Gifting StrategiesGifting of Nonqualified Stock OptionsOne gifting strategy that can reduce your exposure to estate tax is to gift vested nonqualified stock options to family members either directly or through trusts. This strategy removes any future appreciation in the value of the options from your estate. Further, when your family members exercise the options, you remain responsible for the income tax. Your payment of this tax liability is not treated as a gift even though the payment will benefit the new owners of the stock options. Thus, the tax that you will pay will result in an additional “tax-free” amount benefiting your family. Note that nonvested nonqualified stock options should not be gifted. If you have done so, we recommend you consult a professional tax advisor to discuss strategies to lessen the possible adverse tax consequences.
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