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Joanne is a senior vice president with a global telecommunications company where she has accumulated stock options of 100,000 shares and 50,000 shares of restricted stock.
Joanne and her husband want to buy a second home, and are thinking about exercising a significant portion of her options to finance the down payment. However, they are concerned about squandering the opportunity that those options represent, and about the tax liability that they will incur. They decided it was wise to talk with a Wealth Strategist at PNC Wealth Management.
The Wealth Strategist thoroughly reviewed Joanne’s financial goals with her attorney and tax advisor to determine how the options fit into her family’s overall plan. Next, PNC investigated the option grants themselves, including the strike price, the maturity, and whether or not the shares underlying the option grants would be restricted.
Finally, PNC assessed the financial impact of exercising her options. After conducting a cash flow analysis, PNC recommended that they borrow the money to pay for the cost of the exercise, strike price, and related tax liability, thereby converting 100% of the options into shares.
As a client of PNC Wealth Management®, you’ll have access to an experienced PNC Wealth Strategist who can help identify and articulate financial, tax, estate planning, insurance and philanthropic issues. They will assist you in identifying your financial goals and create strategies to keep you on track.
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This story represents a hypothetical scenario and is intended for illustrative purposes; the person described is fictional and not an actual client, but the scenario is intended to reflect a typical and/or previously experienced situation. Actual client experiences and outcomes may vary and future performance or success is not guaranteed.
The PNC Financial Services Group, Inc. (“PNC”) uses the marketing name PNC Wealth Management® to provide investment and wealth management, fiduciary services, FDIC-insured banking products and services, and lending of funds through its subsidiary, PNC Bank, National Association (“PNC Bank”), which is a Member FDIC, and to provide specific fiduciary and agency services through its subsidiary, PNC Delaware Trust Company or PNC Ohio Trust Company. Securities products, brokerage services, and managed account advisory services are offered by PNC Investments LLC, a registered broker-dealer and a registered investment adviser and member of FINRA and SIPC. Insurance products may be provided through PNC Insurance Services, LLC, a licensed insurance agency affiliate of PNC, or through licensed insurance agencies that are not affiliated with PNC; in either case a licensed insurance affiliate may receive compensation if you choose to purchase insurance through these programs. A decision to purchase insurance will not affect the cost or availability of other products or services from PNC or its affiliates. PNC does not provide legal, tax, or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax services agreement. PNC does not provide services in any jurisdiction in which it is not authorized to conduct business. PNC Bank is not registered as a municipal advisor under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Act”). Investment management and related products and services provided to a “municipal entity” or “obligated person” regarding “proceeds of municipal securities” (as such terms are defined in the Act) will be provided by PNC Capital Advisors, LLC, a wholly-owned subsidiary of PNC Bank and SEC registered investment adviser.
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