Estate Planning for Tech Employees: Protecting Your Equity and Your Family

Most tech workers put estate planning off indefinitely. It feels morbid, complicated, and not urgent. But tech compensation creates a specific set of estate planning problems that generic advice doesn't cover — concentrated employer stock with a near-zero cost basis, unvested RSUs that may or may not transfer to your heirs, pre-IPO options with exercise clocks that start ticking at death, and retirement accounts where a wrong beneficiary designation can trigger a 10-year mandatory liquidation.

The good news: the actual work is mostly one-time and inexpensive relative to the stakes. A senior engineer with $600K in RSUs, $300K in a 401k, and a brokerage account has a meaningful estate. Getting it organized takes a weekend of paperwork and a few hundred to a few thousand dollars.

1. Beneficiary designations: the real estate plan for most tech workers

Retirement accounts (401k, IRA, Roth IRA) and many brokerage accounts transfer by beneficiary designation, not by will. If your will says everything goes to your spouse but your 401k lists your college girlfriend as beneficiary, the 401k goes to your college girlfriend. The will doesn't override the beneficiary form.

This is the single most common estate planning mistake, and tech workers are especially at risk because they change jobs frequently — each new employer has a separate 401k with a fresh beneficiary form that needs to be filled out.

What to update

• Current employer 401k: Log into Fidelity/Schwab/Vanguard/Empower and set primary and contingent beneficiaries. Do this your first week at any new job.
• Old 401ks at former employers: Either roll them over to an IRA (simplest) or log into each plan and update the beneficiary designation. You likely have at least one forgotten account from a previous job.
• IRAs and Roth IRAs: Held at your brokerage — update via the account settings page or a beneficiary form.
• RSU plan / equity compensation account: Many companies (via Fidelity, Schwab, E*TRADE, Morgan Stanley) allow you to name a beneficiary on your equity compensation account. Check your equity plan portal and look for a "beneficiary" or "transfer on death" option.
• Taxable brokerage account: Most brokerages allow a Transfer on Death (TOD) registration, which passes the account directly to named beneficiaries outside of probate.
• Life insurance: If you have employer-provided or individual life insurance, the beneficiary designation controls the payout. Review it.

2. What happens to your equity when you die

This is the part that surprises most tech employees. The treatment of your equity at death varies significantly based on whether shares are vested, and your company's specific plan document.

Vested shares (RSUs already delivered, ESPP shares, stock options already exercised)

Shares you already own — in your equity compensation account or taxable brokerage — are straightforward: they're part of your estate. They pass to your beneficiaries (via the account's TOD designation or your will if no TOD is set). And they get a step-up in basis at death — more on that below.

Unvested RSUs at death

This is plan-specific. According to a survey by the National Association of Stock Plan Professionals (NASPP), approximately 63% of companies accelerate vesting of unvested RSUs upon an employee's death, while around 22% forfeit unvested awards entirely.¹

Many companies that do accelerate vesting do so only pro-rata — crediting the months worked through death, not the full unvested grant. For a senior engineer three years into a four-year RSU grant at the time of death, that could mean losing 12–18 months of unvested value.

Read your RSU grant agreement and equity plan document. Look for language under "Death" or "Termination Due to Death." If you have a significant unvested position and your plan forfeits on death, this is worth discussing with an estate attorney — some companies will negotiate, and there may be planning strategies to address the exposure.

Unexercised stock options at death

Stock options — ISOs and NSOs — are even more variable. Most plans give the executor or the estate a limited window to exercise after death, often 12 months. If the estate doesn't exercise within that window, the options expire worthless. This is a risk for estates where the executor doesn't know about the options or doesn't act quickly.

If you hold valuable stock options, make sure your estate documents explicitly identify them, and tell your executor or successor trustee where they're held and what the exercise deadline is.

3. The step-up in basis: the biggest estate planning benefit for appreciated tech stock

Under IRC §1014, inherited assets receive a stepped-up cost basis to fair market value at the date of death.² For tech workers with highly appreciated employer stock, this can be worth hundreds of thousands of dollars.

Example: You received RSUs three years ago worth $40/share at vesting. You've held those shares since — they're now worth $180/share. If you sold them today, you'd owe capital gains tax on the $140/share gain. If instead you die while holding those shares and leave them to your spouse or children, their cost basis resets to $180/share. They can sell the next day and owe zero capital gains tax on the appreciation that accumulated during your lifetime.

This makes spending down other assets first (cash, bonds, lower-basis shares) and holding appreciated employer stock a potentially powerful estate planning move — if you can afford the concentration risk. The tradeoff is that you're exposed to a single stock's volatility. See our concentrated stock guide for how to think about that tradeoff.

Inherited IRAs: the 10-year rule

Under the SECURE Act (2019) and final IRS regulations (T.D. 10001, 2024), most non-spouse beneficiaries who inherit an IRA must withdraw all funds within 10 years of the original owner's death.³ If the decedent had already started required minimum distributions (RMD age is 73 for those born 1951–1959, or 75 for those born 1960 or later), the beneficiary must also take annual RMDs within that 10-year window.

Spouses get a better deal: a surviving spouse can roll the inherited IRA into their own account and treat it as their own, deferring distributions until their own RMD age.

The inherited IRA rules are complex enough that you should review them with an estate attorney or financial advisor when designating beneficiaries, especially if you plan to name a trust as beneficiary of your IRA (which involves additional rules around "see-through" trusts).

4. Will vs living trust: which do you need?

A will is a legal document that says what happens to your assets that don't pass by beneficiary designation or joint ownership. It names an executor to manage your estate and a guardian for minor children. In most states, a will goes through probate — a court-supervised process that can take months and creates a public record.

A revocable living trust holds assets during your lifetime and distributes them directly to beneficiaries at death, bypassing probate entirely. The trust is managed by you as trustee while you're alive; a successor trustee takes over at your death or incapacity.

When a will is probably sufficient

• You're single or married without children
• Your assets are mostly retirement accounts and equity compensation (which pass by beneficiary designation, not will)
• You own property in only one state
• Your estate is straightforward and you don't mind probate

When to consider a revocable living trust

• You own real estate — especially in HCOL markets where home equity is a major asset. Real estate in multiple states creates ancillary probate (separate probate proceedings in each state), which a trust avoids.
• You have minor children and want detailed instructions about how assets are managed until they reach adulthood (wills can name a guardian, but trusts can structure how and when children receive money).
• You have significant taxable investment assets and want them to pass directly without probate delay.
• You're expecting a large liquidity event (IPO, acquisition) and the resulting asset base warrants more sophisticated planning.
• Privacy matters to you — trust documents are private; wills become public record through probate.

A trust doesn't eliminate taxes. It simplifies administration and speeds up asset transfers. For most early-to-mid-career tech workers renting in a HCOL city with most assets in retirement accounts and equity comp, a well-drafted will + updated beneficiary designations accomplishes 90% of what a trust would — at lower cost and complexity.

5. The $15M estate tax exemption: who actually needs to worry

The federal estate tax applies only to estates larger than the basic exclusion amount. For 2026, that threshold is $15,000,000 per person (or $30,000,000 for married couples using portability election), made permanent by the One Big Beautiful Bill Act (OBBBA, July 2025).⁴

Most tech employees — even senior ICs at FAANG earning $400K–$700K — won't hit this threshold. But a few situations can change the math quickly:

• Pre-IPO equity that becomes extremely valuable: If you hold 500,000 shares of a pre-IPO company and it IPOs at $50/share, that's $25M in a single asset. Estate planning well before the IPO can significantly reduce exposure.
• QSBS and estate planning: Shares that qualify for QSBS exclusion under §1202 also receive a step-up in basis at death — but the heir must hold the stock for the remaining QSBS holding period. If you're considering transferring pre-IPO QSBS-eligible shares as part of estate planning (e.g., to an irrevocable trust for heirs), the timing and structure matter significantly for preserving the exclusion. Get professional advice here.
• Serial equity grants over a career: Multiple FAANG RSU grants compounding over 15–20 years, plus home equity in a $3M Bay Area house, plus retirement accounts, can accumulate into a meaningful estate even without a single windfall.

If your estate is solidly below $15M, federal estate tax isn't your concern. Focus on income taxes (step-up in basis) and distribution logistics (beneficiary designations, trust vs probate) instead.

Annual gifting strategy

For those with larger estates, the annual gift tax exclusion lets you give $19,000 per recipient in 2026 (indexed for inflation), completely tax-free and without using any lifetime exemption.⁴ Married couples can give $38,000 per recipient. If you and your spouse have three adult children, that's $114,000/year in tax-free transfers.

If you have RSU vest events and find yourself with significant cash, a systematic annual gifting program to children or a 529 superfunding strategy (front-loading five years of annual exclusions: $95,000 single / $190,000 MFJ) can reduce your estate over time. See our 529 plan guide for details on superfunding.

6. Powers of attorney: the documents you actually need soon

Estate planning isn't only about death. Incapacity — a serious accident, illness, or cognitive decline — can make managing your finances impossible without the right documents in place.

Durable Financial Power of Attorney

This document designates someone to manage your financial affairs if you're incapacitated. Without it, your family may need to go to court to get a conservatorship — a slow, expensive, and public process. A durable POA (unlike a regular POA) remains effective even if you become incapacitated.

Your designated agent can pay bills, manage investments, file taxes, and make financial decisions on your behalf. Choose someone you trust completely — typically a spouse, parent, or close sibling.

Healthcare Power of Attorney / Advance Directive

A healthcare POA names someone to make medical decisions if you can't. An advance directive (living will) expresses your wishes about end-of-life care. These two documents are distinct from your financial estate plan but equally important. Many attorneys bundle them together.

If you're unmarried, these documents are especially important — without a healthcare POA, medical staff may be required to make decisions based on next-of-kin hierarchy (parents, siblings) rather than the partner or friend you'd actually want to be consulted.

7. Life insurance: do tech workers need it?

Life insurance replaces income and protects dependents. If you have no dependents — no spouse, no children, no parents depending on your income — life insurance may not be necessary at all. Your assets speak for themselves.

If you have dependents, the calculation changes:

• Your largest asset may be your future RSU vests, not current assets. A 34-year-old FAANG employee with $180K in the bank but $800K in unvested RSUs over the next three years has most of their wealth in future income. If they die, that future income disappears. Term life insurance covers the gap between current assets and the future income stream your family is counting on.
• Term insurance is almost always the right answer for working tech employees. 20-year level term, enough coverage to replace 10–15 years of your income (or enough for your family to be financially independent). At age 35 in good health, $1M in term coverage typically costs $30–$60/month. Whole life insurance is generally not the right tool here.
• Don't over-rely on employer-provided life insurance. Most tech companies offer 1–2× annual salary in employer-paid coverage, with optional add-ons. This coverage ends when you leave the job, and often isn't enough anyway. Individual term policies travel with you and provide more reliable coverage.

Estate planning checklist for tech employees

When to get a financial advisor involved

A financial advisor focused on tech employees typically coordinates the estate plan across the financial picture: which accounts to hold appreciated stock in (taxable brokerage, to capture step-up in basis), how much to hold vs diversify (concentration risk vs estate benefit), 529 superfunding around RSU vest events, and how life insurance sizing fits into an overall income-replacement plan.

Estate attorneys handle the legal documents. Financial advisors handle the strategy of how to structure assets to minimize taxes, maximize inheritance, and protect your family against the specific risks of tech-concentrated wealth.