Executive Compensation

At EP Wealth, we deliver expert financial planning for corporate executives to help them navigate the complexities of compensation packages and maximize their value. Our comprehensive approach helps executives learn how they may fully leverage benefits like deferred compensation and stock options, while effectively managing associated risks and tax implications. This requires careful coordination of option exercise strategies, tax-efficient timing of income recognition, diversification planning to address company stock concentration, and integration with retirement and estate planning goals.

We offer strategic planning around SEC compliance, trading windows, and Rule 10b5-1 plans to allow executives to manage their equity compensation while maintaining regulatory compliance.

Through sophisticated tax planning, risk management, and long-term wealth accumulation strategies, you can transform your compensation packages into preserving wealth, balancing current lifestyle needs with future financial security and legacy goals.

Types of Executive Compensation

Executive compensation often includes a mix of salary, bonuses, equity, and retirement benefits. Each component plays a unique role in wealth-building and requires strategic planning to potentially maximize its value.

Base Salary and Performance Bonuses: Your base salary forms the foundation of your compensation, while performance bonuses reward achieving individual or company goals. Both require tax-efficient planning to maximize take-home pay.
Equity-Based Compensation: Stock options and RSUs (Restricted Stock Units) can boost wealth. However, they come with unique tax and liquidity considerations, requiring careful exercise and diversification strategies.
Deferred Compensation and SERPs: Plans like deferred compensation and Supplemental Executive Retirement Plans allow you to defer taxable income to a future date, aligning with retirement goals.
Golden Parachutes and Severance Packages: For executives in transitional roles, severance agreements and golden parachutes provide critical financial security during career changes, especially after mergers or acquisitions.

Tax Planning Strategies for Executives

Strategic tax planning is essential to get the most value out of your executive compensation package. At EP Wealth, we focus on timing, deferrals, and managing liabilities.

Timing and Tax Efficiency

The timing of income recognition can make a significant difference. Deferring income or exercising options in low-tax years can reduce your tax burden.

Managing Specific Tax Liabilities

Alternative Minimum Tax (AMT): Certain compensation, like incentive stock options, may trigger AMT. Proper planning helps mitigate its impact.
Net Investment Income Tax: High earners may face an additional 3.8% tax on investment income, making it crucial to plan withdrawals and sales strategically.

Equity Compensation Strategies

Tax-efficient exercise strategies for stock options and deferred compensation plans can potentially preserve more of your wealth for future use.

Risk Management for Executives

Executive compensation often leads to a high concentration of wealth in company stock, increasing risk. At EP Wealth, we help manage and reduce this exposure through:

Diversification Planning: Transitioning from concentrated stock holdings to a diversified portfolio to protect against market volatility.
Hedging and Insurance: Implementing approved hedging strategies and ensuring adequate insurance coverage to safeguard your assets.
Exercise Timing: Choosing when to exercise options to maximize returns while minimizing risks.

By proactively addressing risks, we help you create a plan to protect your wealth from market and company-specific vulnerabilities.

Long-term Considerations for Executive Compensation Financial Planning

From wealth transfer strategies to philanthropy, our advisors’ objective is to help turn your success into a meaningful legacy.

Retirement and Estate Planning Integration

We help integrate compensation elements with retirement plans to manage future income and structure assets to facilitate efficient wealth transfer to heirs, along with other estate planning goals.

Charitable and Legacy Opportunities

Executive compensation offers unique opportunities for charitable giving, whether through direct donations, donor-advised funds, or trusts. These approaches can potentially reduce taxes while creating a lasting impact.

How Corporate Structure Can Impact Executive Compensation

The structure of your company—whether public, private, or preparing for an IPO—plays a critical role in shaping your compensation and planning needs.

For example, executives at private companies face unique challenges with liquidity and valuation, while public company executives must navigate SEC regulations, trading windows, and Rule 10b5-1 plans. Preparing for changes like mergers, acquisitions, or IPOs requires careful coordination to optimize your package and maintain compliance.

Liquidity Planning for Executives

Liquidity is a cornerstone of financial planning for executives. We help make sure you have access to cash when needed without sacrificing long-term goals.

Cash Flow Management: Balancing income, taxes, and expenses to maintain flexibility.
Option Exercise Funding: Planning for the costs of exercising stock options while managing associated tax liabilities.
Emergency Funds: Maintaining a reserve to handle unexpected expenses without disrupting investments.

With customized liquidity strategies, you can make your compensation work for you now and in the future. To learn more about financial planning for executives, find an EP Wealth advisor near you.

DISCLOSURES:

EP Wealth Advisors, LLC. is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings / checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
Hiring a qualified advisor and/or financial planner does not guarantee investment success, and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied results or projections being represented here will be met or sustained.
The need for a financial advisor or financial planner and/or the type of services required are specific to the uniqueness of each individual’s circumstances. There is no guarantee or warrantee that the services offered by EP Wealth Advisors, LLC will satisfy your specific financial services requirements. Services offered by other advisors may align more to your specific needs.
Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.
EP Wealth Advisors (“EPWA”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. All expressions of option are subject to change without notice.
All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment strategy will be suitable or profitable for a client’s portfolio. The risk of loss can never be eliminated even if working with a professional.

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