H1B layoff: how to protect your RSUs, 401(k) and trust

After an H1B layoff, your last day of employment decides what happens to your unvested RSUs, your 401(k) match and your 60-day grace period. Get that date in writing first, because the order you act in matters more than any one move. And a revocable living trust won't shield your US holdings from estate tax.

Get your last day in writing before anything else

Under 8 CFR 214.1(l)(2), the 60-day grace period runs for up to 60 consecutive days after your employment ends, or until your authorized stay expires, whichever is shorter. A new sponsor's petition or a change of status has to be filed inside that 60-day window.

That window is under review. DHS published a proposed rule on 11 September 2026 (RIN 1615-AD22) that would remove the grace period, and comments close on 10 November 2026. Until a final rule takes effect the 60 days still apply, though I'd plan as if they could shrink.

A mass layoff can also move your last day. The WARN Act requires employers with 100 or more employees to give 60 calendar days' notice before a mass layoff, or owe back pay and benefits for the shortfall. So the date on your notice letter and your final day of employment can differ.

Ask HR for four things in writing:

• Your last day of employment.
• Your last day of paid benefits, including health coverage and 401(k) contributions.
• Any RSU vest date that falls inside a notice period.
• Any deadline to move shares out of your equity plan account.

What an H1B layoff does to your RSUs

Your vested shares are mostly taxed already

RSU income is taxed as ordinary income when the units vest, and that vest-day value becomes your cost basis. A later sale taxes only the gain or loss since then. If the shares are flat or down, a forced sale costs little tax.

If they've climbed, timing starts to matter. In your position I'd sell after your US residency ends rather than in its final weeks, unless the concentration risk is too big to carry.

Your residency date decides who taxes the sale

A nonresident alien is generally not taxed by the US on gains from selling US stocks. Two exceptions apply: US real property, and 183 or more days in the US during the tax year, which brings a flat 30% rate on net US gains (IRC 871(a)(2)).

That rule counts days across the whole tax year, so a layoff after midsummer can put you over 183 days before you sell anything. Ask your CPA whether your sale date triggers it.

You can end US residency on your last day in the US instead of 31 December. To do that, attach a dated statement to your move-year return showing your tax home and closer connection are abroad (Treas. Reg. 301.7701(b)-8). Without it, residency runs to year-end, so a November sale is still a resident's sale.

India's side is separate. In an RNOR year (resident but not ordinarily resident), foreign income that stays outside India generally isn't taxed there, and the RNOR window depends on your own day counts. Days in a third country such as Dubai aren't India days, so they add nothing to your India count.

A broker can force your hand

RSUs usually vest into a broker account at Schwab, Fidelity or a similar firm, and some brokers restrict or close accounts once a non-US address is on file. Closure notices typically give 30 to 90 days. Check your broker's current policy before you change your address.

Your 401(k) when the job ends

The match follows the plan, until a layoff changes it

Your own contributions are always 100% vested. The employer match follows your plan's schedule, unless a large layoff triggers a partial plan termination (IRC 411(d)(3)), which fully vests everyone affected.

A 401(k) loan can become income

If you have a 401(k) loan, leaving the job can trigger a loan offset: the plan cancels the unpaid balance against your account and reports it as a distribution. For an offset caused by leaving your job, the IRS lets you roll that amount over by your tax return's due date, including extensions.

Miss that deadline and the amount is taxable income, with the 10% additional tax on top if you're under 59½.

Cash out, roll over or leave it

A lump-sum cash-out is the costly route: ordinary income tax, a 10% additional tax before 59½, and 30% withholding once you're a nonresident alien. I'd leave the account alone until you know where you'll be tax resident when you take the money.

Rolling over or cashing out depends on your age and balance. A rollover to an IRA keeps the money portable, though the custodian has to agree to hold it for a nonresident. It also gives up the Rule of 55 exception if you separate from service at 55 or older.

A revocable living trust won't cut your US estate tax

What the trust does and doesn't do

A joint revocable living trust avoids probate, and that's all it does. You keep control of the assets, so they stay in your gross estate for US estate tax (IRC 2038).

A nonresident alien gets only a $60,000 exemption on US-situs assets, against $15 million in 2026 for a US citizen or domiciliary. US stocks, including vested RSU shares, count as US-situs assets, so estate tax on RSUs applies whether or not a trust holds them.

The trust can change character when you leave

If both trustees move abroad, the trust may stop being a US trust for tax purposes. That changes how custodians and reporting treat it, even though a revocable trust with nonresident alien grantors keeps its income tax effect small.

Read the certificate of trust first: its first clause says whether the trust is revocable or irrevocable.

Who this applies to

You're covered if you hold H1B status or another employment-based status that carries the grace period: E-1, E-2, E-3, H-1B1, L-1, O-1 or TN, along with dependents. A new sponsor who files within the window changes the plan, but the 401(k), vesting and trust points still apply the day you leave the old employer.

It doesn't apply the same way if you hold a green card. You stay a US tax resident until the card is abandoned, so a stock sale is a US person's sale, and your estate generally gets the $15 million exemption.

Workers on STEM OPT sit under different rules and aren't covered here.

What to do in the first two weeks

1. Get the four dates above in writing, and read any severance agreement before you sign it.
2. Ask the 401(k) plan administrator whether the layoff is a partial plan termination, and what happens to any loan.
3. Open an account at a broker that accepts nonresidents before you change your address, because a transfer between brokers takes time and can run longer.
4. Ask a CPA to test your sale date against the 183-day rule and your residency end date before you sell appreciated shares.
5. Pull your trust's certificate of trust and book time with the drafting attorney.
6. File Form W-8BEN with each broker and the 401(k) custodian after you arrive abroad, not before, using your PAN as the foreign TIN.

Common misreadings

• "Nonresident means no US tax on my stock sale." The US generally doesn't tax a nonresident alien's gain on US stock, but 183 days in the tax year, or US real property, changes that.
• "A living trust protects my family from US estate tax." It avoids probate only, and the assets stay in your estate.

Your next move

Email HR today for the four dates in writing, before you sign a severance agreement or touch the 401(k). I'd rather you spend a week on those dates than a year fixing a rushed sale. If your timeline is tight, an InvestMates advisor can run your numbers before day 60.