Equity is the most commonly surrendered asset in US departures. Employees leave millions on the table because the rules are technical and the windows are short. This guide covers RSUs, ISO/NSO options, acceleration, and the post-termination clock.
The Two Instruments
- RSUs: shares that vest on a date schedule. Unvested units are forfeited at departure — no payout, no negotiation after separation. Vested RSUs are yours; sell, transfer, or keep.
- Options: ISOs (incentive stock options) have a post-termination exercise window, often 90 days — beyond that, they convert to NSO status with worse tax treatment. NSOs keep longer windows per plan terms.
The Clock After Leaving
Most plans run the post-termination exercise window from your last day, not from the offer's grant date. Know the number in your grant docs (90 days is standard ISO practice; check your plan). Exercising costs cash + tax, so plan it as a payment, not a formality.
Acceleration Asks
Equity is negotiable before separation: RSU acceleration for a transition month, an extended post-termination exercise window (PTEP), a cash-out of unvested units, or a "good leaver" clause. These asks cost the employer cash, so they work in senior departures, layoffs, and exit negotiations — not on a standard resignation form.
Tax Reality
RSU vesting is ordinary income at vesting; selling triggers capital gains on the difference. ISO exercise is AMT-sensitive (irs.gov publishes the rules). The equity section of your offer is a compensation conversation — see the salary negotiation guide for the total-comp framing.
Put the rule into action
Read the award document clause by clause
Five clauses decide what you keep when you leave, and most people never read them until the week they are negotiating. Pull every award agreement and mark these:
- Forfeiture on separation. What happens to unvested units, and whether any exception covers a layoff or a change of control.
- Post-termination exercise window. Its length and its start date. This is the deadline that expires real money.
- Acceleration. Single trigger, double trigger, or none, plus any discretionary acceleration by the board.
- Cause and clawback language. Some plans treat a for-cause termination differently, and a few allow recovery of vested value.
- Withholding method for RSUs. Whether shares are withheld at vest, and at what rate, so you know the net shares you receive.
Ask for the plan document, not a summary, and confirm the service start date used for vesting. Run your schedule in the vesting calculator and check the cliff entry before you accept a last day that lands two weeks short of an anniversary.
A 30-day sequence before your last day
- Week 1: export award agreements, vest histories, exercise records, and the valuation date behind each grant price.
- Week 2: confirm in writing the separation date, the exercise deadline, and which units vest before that date.
- Week 3: model the decisions as cash: exercise cost plus AMT for ISOs, ordinary income at RSU vest, and the withholding method.
- Week 4: execute the decision you can defend, and keep confirmations, receipts, and the 1099-B expectations in one folder.
If a severance offer mentions awards, settle the equity facts before signing, because a release can cover award claims. Use the severance negotiation letter to bundle the equity asks with the cash asks, and read the equity vesting entry for the RSU versus option split.
Edge cases that quietly cost people the position
- Vest date on your last day. Many plans require active employment on the vest date; a last day moved earlier by a day can erase a tranche.
- ISO window expiry. Miss the plan’s window and the option converts to non-qualified treatment, changing tax and withholding.
- Acquisition conversion. Awards may be assumed, converted, cashed out, or cancelled. Ask which, with the ratio, in writing.
- Rehire after leaving. A return usually means a new grant, not reinstated units, and the old window may not restart.
- Plan amendments. Terms can change for future grants; the agreement you signed governs the units you hold.
- Private company liquidity. Vested does not mean sellable. Ask about transfer restrictions, buyback rights, and secondary windows.
Each of these turns on a document you can request before access ends. See the release of claims entry before signing any award-related waiver at exit, and keep the deadline dates in the application tracker where a busy search week cannot lose them.
| Clause | What it can do at separation | Ask before signing |
|---|
| Forfeiture | Erases unvested units on the separation date | Whether a layoff or change of control is an exception |
|---|
| Exercise window | Expires vested options and converts ISO treatment | The exact deadline date, measured from separation |
|---|
| Acceleration | Determines whether anything vests early | The trigger definition and whether it is discretionary |
|---|
| Withholding method | Reduces the shares you actually receive | The rate and method used at each vest |
|---|
The live rule text sits on the California job exit rules page and the New York job exit rules page, along with the 401(k) Vesting Schedule definition and the equity tax trails guide hub. Confirm there before you put a date or a dollar amount in writing.
\n
Frequently Asked Questions
- Do I keep unvested options if I quit?
- Usually not. Unvested units forfeit at separation under most plans, and the vest date must be met while you are employed. Confirm the separation date the plan uses, in writing, before you give notice.
- What is the standard ISO exercise window after leaving?
- Many plans use a short post-termination window measured from separation, but the number lives in your plan document, not in general practice. Ask the stock administrator for the exact deadline date for each grant you hold.
- Are RSUs taxed when they vest or when I sell?
- Both, in different ways. Vesting is ordinary income on the value at vest, often withheld in shares. Selling later is a capital gain or loss on the difference between that basis and the sale price.
- What happens to equity in a company sale?
- Awards may be converted, assumed, cashed out, or cancelled depending on the merger terms and your grant. Ask which route applies, with the conversion ratio and any acceleration trigger, before you sign a closing agreement.
- Does a layoff accelerate my equity?
- Only if your offer letter, plan, or severance negotiation says so. Ask during the severance negotiation — layoff rounds fund acceleration for retention-sensitive roles.
- What happens to unvested options when fired?
- Forfeited. Cause-based terminations sometimes trigger clawback clauses; read your plan's termination section before signing anything in a severance deal.
The vesting schedule, the post-termination exercise window, and the forfeiture clause are plan documents, and the change-of-control trigger is a contract term. Confirm the window in writing with the plan administrator, and confirm the wage-side windows that ride with the separation — final pay, PTO payout, and the claim deadline — with the state agency named on the state rule pages. Run the units, the months, and the cliff in the vesting calculator before you sign a package that touches your options.
Sources (official record — verify before filing)
IRS — tax guidance