option (NSO) counts as wage income at exercise. The spread on an incentive option (ISO) is an AMT adjustment if you hold the shares past December 31 of the exercise year. With ESPP shares, the tax arrives at the sale, and the holding period decides how much of the gain counts as wages.

The plan puts every date on one calendar: RSU vest dates, option expiration dates, ESPP purchase dates and your company's trading windows. Missed dates usually cost more than wrong forecasts, because a lapsed option or a sale attempted in a blackout can't be undone. Our tax-first habit shows up here in one concrete way. Before Kestrel Bay Retirement Advisors suggests selling a single lot, it projects this year's return with every scheduled vest already included.

Who needs this? Anyone whose employer stock is more than half of net worth, or whose yearly vests are larger than salary. Leah's $1.2 million of company stock is 75% of her $1.6 million net worth, so she clears the first test easily. Her old lots have a basis of about $300,000, which is 25% of their value, and that gap is what makes each sale expensive.

How Kestrel Bay Retirement Advisors works through your grants

The basis map is where the money is. Here's what it does for Leah. She plans to sell $350,000 of stock this year to cut her concentration, and about $200,000 of new RSUs will vest over the coming year. In Plan A she sells each new vest within days, so that's $200,000 with a gain close to $0. She also sells $150,000 of old lots, and the gain is $150,000 × 75% = $112,500.

In Plan B she keeps the vests and sells $350,000 of old lots, a gain of $350,000 × 75% = $262,500. At a flat share price both plans leave $1,050,000 of stock ($1.2 million + $200,000 − $350,000). Plan A realizes $150,000 less gain this year, about $28,200 less tax at an illustrative combined 18.8% rate ($150,000 × 0.188).

The rule we'd give her: if you plan to reduce your company stock this year, sell newly vested RSUs within days of each vest before you touch older lots. Their basis equals the vest-day value, so each dollar sold cuts your concentration while adding almost no capital gain. Investing involves risk, including loss of principal. The share price can also move between the vest and the sale.

• Step 1: You send the stock plan portal export (grants and vesting schedules), your brokerage lot detail and last year's tax return. We request these before the first working session.
• Step 2: We build a lot-by-lot basis map. For Leah it shows older lots with about 25% basis next to new vests whose basis equals vest value.
• Step 3: We run a tax projection for the current year, including upcoming vests and withholding. It also checks whether the default share withholding at vest leaves a balance due (another page covers withholding).
• Step 4: You receive a quarterly sale and exercise calendar that respects blackout windows, plus a one-page summary.
• Step 5: We re-run the projection after each vest and again in the fourth quarter, before any last sales of the year.

What signs say your stock awards have outgrown a spreadsheet?

A spreadsheet works while you have one grant and one vest date. It stops working when lots from different years sit at different bases, or when the tax on one sale depends on what else lands in the same year. Any one of the signs below is enough to justify a closer look, and most people we talk to have two.

• You have never sold a vested share, and the stock is now more than half of your net worth (Leah: 75%).
• Your vests in one year exceed your base salary, so your W-2 swings by six figures with the share price.
• You hold ISOs and expect a large RSU year. Exercising both in the same year stacks AMT exposure on top of your highest wage income.
• You owed tax plus an underpayment penalty when you filed, even though your employer withheld at every vest.

What equity compensation planning can't do for you

It can't predict the share price. A sale calendar only decides how much tax each sale creates and in which year, and investing involves risk, including loss of principal. It also doesn't erase embedded gains. The $150,000 of gain Leah avoids this year stays in her old lots until a later sale or a gift, and selling new vests first only delays that gain.

Insider trading windows can block sales for weeks, and a plan that ignores blackout dates fails in practice. We build the calendar around your company's windows, but we can't open one for you.

Now the honest part. If your yearly vests are small and your company stock is under a fifth of your net worth, you may not need an ongoing plan yet. A once-a-year check with your tax preparer is probably enough, and we'd tell you so.

Which equity compensation mistakes cost tech employees the most?

Holding every new vest for long-term treatment while also selling old low-basis lots is the costliest one we see. New shares pile on top of low-basis lots, so later sales carry large gains. In Leah's example, it realizes $262,500 of gain instead of $112,500 for the same $350,000 of diversification, which is about $28,200 more tax at an illustrative 18.8% rate.

Exercising ISOs in a year that also brings a big RSU release is next, because it stacks AMT exposure on top-bracket wage income. (The AMT math belongs on its own page.) Forgetting the $100,000 ISO limit is quieter. When the stock behind your ISOs, valued at the grant-date price, is worth more than $100,000 and first becomes exercisable in one calendar year, the excess is treated as NSOs. The spread on that excess is taxed as wages.

Letting vested options sit until close to expiration leaves only one or two tax years to absorb the whole spread. To check you're on the better path, list your last four vests and see whether you sold any of them within days. Then compare your oldest lot's basis with today's price. If the answer is no and a wide gap, start with the calendar.

How to start equity compensation planning with Kestrel Bay Retirement Advisors

To contact the firm, fill in the form on kestrelbayretirement.com. We don't list a phone line. Meetings take place by video or phone for clients in any US state, and our office is in Bellevue for those who ask.

The minimum is $400K in investable assets, and you get the fee schedule on paper before we first meet. Bring the vesting schedule export, your latest brokerage gain and loss report and your prior-year return. The first conversation covers which grants you hold, what share of your net worth sits in one stock and which dates are coming up in the next two quarters.

On 10/5/2026, Kestrel Bay Retirement Advisors served 2,600 clients and managed $910 million for them. Equity pay is only part of that work. If the stock position is the bigger problem, our concentrated stock positions page covers it, and donating appreciated stock is another way to move low-basis shares out.