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Can I include stock options in my estate plan?

On Behalf of | Aug 10, 2022 | Estate Planning

As part of their compensation packages, some employees receive stock options. These are good opportunities to have solid investments that can benefit them during retirement. Some people are curious as to how they can use these stock options to benefit their loved ones. 

Including stock options in an estate plan is sometimes possible, but not always. You have to find out if they’re transferrable, which is up to the company. Since the amendment of Rule 16b-3 that went into effect on August 15, 1996, it’s possible for stock options to be transferred while still taking advantage of a liability exemption. 

Limitations of stock options in estate plans

There are sometimes limits on what you can do with stock options in your estate plan. For example, some employers only allow the transfer of stock options to specific relatives. This could severely limit who you could pass them onto. 

For some individuals, transferring the stock options prior to their death is the best option. This enables them to cut down on the value of their estate, which may have positive tax benefits. Additionally, it ensures that the transfer goes through without any issues. You must also ensure you have the proper documentation prepared for the transfer since it must meet the current requirements of the Securities and Exchange Commission.

Making sure that your estate plan is set up in the proper manner is critical. Taking the time to get it all set up is the only way that you can be sure your wishes are followed. Working with someone who knows your wishes and is familiar with similar situations can help to make this process easier for you. 

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