Vested vs. unvested: the basic rule
When an RSU vests, the shares are delivered to your brokerage account (for example Fidelity, E*TRADE, Schwab or Morgan Stanley at Work), taxes are withheld, and the shares are yours. Leaving the company doesn't change that. Your account usually stays open, sometimes converted to a regular brokerage account.
Unvested RSUs are only a promise, conditional on continued employment. Under most plans they're forfeited on your last day of employment. Everything below is about the exceptions.
Resigning
If you resign, unvested RSUs are normally cancelled on your last day. The only lever is timing: check your vest calendar, since staying until after the next vest date can be worth a lot. When negotiating a new offer, you can ask the new employer for a sign-on grant or bonus to replace what you forfeit.
Layoffs and severance
By default, a layoff works like a resignation: vested shares are yours, unvested ones are cancelled. But severance agreements sometimes include:
- Accelerated vesting of RSUs due within a few months, or of a fixed number of shares.
- Continued vesting through the notice or severance period.
- Cash severance, which is wage income. It's usually withheld at the 22% supplemental rate.
Read the severance agreement before signing, and ask whether acceleration is available; it's not always offered up front. Accelerated shares are taxed as wages on the acceleration date, with the usual withholding.
Acquisitions
What happens depends on the deal and your plan documents. The three common outcomes:
1. Assumed or converted. Your unvested RSUs become RSUs of the buyer, usually on the same vesting schedule. Nothing is taxed until they vest.
2. Cashed out. Unvested RSUs are paid out in cash at the deal price, either right away or on the original vesting dates. The payout is wage income.
3. Accelerated. Single-trigger acceleration vests RSUs when the deal closes. Double-trigger acceleration vests them only if you're also terminated without cause (or leave for "good reason") within a set period after the deal, often 12 to 24 months.
Look for "change in control" language in your equity plan and grant agreement.
Retirement, disability and death
Some plans have special rules: continued or partial vesting for employees who retire after a certain age and years of service, and full or partial acceleration on death or disability. These vary a lot between companies, so check your plan documents before planning a retirement date.
Termination for cause
If you're fired for cause (as defined in your plan, typically misconduct or fraud), unvested RSUs are cancelled like in any other termination. Some plans go further, with forfeiture or clawback provisions that can reach shares that already vested, for example after a policy breach or a non-compete violation.
Separately, SEC rules adopted in 2022 require listed companies to have clawback policies (effective since late 2023) for executive officers' incentive-based pay after an accounting restatement. RSUs that vest based only on time are generally not covered. For most employees, vested shares are not at risk.
Tax when you leave
Leaving isn't a tax event in itself. What matters:
- Cancelled RSUs: never taxed, because you never received them.
- RSUs that vest on or after departure (accelerated, cashed out or through continued vesting): taxed as wages when they vest or are paid, reported on your W-2 from that employer.
- Withholding: usually 22% federal. If you're in the 32% bracket or higher, which is common in a year with a big payout plus salary, you'll owe the difference when you file. A mid-year departure can also lower your total income, so the gap may be smaller than you expect. Run the numbers.
- Moving after you leave: the state where you worked while the RSUs vested can still tax them.
Checklist before your last day
- Download your equity statements, grant agreements and vesting schedule. You may lose access to internal HR systems.
- Note the date of your next vest and how many shares are unvested.
- Read the severance, merger or retirement terms for any acceleration or continued vesting.
- Confirm your brokerage account login is personal (not your work email) and update your address.
- If you hold stock options, check your exercise window, usually 90 days.
- Estimate the tax on any payout or accelerated vest, and plan how to cover the gap.