The treatment varies by company and stock plan. You should check your plan and grant agreement, as some plans may accelerate vesting in this situation, at least in special circumstances or upon approval by the board.
Example: You die when only 40% of 10,000 stock options are vested. While the remaining 6,000 options would be forfeited in a standard job termination, such as leaving to work for another company, upon your death the company's stock plan instead accelerates the vesting. The 10,000 vested options may be exercised by your estate or beneficiary under the terms of your stock plan documents. These will have special rules that require the options to be exercised within a specified period.
The 2016 Domestic Stock Plan Design Survey by the NASPP found the following about death-related plan provisions among the surveyed companies:
- Upon an employee's death, 54% of the surveyed companies accelerate the vesting of all the employee's unvested stock options, while 8% accelerate vesting for just a portion of unvested options.
- For a deceased employee's grant of restricted stock/RSUs, 58% accelerate the vesting of the entire unvested portion of the grant, while 11% accelerate the vesting of just a portion.
A survey of 325 companies by the Ayco Company in 2015 found that, for restricted stock and restricted stock units, more than 75% of the companies provide for the acceleration of vesting upon death.
See a related FAQ for the impact of death on performance shares.