Can I model different vesting and expiration scenarios?

Overview of Scenario Modeling

Yes, Grantd enables you to model various vesting and expiration scenarios to understand how different timing decisions impact your client's financial outcomes. This forward-looking capability is essential for strategic planning and tax optimization.

Vesting Schedule Modeling

When adding or editing equity grants, you can configure different vesting schedules to match actual grant terms or model hypothetical scenarios.

Supported Vesting Schedule Types

Linear Vesting

Shares vest evenly over the vesting period
Example: 1,000 shares over 4 years = 250 shares/year
Common for RSUs and options at many companies

Cliff + Linear

Initial cliff period where nothing vests
Followed by regular vesting thereafter
Example: 1-year cliff, then monthly vesting for 3 years
Common structure: 25% after year 1, then monthly for years 2-4

Custom Vesting

Irregular vesting schedules
Performance-based milestones
Front-loaded or back-loaded schedules
Any unique arrangement

Multi-Year Projections

Grantd's 5-year projection capabilities allow you to:

Model Future Vesting Events

Automatic Timeline Integration

All scheduled vesting dates appear in projections
Future RSU vesting creates income in projected years
Option vesting increases exercisable holdings over time
Portfolio composition evolves with vesting schedule

Tax Impact Modeling

RSU vesting generates ordinary income in vesting year
Federal, state, and FICA taxes calculated for each vesting event
Multi-year tax liability projections account for all scheduled vesting
Identify high-income years requiring additional planning

Concentration Evolution

Track how vesting increases equity compensation holdings
Model concentration trajectory over 5 years
See when concentration reaches yellow-flag (10-20%) or red-flag (20%+) levels
Plan diversification strategies accordingly

Expiration Scenario Modeling

Understanding Option Expiration Impact

Stock options have finite lifetimes—typically 10 years from grant date. Modeling different expiration scenarios helps answer:

What happens if I don't exercise before expiration?
How much value could I lose?
When should I exercise to maximize value and minimize tax?

Scenarios to Model

Scenario 1: Exercise Before Expiration

Model exercising options in year 1, 2, 3, etc.
See tax impact in exercise year
Track concentration increase from acquired shares
Understand capital gains treatment on future sales

Scenario 2: Hold Until Near Expiration

Preserve time value longer
Risk of missing optimal exercise windows
Potential for time decay to erode value
Tax planning may be suboptimal if rushed

Scenario 3: Options Expire Unexercised

Out-of-the-money options: No loss of real value
In-the-money options: Potential significant loss
No tax deduction for expired options
Missed opportunity for diversification

Strategic Planning Applications

Tax Year Optimization

Model exercises across different years to:

Find years with lower income (lower marginal rates)
Spread exercises to avoid bracket creep
Manage AMT for ISOs across multiple years
Balance with other income events (bonuses, RSU vesting)

Example Strategy:

Year 1: Exercise 25% of ISOs up to AMT threshold
Year 2: Exercise 25% more if no AMT triggered
Year 3: Exercise remaining 50% in retirement year (lower income)

Concentration Management

Model vesting and exercise timing to:

Track concentration trajectory
Identify when diversification becomes critical
Plan systematic reduction strategies
Coordinate with other portfolio adjustments

Example Scenario:

Current concentration: 15% (yellow flag)
Future vesting adds 5% over 2 years → 20% (red flag)
Model selling owned shares proactively
Plan to offset concentration growth from vesting

AMT Planning for ISOs

Model ISO exercises to:

Calculate AMT impact in each potential exercise year
Identify "sweet spot" exercise amounts below AMT trigger
Generate AMT credits for future use
Optimize multi-year ISO exercise strategy

Example Analysis:

Model exercising 1,000 ISOs: AMT triggered, $15K paid
Model exercising 500 ISOs: No AMT, optimal for this year
Model exercising 500 more next year: Spread AMT across years
See AMT credit recovery in future years

How to Use Scenario Modeling

Step 1: Establish Baseline

Create accurate current state:

Add all existing grants with actual vesting schedules
Input current owned shares
Verify company information and stock price
Set up tax model with current income/deductions

Step 2: Review Default Projections

Examine 5-year projection showing:

All scheduled vesting events
Current tax trajectory
Concentration evolution
No proactive exercises or sales (status quo scenario)

Step 3: Model Alternative Strategies

Create different scenarios:

Exercise options in year 2 vs. year 4
Sell shares immediately at vesting vs. hold
Partial exercises spread across years
Diversification strategies with systematic sales

Step 4: Compare Outcomes

Evaluate scenarios based on:

Total tax liability across 5 years
Concentration levels and diversification achieved
Liquidity provided (cash from sales)
Risk/reward trade-offs
Alignment with financial goals

Vesting Schedule Adjustments

When to Update Vesting Schedules

Update vesting data when:

New grants are awarded
Performance targets are met or missed (for performance-based vesting)
Employment status changes (termination may cancel unvested)
Company modifies vesting terms
Grants are forfeited or cancelled

Impact of Vesting Changes

Changes to vesting schedules affect:

Future income projections (RSUs)
Option exercise opportunities timeline
Multi-year tax calculations
Concentration trajectory
Alert timing (vesting reminders)

Expiration Timeline Management

Tracking Multiple Expiration Dates

When managing multiple option grants:

Each grant has unique expiration date (typically 10 years from grant)
Some grants expire sooner than others
Priority shifts as expiration approaches
Exercise priority scores reflect time urgency

Modeling Expiration Pressure

Consider scenarios where:

Multiple grants expire in same year (concentrated decision point)
Expiration coincides with high-income year (tax challenge)
Stock price near strike price at expiration (exercise decision unclear)
Blackout periods limit exercise windows before expiration

Integration with Other Features

Alerts and Notifications

Set alerts based on modeled scenarios:

Vesting reminders for key grants
Expiration warnings (30, 60, 90 days)
Exercise priority score thresholds
Concentration triggers

Tax Projections

Scenario modeling feeds directly into:

5-year federal and state tax projections
AMT calculations and credit tracking
FICA tax estimates
Required estimated tax payments

Diversification Planning

Vesting and expiration scenarios inform:

When concentration will peak
Optimal timing for diversification
Systematic divestiture schedules
Multi-year diversification roadmaps

Best Practices

Model Multiple Scenarios

Don't rely on single projection:

Conservative (lower stock price growth, worst case)
Moderate (expected case)
Aggressive (higher stock price growth, best case)

Update Regularly

Refresh scenarios when:

Stock price changes significantly (>20%)
New grants are awarded
Employment or income situation changes
Tax laws change
Approaching key decision dates

Document Assumptions

For each scenario, note:

Stock price growth rate assumed
Exercise timing and rationale
Tax rate assumptions
Diversification goals
Any special circumstances

Involve Clients in Scenario Review

Use scenarios to:

Illustrate trade-offs visually
Build consensus on strategy
Set expectations about timing
Create accountability through documentation