Phantom Stock Reveals Untold Value

Jason has prospered over 20 years as research director for a privately owned medical device company. He was granted 10,000 shares of phantom stock, now worth $150 per share. The value of this phantom stock, at $1.5 million, is now his largest asset. The founder is retiring and Jason has been tapped as chief operating officer. The company is being sold to a private owner, which will trigger a liquidity event.

Phantom stock is a reward paid to an executive for the value of a defined number of shares. It represents a promise to pay the value of the shares, usually in cash. Jason, 46, watched the award track the appreciation in his employer's stock over 20 years. The buyout in the form of a cash payment will be a substantial windfall for Jason.

Over the years, Jason dabbled with trading stocks online and was sure to make maximum contributions to his company's retirement plan. He wants to ensure that he and his wife can retire by age 55. They both are career focused and enjoy traveling. He wants to put cash away for long-term security and needs a plan to diversify his assets and ensure long-term security.

The change in control will trigger a $1.5 million liquidity event from Jason’s phantom stock. As a result, SFG would consider the full spectrum of his financial planning requirements. What should he reserve for taxes and investment planning? Finally, they would make an asset allocation recommendation, something Jason had not considered while trading stocks online. As the closing date draws near, Jason is prepared for the next step in his family's financial security.

*The name, likeness, and circumstances in this example are a fictional composite of facts from executives similar to actual SFG Clients.

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