Expiring stock options is an inherent problem. IRS rules only allow equity grants to be tax deferred if there is some risk that you don’t get to keep them. If options lasted forever, there would be intrinsic value and they would insist on collecting taxes equal to the fair value of the grant the moment you got it. Common expiration rules include:
Solving this problem for ISOs requires converting them to NSOs or exercising them to acquire the actual stock. The NSO conversions have negative tax consequences NSO conversion has negative tax consequences in addition to requiring a negotiation with your employer unless it is a universal privilege for all employees (rare). If you exercise your ISOs, you’ll need money for both the exercise as well as the Alternative Minimum Tax (AMT) that may result. Similarly, exercising an expiring NSO to acquire non-expiring shares requires both the exercise cost as well as mandatory withholding taxes on the fair market value (FMV) spread at the time of exercise. For either ISOs or NSOs, ESO can relieve the financial burden and risk by providing this capital for you. See this link for more differences between an ISO and NSO.
RSUs are often re-granted for ongoing employees but former employees are usually out of luck. One common solution acquired through negotiation with the company is the conversion of RSUs to an equal amount of restricted stock. This is known as accelerated vesting and is sometimes a stated privilege in your RSU grant. However, this event triggers a tax event on the FMV of the stock at the moment of delivery. If the stock isn’t publicly traded or restricted from private transfers, this tax can be quite a burden. This is often solved with a net-exercise where a large percentage of your shares are forfeited to the company to cover the taxes. Besides requiring a negotiation with the company, the net-exercise is often not a good deal. At a minimum, you should contact ESO for an alternative proposal to cover the taxes on ALL of your RSU conversion shares to maximize your long term benefit while avoiding personal financial burden and risk.