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.
Creating New Vesting Schedules
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.