Executive benefit strategies are becoming an increasingly important part of estate, business, and succession planning. During the recent webinar, “Executive Benefit Strategies Every Estate Planner Must Know,” Kathleen Bilderback, JD, LLM, AEP, explained how these plans work, why they matter, and what financial professionals and estate planners should understand when helping clients navigate them.

The program, sponsored by the American Cancer Society, focused on the growing role of executive benefits in compensation planning. Bilderback explained that executive benefits can include bonus plans, non-qualified deferred compensation plans, split dollar plans, stock options, restricted stock, phantom equity, and equity appreciation rights.

One of the biggest takeaways was that plan design matters. Business owners must first decide whether they want executives to receive actual equity in the company. That decision can lead to plans that grant equity, such as incentive stock options, non-qualified stock options, and restricted equity, or plans that do not grant equity, such as phantom equity and equity appreciation rights.

Plans that grant equity can help recruit, retain, and reward key executives, but they can also affect ownership, succession planning, valuation, estate planning documents, and shareholder agreements. Bilderback explained that companies must consider what happens if an executive leaves, dies, becomes disabled, or wants to transfer ownership to a trust or charity.

The webinar also covered synthetic equity plans, which do not grant actual ownership but provide executives with a cash benefit tied to company value. These plans can be useful when owners want to reward executives based on business performance without diluting ownership. They can also provide flexibility through vesting schedules, performance goals, and change-of-control provisions.

Another important takeaway was the role of tax and compliance rules. Different plan designs can create different tax consequences, including ordinary income, capital gains, estate inclusion, and potential Section 409A issues. Bilderback stressed that payment timing, vesting, beneficiary designations, and plan terms must be handled carefully.

The discussion also highlighted the connection between executive benefits and life insurance. Life insurance is often used to provide liquidity for heirs or to informally finance certain executive benefit plans. Charitable planning may also play a role, especially when synthetic equity benefits are taxable to the recipient and a charity or donor-advised fund may be named as beneficiary.

For NAIFA members, the message was clear: executive benefit plans can have major implications for estate planning, business succession, taxes, liquidity, and charitable giving. By understanding these strategies and reviewing plan documents carefully, financial professionals can help clients ask better questions, coordinate with legal and tax professionals, and create plans that support both business and personal planning goals.