Here's the pattern. Somebody gets laid off, reads the severance agreement three times, negotiates two extra weeks of pay — and never opens the equity paperwork until a reminder email lands eleven weeks later saying their options expire Friday.
The severance is the loud document. The equity is the quiet one with a clock on it.
This is not investment advice, and none of it will tell you whether to exercise. It's a map of what typically happens to equity after a layoff, so you know what you're holding and what's about to expire while you're busy updating your resume.
First: find three documents
Not your equity portal dashboard. The actual paper. Most people have these buried in an email from their first week and have never read them.
- Your grant agreements — one per grant, usually. These have your strike price, grant date, vesting schedule, and the exercise window after you leave.
- The equity plan document — the master rules the grants sit inside. This is where forfeiture and acceleration language usually lives.
- Your separation agreement — because it may change the equity terms, and because signing it can waive claims connected to them.
Then export a full statement from your equity portal while you still have access. Company logins get shut off fast, sometimes the same day, and it is considerably harder to reconstruct a vesting history from the outside.
Know which thing you actually have
People say "my stock" for three very different arrangements.
- Incentive stock options (ISOs) — a right to buy shares at a set strike price. Potentially favorable tax treatment, and the tightest post-layoff deadline of the three.
- Non-qualified stock options (NSOs) — the same right to buy, taxed as ordinary income on the spread when you exercise.
- Restricted stock units (RSUs) — a promise of shares, no purchase required. Nothing to exercise, nothing to pay in, and generally taxed as income when they vest and deliver.
Options require you to spend money to keep them. RSUs do not. That difference drives almost everything that follows.
The unvested portion is usually gone
This is the part nobody softens for you. In most plans, unvested equity is forfeited on your termination date, no matter how close you were. Eleven months into a twelve-month cliff typically means zero, not eleven-twelfths.
There are two common exceptions worth checking rather than assuming.
- Change-of-control acceleration. Many plans include double-trigger acceleration — unvested equity vests if the company is acquired and you're terminated within a defined window afterward, often somewhere in the twelve-to-twenty-four-month range. If your layoff followed an acquisition, read this clause carefully.
- Notice-period vesting. If you're being paid through a notice period or kept on as an employee for several weeks, your termination date and your last working day may not be the same date. That gap sometimes covers a vesting date.
Ask HR for your official termination date in writing, then compare it to your vesting schedule. A three-day difference has changed outcomes.
The vested options have a deadline — usually shorter than you think
Vested options don't stay yours indefinitely after you leave. Your plan sets a post-termination exercise period, and the long-standing industry default is 90 days from your termination date. Some companies have moved to extended windows of several years. Some haven't. You cannot tell which you have without reading the document.
Two things about that 90-day mark that surprise people:
- It's a hard expiration, not a nudge. Vested options you don't exercise inside the window are generally gone. Not deferred, not paid out — gone.
- For ISOs, it's also a tax line. Under federal tax rules, ISOs must typically be exercised within three months of the end of employment to keep ISO tax treatment. Exercise later — even if your company generously gave you five years to do it — and they're generally treated as non-qualified options instead. The extended window is real. The ISO tax treatment inside it usually is not.
Write the actual date on your calendar the week you're laid off. Then set a reminder three weeks before it.
Exercising is a purchase, and at a private company it can create a tax bill on stock you can't sell. You pay the strike price in cash out of pocket, and exercising ISOs can pull the spread between strike price and current valuation into the alternative minimum tax calculation for that year — a bill that comes due at tax time whether or not the shares are sellable, and whether or not the company ever has a liquidity event. People have paid five and six figures on paper value that later went to zero. Before exercising anything, run the numbers with a CPA or tax professional who has seen equity like yours.
If your company is private, RSUs come with a second condition
At a public company, RSUs generally vest on schedule and deliver shares you can sell. Simple enough.
Private companies commonly use double-trigger RSUs instead: they vest only when you've met the time-based schedule and a liquidity event happens — usually an IPO or an acquisition. If you leave before that second trigger fires, plan terms often forfeit the units entirely, even the ones where you already served the full time requirement.
Some plans do preserve time-vested units for a defined period, and if a liquidity event happens inside that window they can still deliver. Others expire if no event occurs within the award's term. This is genuinely plan-specific and it is worth having someone read the exact language rather than going by what a coworker told you in a group chat.
What you can reasonably raise before you sign
Equity terms are less flexible than severance pay, but the ask is free and the window closes when you sign.
- A written confirmation of your termination date, vested share counts by grant, and your exercise deadline
- An extended exercise window — sometimes granted in layoffs, and worth asking about explicitly with the ISO tax consequence in mind
- Continued vesting through a paid notice period, if a vest date falls just past your last working day
- Confirmation of what happens to any unvested units if a liquidity event occurs later
Ask in writing. Keep the reply. If the answer contradicts the plan document, that's a question for an employment attorney before you sign anything.
Do the arithmetic before you decide anything
Three numbers, one page:
- Cash to exercise — strike price multiplied by vested shares. This is money you spend during a period with no paycheck.
- Estimated tax exposure — for the year you exercise, which a tax professional can estimate for your situation.
- What the shares might actually be worth — and, for private companies, when you could realistically sell them. Sometimes the honest answer is "unknown" and "not soon."
Then weigh that against your runway. Spending your emergency fund on illiquid shares during a job search is a decision people regret more often than letting options expire — and it's a decision to make with a financial professional, not at 1 a.m. with a browser tab open.
What to do this week
- Download every grant agreement, the plan document, and a full equity statement before your access is cut off
- Get your termination date in writing and compare it to each vesting date
- Find your exercise window in the plan document and put the expiration date on your calendar with a three-week warning
- List vested shares, strike price, and grant type in one place so a professional can review it in fifteen minutes instead of two hours
- Book time with a CPA or financial professional before the window closes, not after
Our Severance Response Letter helps you put your equity questions to HR in writing before you sign, and the Budget Reduction Worksheet helps you see whether the cash to exercise is actually there. Both are in our Job Loss bundle at lumeway.co/templates. They're organizational tools to help you prepare — not a substitute for advice from a licensed professional.
The clock started on your last day, whether anyone told you or not. Ninety days is a lot shorter when you're also looking for work.
This post is for general informational purposes only and is not legal, financial, or tax advice. Equity terms vary significantly by company, by plan, and by individual grant, and tax rules change. Nothing here recommends exercising, holding, or selling any security. Please review your actual grant and plan documents and consult a licensed financial professional, a tax professional, and an employment attorney about decisions specific to your situation.