The Equity Compensation Guidebook

Today we're going to talk in a bit more detail about the taxation of ESPps, better known as employee stock purchase plans. I've mentioned before that ESPs are my favorite form of equity compensation. This is for a few reasons, but before I jump into the reasons, just a quick reminder of what an ESPP is. In its simplest form: employee stock purchase plans allow employees to purchase company stock through payroll deductions. I did an early podcast episode focusing just on ESPPs. I think it's episode 7. You may want to go back and listen to that episode for general details on employee stock purchase plans but please overlook any audio issues. It was an early episode and some of those sound a bit echoey.

• How do I love thee? Let me count the ways [0:58]
• Holding periods for ESPPs [4:50]
• Long and short term capital gains [7:37]
• This week’s FLASHBACK [8:58] 

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Today we're going to go completely off topic from equity compensation. The bonus is it will be super short. We’ve lived in our home for four years! We still get junk mail from the retirees we bought it from. A common piece of mail is the invitation to a dinner seminar. 

Now, I’ve never attended one because I’m not the one being invited but mainly because the fine print says something along the lines of if a financial advisor, attorney, or even a CPA attends the host will charge them an educational fee that's usually in the range of a couple thousand dollars. No thank you! But let’s chat about all the things I’ve learned just from reading these fancy meal mailers!

• What you get in retired people’s mail [0:56]
• Did you know there are new rules to investing? [1:49]
• “Crash proofing” your assets and retirement [2:21]
• This is not a sales pitch! [5:27]
• This week’s FLASHBACK [8:30] 

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Today on Equity Compensation Guidebook we're going to talk about another tax-smart investing concept, direct indexing. Direct indexing is building out an investment portfolio to track the performance of a specific index. However, you do it through buying individual positions instead of buying an exchange-traded fund (ETF) or a mutual fund. 

The concept of direct indexing has been around for years and it provides many benefits which we'll cover in this episode. Up until now, it hasn't been available to the masses as it was expensive to administer. The investment companies that provided direct indexing had to set high minimums which put it out of reach for many investors. Fortunately, technology has advanced enough to provide more access to the continuously increasing interest in direct indexing.

• The concept of direct indexing [1:27]
• Picking on mutual funds [3:26]
• Taking out the middleman with ETFs [4:44]
• How direct indexing can help you be even more tax-smarter than ETFs [6:49] 
• Flexibility that puts you in control of the companies you invest in [9:26]
• This week’s FLASHBACK [11:23] 

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Welcome to the second part of the tax-smart investing mini-series. I feel like I'm cheating you by calling this a mini-series since it's just two parts. However, I'm a child of the '80s and mini-series is just so much cooler to say! A couple of key points from last week… It’s not what you make, it's what you keep. Meaning, what you make is only counted after the taxes you pay. Don’t tip Uncle Sam! Don’t break the law but make sure you are getting as close to the line as possible so Sam gets his and you keep yours! In the last episode, we covered 7 specific strategies to be a tax-smart investor, so check that out if you missed it.

Today we’re going to talk about 5 specific tax-smart planning ideas for 2021. These ideas come directly from SEI and their tax planning team. So without further ado let jump into them. As a reminder, be sure to consult your tax advisor before implementing any of these ideas.

• The Roth conversion [3:24]
• Accelerating income tax deductions [4:48]
• Lower cost basis strategy [6:13]
• Moving future income into the current year [7:24]
• Limiting 401k deductions [8:03]
• This week’s FLASHBACK [11:23] 

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Welcome to another mini-series. I'm going to go a bit off-topic from equity compensation with this one. I think we deserve a break after the 4 part series on net unrealized appreciation. I'm going to spend the next two episodes talking about tax-smart investing. 

I have a couple of mantras that you may have heard me say before but these are specific to taxes. First... it's not what you make, it's what you keep. Meaning I want to know what your returns are after taxes. More importantly, it extends to making sure you’re taking advantage of all of the IRS approved tax-saving strategies that are available to you. Why? Well, the other mantra is don’t tip Uncle Sam. There is no reason to pay more in taxes than necessary. Just to be clear, I would never recommend anything illegal or even unethical. The IRS provides a lot of strategies for saving taxes, but it's up to you to take advantage of them. Let go find out how!

• Using a 3rd party money manager [1:44]
• Tax smart strategy #1 - Tax Loss Harvesting [3:08]
• Tax smart strategy #2 - Proper design of portfolios [3:50]
• Tax smart strategy #3 - Tax lot investments [4:15]
• Tax smart strategy #4 - Withdrawal and rebalancing [5:00]
• Tax smart strategy #5 - Managing holding periods [5:27] 
• Tax smart strategy #6 - Portfolio transition management [6:00]
• Tax smart strategy #7 - Gifting [6:34]
• This week’s FLASHBACK [7:44] 

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Welcome to Part 4 of the Equity Compensation Guidebook NUA mini-series. This is actually the final part. There are previous segments that you may want to listen to. However, as always, you're more than welcome to jump in right here. Thus far we've covered distributions for NUA, we dug into when it makes sense to do NUA, and everyone's favorite...taxes. As a reminder, NUA stands for Net Unrealized Appreciation. 

It's an advanced planning and financial planning technique for people who own company stock within tax-deferred workplace retirement plans. The key here is the stock has appreciated since they acquired it. NUA is a way to potentially save significant amounts in taxes. Now that we've covered a lot of the details in previous episodes I believe it's time to dig a bit more into qualifying events and some key rules with NUA. This is important because not just anyone can decide one day that they want to do Net Unrealized Appreciation, you have to qualify and today we will find out if you do!

I hope you’ve learned something useful throughout this mini-series. Please share it. You never know who you know that needs to know what you just learned!

• Do you qualify for NUA? [2:04]
• Specific criteria you need to meet to be kosher with net unrealized appreciation [3:49]
• A few final rules and thoughts [6:36]
• This week’s FLASHBACK [11:08] 

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Welcome to part three of the NUA mini-series. There are two previous segments you may want to listen to, or you can jump in right here. So far in previous episodes, we've covered distribution options for NUA and when it does and does not make sense to do an NUA. As a reminder, NUA stands for Net Unrealized Appreciation. This is an advanced financial planning technique for people who own company stock within tax-deferred workplace retirement plans. The key here is that the stock has appreciated since acquiring it. NUA is a way to potentially save significant amounts in taxes and I’m going to tell you how in this episode.

• Tax basics for Net Unrealized Appreciation [1:49]
• A few rules to know about the NUA [5:23]
• The difference between public and private stock [7:50]
• This week’s FLASHBACK [9:12] 

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Welcome to Part 2 of the NUA (net unrealized appreciation) mini-series. If this is the first episode in the series that you're listening to it may be worth it to go back and have a quick listen to the last episode just to get a little background. However, you're more than welcome to jump in right here. 

I promised in the last episode to spend some time talking about when it makes sense to use net realized appreciation. I can't stress this enough NUA is an advanced financial planning technique. It is designed for people with company stock in a tax-deferred employer retirement plan. But, just because you fall into this category does not mean you should use an NUA. Listen to this episode of the Equity Compensation Guidebook to learn more about whether it’s right for you.

• When it may NOT make sense for you to us NUA [1:12]
• When it DOES make sense to use the NUA [2:42]
• Is the gap between ordinary income and capital gains rates enough? [4:49]
• The time frame until you have a qualifying event [6:56]
• This week’s FLASHBACK [8:09] 

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Today's episode of the Equity Compensation Guidebook is the start of another mini-series. I did one before and the responses were positive so I thought I would do another. Plus, this is a great way for me to dive deeper into an equity compensation-related topic. These can be complex topics and my choices are to do a long episode or break the topic into manageable parts. My philosophy is to keep these episodes well under 30 minutes. Why? As a child of the '80s, I learned everything can be solved in a 30min sitcom episode. I figure that applies to podcasts too, right? I covered the generalities of what net unrealized appreciation or NUA is in episode 28 so if you haven’t already, go check that one out! And if you have, thanks!

• Don’t be an NUA guinea pig [1:30]
• The rollover Individual Retirement Account [2:55]
• The lump-sum [4:08]
• When to consider an NUA [5:33]
• Saving big when you utilize an NUA [6:14]
• This week’s FLASHBACK [8:51] 

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In today's episode of the Equity Compensation Guidebook, I'm following up on a planning topic I mentioned a couple of episodes ago. Net Unrealized Appreciation, better known as NUA in my world. This is a great resource for equity compensation and ESOP participants who have concentrated and highly appreciated stock positions. As always, I do my best to stay high level in these introductory topic podcasts.

• The simple breakdown of an NUA [0:57]
• Two choices when you take a distribution out of your ESOP [2:19]
• Other factors to consider with NUAs [3:57]
• Three steps of taxes [4:53]
• Four important requirements to take advantage of an NUA [5:52]
• This week’s FLASHBACK [7:20] 

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