How to Mitigate Taxes & Diversify a Large Stock Position: Part 2

Five people, five completely different net worths, ages, and family situations, and every single one of them is sitting on a stock position that's grown so large it's now the single biggest risk in their financial life. In part two, we're taking the strategies we learned about in part one of this miniseries, and we're running it through five real case studies with real numbers, so you can see exactly which strategies fit different situations, and more importantly, why the "obvious" answer is wrong more often than you think.

00:01:00
Welcome back. This is part two of our miniseries on concentrated stock positions and how to diversify out of those in a tax-efficient manner. If you haven't heard part one yet, I highly recommend you go back and listen to that first. We walked through the tax brackets that actually govern these decisions, why concentration risk is the real enemy here and not necessarily the tax bill, or not so much the tax bill, I should say, and several strategies such as just selling the position, holding it for a step-up in basis for heirs, gifting it to family while you're alive, direct indexing, and charitable giving strategies, and more. In this episode, we're not adding new strategies or tools. We're taking everything from part one, and we're putting it to work against five case studies with real numbers, real trade-offs, and in a couple of cases, some things that might surprise you about which strategy actually fits which person. One reminder before we dive in: what we covered in part one and what we're applying today is a strong core toolkit, but it's not the entire universe of what's available. Just know that there are more strategies, more structures, and more nuance than just two podcast episodes can carry. Without further ado, let's dive right in.

00:02:20
Case study number 1: we have Karna and Jana. Karna and Jana are both 68 years old and retired. They're married, with a net worth of around $13 million, built from $9 million in a brokerage account—so that's just like a plain Jane investment account. It could be titled in one of their names, both of their names, or maybe in the name of their revocable living trust. Doesn't matter. $2.5 million in an IRA and $500,000 in multiple Roth accounts. They also own their home that's worth $1 million. Obviously, the majority of their net worth here is in that brokerage account. How did that happen? Well, this is the kicker: $5 million of that $9 million brokerage account is all sitting in a single stock. And just 2 years ago, that position was worth about $500,000. It's all long-term capital gain because they've held it for longer than 12 months, and they've received a 10-fold return in just 24 months.

00:03:31
You might be wondering, how does someone even end up having a single stock position worth $500,000 to begin with? And the answer is, in this case, it doesn't really matter because this is a case study. However, there are several ways that this actually happens in real life. The most common is that it comes from employer stock compensation of some sort. It might be stock options or what we call restricted stock units, AKA RSUs, things like that. It's especially in these cases where you can see a stock go through a very sharp uptrend or downtrend in such a short period of time. Because a lot of times, these companies are newer, they're more innovative tech companies, and their stocks can be very volatile. Someone might have a very concentrated stock position by inheriting it from their parents, or maybe they're just extremely lucky and have been buying more and more of that position over many years because they had a strong belief in the company, and that company ended up doing very well over the past decade or even 20 years.

00:04:42
There are multiple ways that this can happen, but for our case study, let's just say that it came from employer stock, AKA equity compensation, since that is the most common situation. So what do you do here? There's actually a few things, and they're not mutually exclusive. First, just selling is definitely on the table. At the federal level, their worst-case marginal tax rate is 23.8% on the portion of the stock that is the capital gain or the appreciation. That alone eliminates concentration risk and creates a large, diversified pool of capital if they were to sell it.

First and foremost, it would be in cash, and then if they decided to reinvest it, they can diversify. Second, direct indexing can be layered in here, sized appropriately to systematically harvest losses that offset gains as they sell down the position over time. This is where things can get tricky, though, because remember, as we mentioned in part one, if you are going to successfully utilize a direct indexing strategy and start diversifying as soon as possible, you're going to need additional money other than the stock position itself to make this happen, at least to make it happen quick enough. In their case, they actually do have additional funds. If you'll remember, the brokerage account is worth $9 million, and about $5 million of it is in the individual stock. So the other $4 million can be used to help execute this direct indexing strategy. The money in the retirement accounts, however, won't really help us here, nor will any of the equity in the home.

00:06:32
Ideally, we want an equivalent amount. So if we have $5 million in concentrated stock, the easiest and fastest route to quickly diversifying using direct indexing would be to have another $5 million of other funds. However, in this case, $4 million is very doable as well. But it is also going to depend on how that other $4 million is currently invested and whether or not there are sizable gains there, right? If they're invested in a bunch of other stocks or some kind of funds of some sort, those might have gains right now as well. If there are already sizable gains with that side of the portfolio, we may need to do additional capital gains analysis and tax analysis before we start executing on a direct indexing strategy.

One thing I want to note about this is that all of these numbers are relative. If you have this concentrated stock position, but you don't have, let's say, $9 million in an investment account and $5 million of it in one stock, and you have a much smaller amount, the premise is still the same.

00:07:40
If you're going to utilize a strategy like this, you're going to need other funds that are available outside of retirement accounts. And the closer the value of those funds can be to the size of the concentrated position that you have, the better. You also have to realize that if those other funds are, let's say, in cash and you're going to utilize this strategy, you're going to have to invest those dollars, which will then subject them to a new type of risk because they would have gone from cash to now being invested across the overall stock markets. You don't want to use money that you already have a plan for using, you know, in the coming year or two, right? If you were going to use that extra cash to buy your vacation home, well, this probably isn't going to work out very well.

00:08:29
Okay, the third thing that deserves a serious look in this situation, given the size of this gain, are charitable tools. More specifically, a pooled income fund or a charitable remainder trust. We call that a CRT for short. Those can be considered to donate a meaningful slice of the stock. Doesn't need to be all of it. It would get them a sizable tax deduction to offset gains on other sales of the stock that they might make that was not donated to the charity. It moves a chunk of the position out to charity tax-free, and it can create lifetime income for them. If they were to use a strategy like this, they definitely would need competent attorneys that have experience in drafting things like charitable remainder trusts and similar types of trusts in order to make sure that it is executed properly and they don't break any of the rules. This decision also weighs heavily on their legacy. Do they want to leave behind money for heirs? Do they have any heirs? If the answer is no to either one of those questions, then a charitable remainder trust could be a really good solution for them.

Also, they have the ability to use a donor-advised fund, and we call those DAFs for short, DAF. This is essentially the simpler version of the same idea. However, it doesn't create the income stream. So with a donor-advised fund, you can typically just open up one of these with your financial professional. You don't need to go get a bunch of legal documents drafted, yada, yada, yada. The benefits you get with the DAF are that when you contribute a portion of the stock, you get a deduction, a tax deduction. That can help offset the gains from selling some of the stock that you did not contribute to the DAF. So it checks pretty much two of the three boxes when comparing it to a CRT for diversification purposes and tax purposes. However, they each have additional pros and cons to weigh as well for things like cash flow planning and legacy planning.

00:10:41
There are also other really unique strategies they could use in this situation, but they go beyond the scope of just a single podcast episode. The real lesson from this case is that most solutions here use a combination of approaches, not just one. And because their concentration risk and net worth rose so dramatically in such a short window of time, there's an argument for acting decisively rather than spreading the diversification out over many years. Some of these tools take time to implement, and a 10x move involving millions of dollars in a couple of years is not a stable, low-volatility situation, especially mentally. Get ready for an emotional roller coaster if that's you. A stock that runs that fast to that extent can give back a lot of that gain just as fast, and in fact, usually faster.

00:11:40
Case study number 2: we have John. John is 61, single, no children, with a partner and siblings as his intended beneficiaries. He's got $6 million in AMD stock with a basis of just $200,000. He has an IRA with $800,000 and a $500,000 home. This situation is similar to case study number 1. However, John built this position in AMD slowly over a very long career at the company. The stock has spiked really hard in the last year. He's also charitably inclined as of right now, but his legacy wishes may change if he ends up getting remarried. So here's one way to sequence this and start diversifying over several years. In year 1, he could put, let's say, $2 million into a CRT or pooled income fund. This would generate income for John, and whoever else he designates, and the deduction he gets can be used to offset gains from selling additional shares outright, like we just discussed in the last case study.

And one quick thing to note on the charitable trust strategies is that you're not going to get a tax deduction that equals the value of what you're donating. In this example, if he puts $2 million into one of these trusts, he's not going to get a $2 million tax deduction. The way the actual deduction is calculated gets much more complicated. However, it should still be sizable enough to make a very meaningful difference if he were to sell some other stock at a gain. Additionally, he can now use available cash after the charitable contribution and sale of some of his stock to fund a direct indexing strategy, which can start generating paper losses that would offset gains going forward on any AMD stock that he still has. Each year moving forward, he could sell enough stock to fill up maybe the 15% long-term capital gains bracket without spilling over into the 20% bracket, understanding that some of this will still get hit with that 3.8% net investment income tax that we also discussed last episode. So instead of being 15%, it might be 18.8%.

00:14:10
Let's zoom out and understand what's going on here. In John's situation versus the first case study, he does not have additional cash on the side to utilize something like a direct indexing strategy, at least from the start. However, if we layer in multiple strategies here and he utilizes something like a charitable trust or even a donor-advised fund to get a tax deduction, and then he sells some of his other stock at a gain, he is able to now raise some cash because he's selling that stock that he can then use in a direct indexing strategy to help keep that diversification wheel moving in a tax-efficient manner. So in essence, he can continue to sell each year and fill up the 15% capital gains bracket and continue using charitable vehicles such as the ones we discussed. With this combination, John might be able to diversify most, if not all, of his AMD position by the time he's, say, 65.

By the way, if John can start diversifying and implementing these types of strategies over the next few years, it can also help him avoid very high Medicare IRMAA surcharges once he's Medicare eligible, which is nice given his current age. If he instead was to incur a majority of these capital gains after he was Medicare eligible and on Medicare and didn't take his RMDs from his IRA until his 70s, he would likely be paying thousands of dollars a year in Medicare premiums that largely could have been avoided, right? So there's a lot of stuff going on here. We don't want to just look at this through a silo and just focus on what amount in taxes am I going to pay on the stock sale alone. We have to look at how would that impact other parts of our tax return and in what years, for how long.

00:16:15
Okay, case study number 3. Here we have Bernice, and this one's mostly about avoiding unnecessary taxation. It's not too much about concentration in a specific stock or company. I wanted to include this case because it's an important gut check for many investors, and it can become a very serious problem for those that start diversifying out of their concentrated stock position and they start reinvesting in things like mutual funds. So here we have Bernice. She's 84, widowed, no family left. Her estate is going to charity, her entire estate. She's got $1.4 million in just two mutual funds that have very large embedded gains because she's held these for a long time and they've done very well. She has $2.1 million in several other diversified mutual funds, all in a taxable brokerage account. She has a $250,000 IRA and a small annuity.

00:17:20
Her income from a pension, her Social Security, and the annuity covers pretty much all of her living expenses. And she also gives $15,000 a year to charity already. Her complaint is that she hates the capital gains distributions that the mutual funds throw off every December because she has to pay taxes even if she doesn't make any money. I would say that's a valid complaint, and you'll understand why in a minute. And again, this is a very common real-world scenario.

00:17:54
So for those of you unfamiliar, the term capital gains distributions is different than capital gains taxes, although they are related. Generally speaking, capital gains distributions are basically the mutual fund passing its trading profits from buying and selling stocks inside the fund through to you, the shareholder, whether you wanted them or not. Here's the mechanics. A mutual fund is a pool of stocks or bonds or sometimes other assets run by a “professional money manager.” And throughout the year, that manager will buy and sell holdings inside of the mutual fund. Sometimes it's because they're rebalancing, they're taking profits, they are responding to redemptions from other shareholders who want to get cash out, things like that. Every time the fund sells a position for more than it paid for that investment, that's a capital gain inside of the fund.

00:18:59
Now, by law, mutual funds are structured as what we call regulated investment companies. They don't pay tax on those gains themselves for the most part. They're required to distribute substantially all of those net realized gains to the shareholders each year, typically once, and it's usually near year-end, though some funds distribute more often or even semiannually. Now, when they do, you owe the tax, even if you never sold a single share of the mutual fund yourself. There's really no telling exactly whether or not a fund will have a capital gain distribution in any given year. A mutual fund manager may decide to sell a position at a gain this year that they've held for the last 10 years in the mutual fund, even though the mutual fund itself maybe is down 5% this year, and you would still have taxes to pay because of that.

00:19:56
And on a side note, this problem, like I said, it's extremely common. In fact, several years ago, a family came to our office because in the prior tax year they had around, I want to say it was like $140,000 capital gain distribution between just two mutual funds, and they had to pay the tax on that. So that was pretty brutal. They didn't do anything themselves, and so that was one of the biggest surprises that they've ever had in their life. Obviously, they wanted to fix this situation immediately. Anyways, I just thought I should share that.

00:20:34
Usually towards the end of the year, around September or October, they will give you an idea, they being the fund companies, as far as what to expect on a potential distribution, but they are just estimates. In reality, it's just one of those mysteries you'll have to deal with every year if you own mutual funds that trade stocks in a taxable account.

Am I going to have a capital gain distribution this year? How big can it be? Or is nothing going to happen? Who knows? You'll have to wait and see. A common solution to this issue is owning maybe an index fund or an exchange-traded fund, or ETF for short, instead. These types of funds oftentimes do not produce annual capital gains distributions, or if they do, they are typically very minimal.

00:21:27
So here's the thing. This is not as bad of a concentration problem as the last two case studies. The funds Bernice holds are fairly diversified, although there are many mutual funds out there that are not as diversified as you might think, especially if they are sector-specific. For example, you can own a semiconductor mutual fund or a utilities mutual fund or something like that that is only invested in companies or stocks in that one single sector. What she has is basically a tax annoyance and, quite frankly, an unnecessary taxation problem given her exact situation.

So given that everything she owns will eventually go to charity anyway, and given that non-IRA assets will get a full step-up in basis at her death, aggressively selling and reallocating right now in order to get rid of these pesky capital gains distributions might not even be worth the tax cost. However, you will always want to do an analysis on how it can affect your entire tax situation. For instance, large capital gain distributions year after year increase your income, which could then disqualify you for certain deductions, could cause more Social Security to become taxable, or cause surcharges on your Medicare premiums, like we discussed before, those IRMAA surcharges.

00:22:59
Here's some reasonable options. Do nothing differently and just keep giving $15,000 a year to the charities of her choice, although I might have her shift some, if not all, of that giving to qualified charitable distributions, also known as QCDs, from her IRA, depending on her total required minimum distributions that she has to take. A CRT or pooled income fund, like we discussed before, is also worth mentioning, given that the charitable deduction calculation for these gets more favorable the older you are. Though since she doesn't actually need the income, it actually makes a donor-advised fund look even more beneficial. Just as in the previous case studies, she could contribute a large amount of these mutual fund shares in kind to a donor-advised fund, then use the tax deduction to sell additional mutual fund shares. That would reduce her exposure to these capital gains distributions, and she would be able to reallocate that cash to more tax-efficient ETFs or index funds, maybe. Therefore, each year going forward, she can continue to give to the charity through QCDs from her IRA and donor-advised funds donations with her taxable brokerage account mutual funds.

00:24:23
All right, case study number 4. We have Steve and Tori. Steve and Tori are 65 and 63. They're both retired. Steve worked at the same publicly traded company for 40 years and has $1.5 million of that company's stock with a basis of just $50,000. Most of this stock was acquired through net unrealized appreciation, or NUA, treatment inside his old 401(k).

00:24:55
Now, before we go any further, for those of you that are like, "What in the world did you just say? What is net unrealized appreciation?" We have mentioned it or talked about it before in previous episodes. It's basically a strategy that can be utilized if you have employer stock that is actually inside of your 401(k) or profit-sharing plan, and there's actually a couple other types of plans that are eligible for NUA, but that's a little too far in the weeds for today. For most people, it's going to be in their 401(k). Actually, another pretty common one you may be able to use NUA is if your company offers an ESOP or an employee stock ownership plan that allows for it.

The key is that not everybody will have the opportunity to use this strategy, and also it has nothing to do with other equity compensation that you might get, like restricted stock units or stock options. It's only if you own company stock or a company stock fund in the vehicles that I just discussed. And essentially, depending on the price of the stock when it was purchased in your account versus the price today, there can be huge tax advantages to utilizing the NUA strategy. And again, I won't go into the fine details on it, but just understand that people will do this if it makes sense and it will save them in taxes in the long run.

00:26:20
Okay, back to Steve and Tori. They've also got $1 million combined in IRAs. They have $700,000 in Steve's, $300,000 in Tori's. They have a paid-off home, and they have $250,000 in cash. Their annual expenses are only $60,000 per year, almost fully covered from the $50,000 in Steve's Social Security benefits alone. They are not charitably inclined. They want the wealth to go to their three kids, so some would say the kids are their charity.

00:26:53
And just as a side note, this particular company stock has a long history of stability, even through big recessions. So Steve and Tori are really in no rush to diversify all of it, although what happened in the past is definitely no guarantee of what happens in the future. So they do understand that they have a concentration risk that they still can't ignore. This case is a good reminder that there's no one-size-fits-all urgency dial. They have real concentration risk, but the stock's actual volatility is historically pretty low. They don't need to touch the money for years, so they're really not in any rush. The plan here can be patient and tax-efficient rather than being really aggressive and trying to diversify as quickly as possible. Also, the fact that Steve utilized the NUA strategy already to get his company stock out of the 401(k) plan and into a brokerage account changes a couple things.

00:28:00
Okay, so what are some of their options? Well, they can gift appreciated stock up to the annual exclusion amount to each of their three kids, which is currently $19,000 per recipient in 2026. This would move stock out of their estate at zero gift tax cost. And because there's no rush, they could do this each and every year, and typically that exemption amount goes up slightly each year. And what I want you to realize here is there is a difference between gifting the stock itself and selling the stock, then gifting the cash afterward, because it changes who pays the tax on the gains. So sometimes it makes sense to gift the actual stock first if the person receiving the gift, known as the donnee, is in a more preferential tax situation. In other words, they will pay less in taxes than the donor would if the donor sold it first, then gifted the cash.

00:29:01
A lot of times, in practice, for people that are in retirement, it does make sense to gift to their children. Again, every situation is different. What I mean by that is gift the actual shares to their children. Sometimes adult children are in their peak earning years, and they're in some of the highest tax brackets. So in those cases, it probably doesn't make sense. Oftentimes, however, there are opportunities where retirees can give a gift to an adult child or maybe a grandchild, and they're in a more preferential tax situation. This is mainly because if the retiree were to sell it and cause a large amount of capital gains, not only will they pay the capital gains taxes, but it might also cause them, like we talked about earlier, to lose other deductions. It will cause more of their Social Security to be taxed, and again, can cause those higher Medicare premiums.

00:29:56
So when you bundle all of these things together, these other hidden taxes, the real tax hit to the retiree can be much higher than just the capital gains rate. So when comparing the tax situation of the child to the retiree, you have to factor in all of these other things. Also, one really cool, also really nerdy tidbit on the NUA strategy that we talked about is that the portion of the stock that you own, or like in Steve's case, the NUA portion that he owns that is subject to that NUA treatment, does not trigger that extra 3.8% net investment income tax, which normally incurs when you sell an investment at a capital gain. If you go over those thresholds to where you would normally pay that extra 3.8%, the stock that is subject to the NUA treatment does not actually trigger that, or the gain from that stock does not trigger it.

I will tell you right now, if you're doing your own taxes, and even if you have a professional, most people do not understand that small nuance that I just shared. The software is not going to know that either. So you are going to have to make those adjustments yourself manually or tell the professional you're working with or ask them to look into it, because that can be a very meaningful amount of tax savings if we're talking about large capital gains here.

A second option is Steve and Tori can just hold the stock and not do anything with it. But there's a technical point that trips people up here. The NUA portion of company stock does not receive a step-up in basis at death like most other holdings in a brokerage account normally would. So because Steve and Tori don't really need much of the money and they want the majority of it to go to their three kids, doing nothing can actually hurt the situation, because if there's no step-up in basis, the kids will be paying taxes on this money, possibly at the worst time.

00:32:08
And because Steve and Tori's income is modest, they have room to sell a calculated amount of stock every single year and fill up the 0% capital gains bracket first, with any additional gain that spills over landing in the 15% bracket rather than higher. And remember, no extra 3.8% net investment income tax on that either. That's not a fully tax-free strategy, but it's a disciplined and repeatable way to harvest these gains at the lowest possible rates given their situation. And they can do that year after year without ever feeling rushed. If they were to fill up the full 0% capital gains bracket and recognize a little bit more of a gain that falls into that 15% bracket, when you take the real effective tax rate that they actually pay on the money, it's going to be somewhere in the single digits, likely, or 10 or 11%. It's really good to get some of this money diversified at single-digit tax rates if you can, and then reinvest it. And then you can have the kids inherit it later and get a step-up in basis for more tax savings on any additional gains that you might have earned. Pretty cool stuff.

00:33:27
Okay, moving on. Case study number 5, Amber. Amber is 55, a single parent of two teenagers, and she's an executive at a publicly traded tech company. She's got $3 million spread across different types of employer equity compensation. So she has restricted stock units, or RSUs, like we mentioned earlier. She has incentive stock options, or ISOs, and she also has some non-qualified stock options from her employer. However, most of it is in RSUs. Plus, she has $1 million in her 401(k) and $500,000 in an account with her financial advisor. She plans to work until she's 65, and the majority of her annual compensation continues to come from newly vesting restricted stock units. So most of her income is her salary as an executive plus whatever restricted stock units vest. She's not charitable right now, but expects that to change after retirement and depending on what her children end up doing after high school and what kind of careers they get, so on and so forth.

00:34:39
This case is different from the others because it's not a static pile of concentrated stock. It is a moving target. New shares are showing up every quarter for the next decade until she retires. This is common. When you have equity compensation as part of your comp package with your employer. In Amber's case, she receives restricted stock units and different types of stock options fairly frequently. So she's got a lot of different stuff going on here. Different rules apply to everything. What can she do with all this employer stock? Well, first, she can sell any newly vesting RSUs immediately or pretty close to it. RSUs, or restricted stock units, are taxed as ordinary income right at vesting based on the value that day. And every day she holds them past vesting is pure uncompensated single stock risk that she would be taking on top of the concentration she already has.

00:35:39
In fact, she has more than just the risk of the majority of her net worth tied up in one single stock, because she works for that company. She's still working and planning on working for the next decade. So her income is dependent on that company. Her benefits are dependent on that company, basically her entire financial security. And just so you guys know, with restricted stock units, like I said, when they vest, you own shares of the company, and you owe ordinary income tax based on the value the day they vest. And that will be reflected, in this case, on her W-2. If she were to turn around and sell them immediately, she's not going to have any additional capital gains tax or anything like that that is in addition to the ordinary income taxes she already paid. In other words, she has no choice as far as paying the taxes when the RSUs vest. It is literally an award from the company of stock. It is compensation that they are giving to her, and she owes the taxes on it. So doing this basically just avoids further concentration in the stock going forward if she were to just sell them immediately after they vest. Now, many people that get RSUs typically don't sell all of their shares right when they vest, because oftentimes the employees strongly believe in the company they're working for. You know, it's kind of like having skin in the game. They continue to hold some of those awarded RSUs that have vested. In this case, part of the $3 million that Amber currently has is made up of RSUs that have already vested that she's held for a couple years now.

00:37:22
Now, over the last few years, the company stock price hasn't really done much. It has very minimal appreciation. And with only modest additional appreciation, she could decide to sell and diversify these shares next, depending on her current tax situation. She already paid the ordinary income taxes when these RSUs first vested a couple years ago. So now, if she decides to sell these shares, she's looking at long-term capital gains on the appreciation so far since they vested. Because she's already working and she gets quite a bit of compensation, she's likely going to pay between 18.8% and 23.8%, depending on whether or not she is in the highest tax bracket. You might be wondering where I got that 18.8% and 23.8%. It's just the 15% and 20% capital gains tax brackets plus the 3.8% net investment income tax, which will apply to those with higher incomes in certain years and investment income. If this situation was slightly different and she said that she wanted to retire next year, maybe then we might wait until next year to utilize this strategy. If she's not going to have any other income right after she retires, then if she sells some of these older RSUs and incurs a capital gain, a lot of that gain will be taxed at 0%. And because she would retire in that following year, it's not that much longer that she needs to remain concentrated in this company stock before she starts to sell and diversify.

00:39:09
Lastly, she could layer in direct indexing here as well. She could use her $500,000 that she has in available cash and investments with her financial advisor, her ongoing RSU income as more and more shares vest, and any proceeds from shares that she liquidates. And this can build a systematic loss harvesting engine, let's call it, that offsets gains from the ongoing sales of options and RSUs for years to come. Since this isn't a one-time event for her, the way that it is for somebody who's already retired and they're no longer earning those equity compensation awards. And the mistake I see executives consistently make is treating unvested and freshly vested equity as already diversified because I sold some old shares last year. It's not. If your compensation structure keeps refilling the stock position because you keep earning these RSUs and they keep vesting, your diversification strategy has to be ongoing as well. Again, it's not a single event.

00:40:30
Okay, so let's zoom back out real quick. We had five different people, five different numbers as far as net worth and types of accounts, things like that. And honestly, five different right answers, because the right answer was never really about the stock or the company itself. It was about each person's timeline, their need for liquidity, their charitable intents, their family goals, their other income and investments, and frankly, how much risk they could stomach if the future performance of the stock takes a turn for the worse or pretty much stays the same and doesn't go anywhere, right? Those are two really big risks.

00:41:11
Between part one and part two, we covered a list of strong, what I would call core strategies, which, as a reminder, we're selling the stock outright, holding it maybe for the step-up in basis at death, gifting, direct indexing, a little bit of net unrealized appreciation, and a charitable giving toolkit, if you will. It's not the entire universe of what's available. There are more strategies, there's more structures, and there's more nuance in the layering than two episodes can carry. And what applies to you depends entirely on your own numbers, your own goals, and your own tolerance for risk, so on and so forth. So if you're sitting on a concentrated position right now, whether it's stock you inherited, stock you've held since an IPO, or stock that keeps refilling every quarter because of how your comp package works, the worst thing you can do is nothing, simply because doing something feels complicated or feels like it means paying tax you could otherwise avoid by waiting. As we walked through in part one, the tax bill on a gain that you've already banked or realized and recognized is a known, bounded number. The risk of parking a large majority of your net worth that took years of your life to accumulate in one position and hoping it all works out is not a certainty by any means. So I would say the diversification is far more important than the tax consequences.

00:42:44
So that does it for this mini-series on concentrated stock positions. As always, this is educational content. It is not personalized advice. So talk to your own advisors and tax professionals before acting on anything we discussed in this episode. If you found this valuable, please share it with somebody who's either retired or getting close to retirement and possibly has some built-up equity in a concentrated stock position and could use this information. If you have a question you'd like to get answered on a future podcast episode, check out our Ask a Question page on retiredishpodcast.com. We will include a link in the episode show notes right there. You can click on it, you can record your question or type it in directly from your phone, and you can request that it is answered anonymously. Do yourself a favor and subscribe to or follow the show on your podcast app. That way you get alerts each time a new episode drops. And for even more valuable retirement, investing, and tax content, be sure to check out our free Retired-ish newsletter to get actionable tips once a month straight to your inbox. Our newsletter often dives deeper into the topics we discuss on the show, as well as includes useful guides and charts available for download. As always, you can find the links to the resources we have provided in the episode description right there on your podcast app, or you can head over to retiredishpodcast.com/98. Thanks again for tuning in and following along. See you next time on Retired-ish.

00:44:35 Disclosures
Cameron Valadez is a registered representative with, and securities and advisory services are offered through LPL Financial, a registered investment advisor member, FINRA SIPC. Neither LPL Financial nor its registered representatives offer tax or legal advice. Always consult a qualified tax advisor for information as to how taxes may affect your particular situation. The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. All investing includes risk, including loss of principal. No strategy assures success or protects against loss. All indices are unmanaged and may not be invested into directly. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific tax issues with a qualified tax or legal advisor. Tax and accounting-related services offered through Planet Business Services, DBA Planable Wealth. Planet Business Services is a separate legal entity and not affiliated with LPL Financial. LPL Financial does not offer tax advice or tax and accounting-related services.