Stock Plan Vesting Schedules

Stock Plan Vesting Overview

Stock plans within RightCapital allow users to simulate the impact of equity compensation in a client's future cash flows. When clients receive equity compensation in the form of a grant, there is typically a specified term of employment that needs to be contractually fulfilled before taking ownership of the equity. This is referred to as a the vesting schedule. Simply put, vesting represents a clients ability to earn rights to equity shares over a period of time. Typical vesting schedules are between three and five years long. When entering stock plans into a client's net worth (step 4 of the data entry), RightCapital will ask for the vesting schedule to determine the client's eligibility for exercising the equity shares and any potential tax impact.

The default vesting schedules in RightCapital are 3, 4 or 5 years with equal amounts of equity vesting on an annual basis. For example, in the 4 year vesting schedule, 25% of equity shares will vest each year. Equity shares can only be purchased after they have vested.

The specific year, month, and day that a grant is received will act as the start date for the vesting schedule. Let's assume the grant below is operating on a 4 year annual vesting schedule.
In this example, our Grant Date is 01/18/2024. With a 4 year annual vesting schedule, our grant will be 25% vested on 01/18/2025, 50% vested on 01/18/2026, 75% vested on 01/18/2027, and 100% vested on 01/18/2028.

Creating New Vesting Schedules

In addition to the default vesting schedules, RightCapital also grants you significant flexibility to create customized vesting schedules for clients with stock plans. This can be done in the Advisor Portal, by navigating to the Models > Vesting tab. To create a new vesting schedule, click the blue "Add Vesting" button in the upper left:
Your new vesting schedule can be renamed by clicking the pencil & paper icon to the right of the schedule name. You can use the 'Vesting Type' and 'Vesting Period' options to tailor the schedule to best suit your needs. Once these are dialed in, you can enter the vesting percentages into each row of the schedule, to determine what percentage of each grant will vest for each time interval. Once the total equals 100%, click the blue Save button in the lower right.
Vesting Type: Choose between Annual, Semi-Annual, Quarterly, and Monthly vesting. The time interval between each row of the schedule will automatically adjust to reflect your chosen option.

Vesting Period: The total number of years for your vesting schedule. You can choose anywhere between 1 and 10 years for the total vesting period.
Note on Monthly Vesting:

When using Monthly as your Vesting Type, the Vesting Period will have a maximum of 5 years, rather than 10.

After new vesting schedules are created and saved in the Advisor Portal, they can be leveraged in every client plan. Within a stock plan entry in the Profile > Net Worth, you will find your custom vesting options alongside the default schedules:

Only one vesting schedule can be applied per stock plan in the client's Net Worth. If clients have equity grants with different vesting schedules, they must be entered in separate stock plan entries within the Net Worth. For more information on stock plans in RightCapital please click here.

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