Navigating Liquidity Events: Key Insights for IPOs, M&As and Buyouts

Embracing your financial turning point

You’ve been working tirelessly at your job, driven by the promise of something big on the horizon. Maybe you believed in your company’s mission from the start, or maybe you saw the potential for growth—not just for the business, but for yourself, too. Over the years, you’ve built and contributed to the value of your company—whether through founding the business, accumulating equity compensation like stock options or Restricted Stock Units (RSUs) or other forms—knowing that one day it could pay off and transform your financial future. Now that day has come, and you’re looking for the right guidance.

That’s why wealth planning and understanding strategies for financial windfalls are essential to maximizing your benefits. We’re not just about managing money; we’re about helping entrepreneurs and employees alike understand how this new wealth can shape their lives and how effective wealth management can secure long-term success.

In this article, we’ll explain different types of wealth transactions—whether it’s an IPO, merger, acquisition or buyout—and guide you through the key decisions you’ll need to make during the process. We’ll provide the tools to help you approach your financial future with clarity and confidence.

Whether you’re just beginning to explore your choices or are already navigating this process, remember: You’ve got this—and we’re here to support you every step of the way.

Table of Contents

Embracing your financial turning point
What are liquidity events?
Preparing for a liquidity event
Post liquidity event considerations
Don’t navigate a liquidity event alone
Glossary

What are liquidity events?

In the world of finance and business, a liquidity event is one of those big moments where everything changes. Liquidity events, such as IPOs, mergers and acquisitions, require careful liquidity event planning. Whether it’s pre-IPO planning or developing a solid exit strategy, these financial windfalls can reshape your financial future, allowing you to convert your equity into cash and create new opportunities.

Types of liquidity events and FAQs

These significant payouts give shareholders a chance to “cash out” realize the value of their investment. These events can take many forms, and understanding how they work is crucial for entrepreneurs, employees and investors alike. Knowing what to expect and how to plan for a wealth transition can help you maximize your financial outcome.

Asset sale: This occurs when a company sells off its assets, such as real estate or divisions of the business, and uses the cash to provide liquidity for shareholders.

• Who participates? The company selling the assets, potential buyers (which could be other companies or private equity firms) and shareholders who receive the proceeds.
• Purpose: To raise capital, improve financial health or refocus the company on core operations. It may also be a strategy during restructuring or downsizing.
• Benefits: Shareholders gain liquidity without needing to sell the entire company. The company can focus on its key business areas and reduce debt or invest in growth opportunities.
• Risks: The company might lose valuable assets that could have provided future growth. Additionally, selling assets can sometimes signal financial distress to the market.

Initial Public Offering (IPO): An IPO happens when a private company offers shares to the public for the first time. Once public, employees and investors typically after a six-month lock-up period, may sell their stock in the stock markets. The process requires extensive regulatory filings, like the S-1 form with the Securities and Exchange Commission (SEC), and often involves months or even years of preparation. Many employees with concentrated stock face tough questions, like should I sell my RSUs when they vest? It’s crucial to develop a strategy that takes tax implications into account.

• Who participates? The company going public, its employees, early investors, underwriters and the general public who buys shares in the IPO.
• Purpose: To raise capital for growth, pay off debt or allow early shareholders to monetize their equity.
• Benefits: Companies gain access to capital markets and shareholders can sell their equity at potentially high valuations.
• Risks: The process is expensive, and companies become subject to public scrutiny, market fluctuations and regulatory requirements.

Mergers and acquisitions (M&A): The merger of two companies or the acquisition of one company by another can result in shares being purchased or converted into cash. If the acquiring or merged company is public, shares may become liquid; otherwise, shares in private companies typically remain illiquid.

• Who participates? The companies involved in the merger or acquisition, along with their shareholders, employees and sometimes regulatory authorities.
• Purpose: To enhance growth, achieve economies of scale, expand geographically and/or diversify products and services.
• Benefits: Shareholders may receive cash or liquid shares, often at a premium, while companies can grow faster or gain strategic advantages.
• Risks: Cultural clashes between merged companies, integration challenges or the potential for shareholder dissatisfaction if the deal doesn’t live up to expectations.

Private equity buyout: A private equity buyout occurs when a private equity firm acquires a controlling interest in a company, often through the use of debt to finance the purchase (leveraged buyout). This transaction provides shareholders and employees the opportunity to sell their shares and turn their equity into cash. It frequently involves taking the company private, allowing for restructuring or operational improvements away from the scrutiny of public markets.

• Who participates? Private equity firms, shareholders and employees holding stock or equity in the company.
• Purpose: To provide liquidity to shareholders and reposition the company for growth, often by restructuring or streamlining operations under private ownership.
• Benefits: Shareholders can sell their equity for cash, often at a premium. Private equity firms may bring in capital and expertise to boost the company’s performance.
• Risks: Once private, shareholders no longer have access to the same liquidity options, and the company may face significant restructuring that could impact employees and stakeholders.

Recapitalization: Recapitalization occurs when a company restructures its debt and equity mix, often by issuing new debt or equity, paying out dividends or buying back shares. The goal is to improve the company’s financial structure, boost shareholder value or raise funds for growth. This strategy allows companies to realign their financial footing while offering liquidity and growth opportunities.

• Who participates? Management, the board of directors, existing shareholders and sometimes private equity firms or other investors.
• Purpose: To stabilize the company’s capital structure, provide liquidity to shareholders through dividends or buybacks or fund expansion.
• Benefits: Shareholders can receive returns through dividends or share repurchases, and the company may achieve tax savings on new debt.
• Risks: Increasing debt can lead to financial strain, and issuing new equity could dilute current shareholders’ ownership.

Secondary market sale: This refers to the sale of privately held shares of a company, typically by early employees or investors, to outside private investors before a liquidity event like an Initial Public Offering (IPO). This allows shareholders to “cash out” some of their equity and get early liquidity without waiting for the company to go public.

• Who participates? Early investors, employees or founders who hold equity can sell shares to accredited investors, venture capitalists or institutional buyers. This is common in startups or private companies with high valuations where employees want to lock in some of their gains.
• Benefits: Sellers get liquidity before the IPO, and buyers get a stake in the company at a potentially lower price than if they waited for the IPO.
• Drawbacks: Sellers may receive less than they would in an IPO, and the company has limited control over who buys the shares, potentially leading to unwanted shareholders.

Tender offer: A tender offer occurs when a buyer (often the company itself, a private equity firm or an external investor) offers to purchase shares directly from shareholders, typically at a premium over the current value of the shares. The company may make this offer to employees, investors or other stakeholders to provide liquidity or facilitate a buyout.

• Who participates? Both early investors and employees with stock options or vested shares. These offers often come at a significant premium to entice shareholders to sell.
• Purpose: It provides liquidity to shareholders without the need for a public market or an IPO. Tender offers are also used in acquisitions, as a way for buyers to gain control of a company by buying a significant portion of its outstanding shares.
• Benefits: Shareholders can sell their shares at a premium, often higher than what they might receive in a public sale.
• Risks: If shareholders believe the company’s value will increase significantly in the future, they may miss out on greater profits by selling early.

FAQs: Understanding liquidity events

Navigating a liquidity event can be complex, with many financial, legal and tax considerations to keep in mind. To help you better understand the process and make informed decisions, we’ve compiled answers to some of the most common questions surrounding liquidity events. Whether you’re an entrepreneur, employee or investor, these FAQs will give you the foundational knowledge needed to approach your liquidity event with confidence.

• What is a liquidity event?
  A liquidity event is a transaction, such as an Initial Public Offering (IPO) or an acquisition, that allows shareholders to convert their equity compensation into cash or publicly traded stock that can be sold for cash. It’s also important to plan for the tax implications of liquidity events, which may vary by state or the type of equity compensation.
• What qualifies as a liquidity event?
  Common examples of liquidity events include mergers, acquisitions, IPOs, private equity buyouts and secondary market sales. These events provide shareholders the opportunity to sell their equity for cash.
• How does a liquidity event differ from an exit strategy?
  A liquidity event specifically refers to the conversion of equity into cash, while an exit strategy is a broader plan that outlines how and when investors or business owners will leave an investment, which could involve selling shares or the business.
• What is the legal definition of a liquidity event?
  Legally, a liquidity event is defined as any transaction—such as a merger, acquisition or IPO—that gives shareholders the ability to convert their shares into cash or liquid assets. The specific legal terms can vary depending on agreements like liquidity event clauses in contracts.
• What are the tax implications of a liquidity event?
  A liquidity event may have tax implications, potentially triggering capital gains tax, ordinary income tax or alternative minimum tax (AMT), depending on factors such as the type of equity, holding period and your state of residence. For instance, California’s high-income tax rates, combined with the $10,000 cap on state tax deductions introduced by the Tax Cuts and Jobs Act (TCJA), can result in a heavier tax burden for residents. Additionally, actions like exercising and holding incentive stock options (ISOs) may create an AMT liability.
• How do you plan for a liquidity event or exit strategy?
  Planning for a liquidity event or exit strategy requires assembling a team of financial advisors, understanding your financial goals and how the value of your equity can help you achieve them, reviewing tax implications and ensuring your estate planning documents are up-to-date. Proper timing of stock sales and the strategic use of trusts can optimize your financial outcome. Collaborating with your tax professional and wealth manager is essential to cover all aspects of this complex transaction.
• What is the capital gains tax rate for stock sales after an IPO?
  Capital gains from stock sales after an IPO are taxed at either short-term or long-term rates, depending on how long you’ve held the shares. If you hold the stock for less than a year before selling, you’ll be subject to short-term capital gains tax, which is taxed at your ordinary income tax rate. If you hold the stock for more than a year, the sale qualifies for the lower long-term capital gains tax rate. Keep in mind, however, that states may treat capital gains differently. For example, California taxes both short- and long-term capital gains as ordinary income, with rates up to 13.3%. It’s essential to plan for both federal and state taxes to optimize your tax outcome.
• Can a liquidity event include stock buybacks?
  Yes, stock buybacks can be part of a liquidity event, offering shareholders the chance to sell shares back to the company. This often provides a way for employees or early investors to convert equity into cash.

Preparing for a liquidity event

Financial milestones like IPOPs or private equity buyouts can be life-changing, offering opportunities for substantial financial gains and the chance to redefine your financial future. However, the path to fully capitalizing on these opportunities can also be overwhelming. Early planning is crucial, and it’s not just about the transaction itself—effective financial planning ensures that you make informed decisions before, during and after the liquidity event.

Our approach includes understanding how Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NQSOs) are taxed. Stock option planning can help you make informed decisions about exercising shares and minimizing tax liabilities. Careful consideration of the tax implications of stock options ensures you keep more of what you’ve earned.

We’ve guided countless clients through the complex process of preparing for liquidity events, including utilizing tax-saving strategies. Our experience spans helping business founders, executives and employees transform newfound wealth into lasting financial security. From pre-transaction meetings to map out your vision to implementing a tailored financial plan post-transaction, our award-winning wealth managers make financial planning clear and actionable, providing the experience you need to navigate this pivotal moment.

Key tax and planning strategies to consider early

10b5-1 plans
If you’re a corporate insider or an employee with restricted stock, a 10b5-1 plan allows you to pre-determine stock sales within a specified period (typically 6–12 months) to manage compliance and reduce the risk of insider trading accusations. This plan can be a strategic component of your liquidity approach, giving you control over when to sell shares while addressing compliance concerns.

In California, RSUs are taxed as ordinary income when they vest, which can result in significant state tax obligations. Planning when and how to exercise shares within a 10b5-1 plan can help align your equity sales with tax-efficient timing and cash flow needs.

Qualified Small Business Stock (QSBS)
If you’re holding Qualified Small Business Stock (QSBS), you may be eligible for significant tax benefits. Under certain conditions, QSBS holders can exclude up to the greater of $10 million or 10 times the adjusted basis of the stock from federal capital gains taxes. Understanding whether your shares qualify for QSBS treatment and how your state handles the taxation of QSBS can save you a substantial amount in taxes when you sell.

83(b) Election
An 83(b) election is a tax strategy available for those receiving stock as part of their compensation that vests over time. Filing an 83(b) election allows you to pay taxes on the stock’s value at the time it is granted, rather than when it vests; or, in the case of stock options, when exercised if the plan allows you to exercise the stock options prior to vesting (an “early exercise”). If the stock appreciates significantly by the time you sell the shares, this can result in lower overall taxes by allowing you to take advantage of capital gains rates on the appreciation if you sell the shares 12 months after (or later) the date of the 83(b) election. This can be a particularly attractive strategy when RSUs are granted at a very low price and/or when stock options are granted at a very low strike price and the plan allows you to exercise the stock options before they vest.

By incorporating these tax strategies into your liquidity planning, you can potentially minimize taxes, which could help you keep more of the wealth you’ve earned. From capital gains tax strategies to tax-efficient wealth transfer options, careful planning can contribute to a more secure financial outlook after liquidity.

Three essential steps to prepare for your financial milestone

Preparing for a significant payout, whether through an IPO, merger, acquisition or private equity buyout, involves understanding the risks and rewards of concentrated equity holdings. Proper planning ensures you can maximize the value of your equity while minimizing risks such as tax implications and market fluctuations. Here, we’ve outlined a three-step approach, covering essential actions to help you prepare fully, regardless of the type of financial transaction you’re navigating:

A successful liquidity event requires a coordinated effort from a team of experts who can provide specialized guidance in key areas such as long-term financial planning, tax planning, estate planning and investment management. Engaging your team early will ensure you have the right advice and strategies in place before making any major decisions. This team should include a wealth manager, estate planning attorney and tax advisor. Together, they’ll provide the expertise needed to make informed decisions and optimize your financial strategy.

Your key actions:

• Engage your wealth manager: This person acts as the quarterback of your team, integrating all aspects of your financial strategy, such as stock option planning and exercising stock options, to help you make informed decisions throughout the liquidity event. But beyond the essential financial planning and tax strategies, a top-tier wealth manager can also offer you something invaluable—access.
• Consult an estate planning attorney: Ensure your wealth transfer is efficient and aligned with your wishes, protecting your assets and managing your estate effectively.
• Work with a tax advisor: Navigate the tax implications of your liquidity event, optimizing strategies to minimize liabilities and maximize after-tax wealth. For more insights on avoiding common tax pitfalls during liquidity events, read our article on how to avoid liquidity event tax traps.
• Include additional advisors: Depending on your situation, you may also need risk management specialists, philanthropy advisors or business consultants.

Planning for a liquidity event isn’t just about numbers; it’s about aligning your finances with your life aspirations. This significant transition can be both exciting and overwhelming, so it’s essential to address both the practical and emotional aspects of your wealth. From minimizing taxes to managing newfound responsibilities, understanding your vision will shape the roadmap for your financial future. By thinking holistically, you can ensure that your plan supports your personal values, long-term goals and financial security.

As part of our Total Wealth Management service, we discuss your investment strategy that is aligned with your dream life.

But it’s also important to understand that financial planning is an ongoing process—not a one-time event. As your life evolves post-liquidity, your financial plan should adapt with it, ensuring you remain on track to achieve your long-term objectives. That’s where a comprehensive financial planning process becomes invaluable.

Your key actions:

1. Create a vision: It’s essential to clearly define what you want your life to look like after the transaction. Start by exploring and articulating your values to ensure your financial decisions align with what truly matters to you—whether that’s financial security, philanthropy or achieving work-life balance. As you envision the future, reflect on your career aspirations, retirement plans and legacy. This process goes beyond financial decisions; it’s about shaping your life decisions. Identify the goals that will bring you the most fulfillment, whether that’s achieving financial independence through retirement or planning your “second act.” By thoughtfully considering these questions, you’ll gain clarity on how best to use your wealth. Prioritizing these goals will guide you in crafting a detailed roadmap for your financial future.
2. Identify your core values and priorities: Along with new opportunities, a large infusion of wealth introduces a new set of pressures and challenges. It’s crucial to realize that finances are just one aspect of the equation when it comes to planning for a transaction. Take the time to reflect on your core values and priorities—whether it’s financial security, philanthropy or adjusting your lifestyle. A successful plan is not just about maximizing wealth but about aligning your wealth with what truly matters to you. For some, the top priorities might be financial security and transferring wealth to children or grandchildren. Others might prioritize using the wealth to improve society through philanthropy or perhaps to retire early and travel. Whatever your priorities are, taking inventory of them is a vital first step in providing a high-level roadmap for your wealth management plan.
3. Consider your career aspirations post-transaction: One often overlooked aspect of planning for a liquidity event is deciding what you want your career to look like afterward. Whether you’re an entrepreneur or an employee, the transition from an active role to post-transaction life can be challenging. Think about whether you want to stay involved in your company, retire or pursue new ventures. Your decision may influence your financial strategy and how you structure your wealth post-transaction.
   

   After a liquidity event, many professionals ask, “What’s next?” Feeling too young to retire? You may need a new vision. It seems like more people are becoming entrepreneurs and cashing in on their successful business ideas at younger and younger ages. While these great achievements deserve celebration, what we often see with younger clients is that soon after the thrill of being flush with wealth dissipates, they feel a bit lost. Read more.

4. Set specific goals: After identifying your priorities—both in terms of your wealth and career—begin outlining specific actions that will help you achieve these higher-level goals. Whether it’s purchasing a vacation home, supporting your children’s education or contributing to a charity, it’s important to clarify what you want to achieve. Putting your goals into two categories— “core” and “stretch”—can help prioritize them. Core goals are those you must achieve, while stretch goals are aspirations to pursue with any remaining wealth after the core goals are met. Knowing how much wealth is needed to fund these goals is crucial. Work with your wealth manager to put a price tag on your vision. This clarity will help inform your decisions during the transaction, allowing you to act strategically and confidently.

Tax planning is a crucial part of managing your wealth—especially if you have multiple layers of taxes to consider. Without careful planning, you could end up paying more than necessary, which could affect your long-term financial goals. When it comes to equity compensation, the stakes can be even higher, particularly in states with high tax rates like California.

For example, when your restricted stock units (RSUs) vest, they’re treated as ordinary income, meaning they could push you into a higher tax bracket. This is why it’s important to ask questions like, “How much tax will I owe when my RSUs vest?” and “Should I sell the shares right away or hold on to them for potential growth?”

Plus, there are several advanced tax strategies to consider that can help you optimize your financial outcome during a liquidity event:

• 10b5-1 plans: A 10b5-1 plan is primarily a tool for corporate insiders to pre-schedule stock sales, helping them avoid insider trading concerns by setting predetermined sales prices and timelines. While the main goal is compliance, a 10b5-1 plan can also bring a degree of predictability to stock sales, which may support broader tax planning efforts. By spreading out sales, you may still benefit from long-term capital gains tax rates, avoid higher tax brackets, and better manage exposure in high-tax states like California. This approach provides a structured method for managing both compliance and timing considerations around your equity compensation.
• Qualified Small Business Stock (QSBS): For those holding QSBS, you may be eligible for significant tax benefits. Under certain conditions, QSBS holders can exclude up to the greater of $10 million or 10 times the adjusted basis of the stock from federal capital gains taxes. If your company meets the qualifications, understanding whether your shares are eligible for this treatment could save you substantial tax dollars.
• 83(b) Elections: If you receive restricted stock or stock options that you’re permitted to exercise before they vest as part of your compensation, an 83(b) election allows you to pay taxes on the stock’s/options’ value at the time of the grant (or early exercise, if stock options), rather than when it vests. This strategy can result in significant tax savings, especially if your company’s stock appreciates over time. It allows you to treat any future gains as long-term capital gains, which are taxed at a lower rate than ordinary income. This can be a particularly attractive strategy when RSUs are granted at a very low price and/or when stock options are granted at a very low strike price and the plan allows you to exercise the stock options before they vest.

By working with your financial advisor and tax professional, you can develop a strategy that not only minimizes taxes but also helps you make the most of your equity compensation. This could include timing stock sales to optimize tax rates or diversifying your portfolio in a tax-efficient manner. In the end, thoughtful tax planning ensures you keep more of what you’ve earned while supporting your long-term financial vision.

Key actions:

1. Evaluate your compensation: Review your stock options, RSUs and any other equity compensation with your tax advisor to understand their tax implications. RSUs, for example, are taxed as ordinary income when they vest, and in high-tax states like California (with rates as high as 13.3%), careful planning is essential.Proper tax planning around equity compensation can help reduce your overall tax burden. For non-qualified stock options (NQSOs), exercising and holding may qualify for long-term capital gains rates after a year, though it often makes more sense to leave options unexercised until you’re ready to sell. Your tax advisor can help you determine the best timing for each type of equity, helping to minimize taxes and maximize your net proceeds
   Why this matters: Taking the time to evaluate your compensation is more than just a financial checklist—it’s about preserving the wealth you’ve worked so hard to build. The difference between ordinary income tax and long-term capital gains rates can lead to significant savings. Understanding the tax implications upfront helps you leverage strategies to avoid unexpected tax liabilities, giving you greater confidence in your financial future.

2. Plan the timing: Work with your wealth manager and tax advisor to strategically plan when to exercise stock options and sell shares, with attention to your broader financial goals. While timing can impact your tax liability, it’s equally important to consider how your net proceeds will be used, your confidence in the stock’s future performance, and your need for diversification. In some cases, exercising early and holding shares for more than a year may qualify you for the lower long-term capital gains tax rate, but this approach only makes sense under specific conditions.

   For California residents, all capital gains are taxed as ordinary income at the state level, which means timing considerations need to account for both state and federal taxes. Aligning your stock transactions with your financial goals and anticipated income can help you manage your tax exposure. For instance, spreading sales over multiple years may help prevent income spikes, while bunching transactions into a single year could offer other advantages. Working with your advisory team can help ensure your decisions are well-balanced across tax and personal financial objectives.

   Be aware of AMT: Exercising ISOs can trigger AMT, a parallel tax system designed to ensure high-income individuals pay a minimum level of tax. Stock option planning is highly nuanced, and while AMT may not always be avoidable, proactive planning can help manage its impact and avoid unexpected tax liabilities. Working with your tax advisor can provide clarity on when exercising ISOs aligns best with your financial strategy. ISOs vs. NQSOs: While ISOs may qualify for long-term capital gains tax treatment at the federal level, they can also trigger AMT if not carefully planned. NQSOs, in contrast, are taxed as ordinary income upon exercise. Your wealth manager can help you navigate the tax implications of each type of option and integrate them into your broader financial strategy, ensuring alignment with your long-term goals.

   Why this matters: Properly timing your transactions and being aware of potential AMT implications not only helps you maximize your after-tax wealth but also ensures that your financial moves align with your broader life goals. By carefully planning when to exercise and when to sell, you can take full advantage of tax-saving opportunities, ultimately preserving more of your hard-earned wealth.
3. Trusts and giving: Consider setting up a trust or leveraging annual gift tax exclusions as part of your estate planning strategy. For example, establishing a Grantor Retained Annuity Trust (GRAT) allows you to transfer wealth to heirs while minimizing gift and estate taxes. Discover how freezing assets in your estate before a liquidity event can protect your wealth and minimize gift and estate taxes. By giving shares or utilizing trusts, you can reduce your taxable estate and potentially minimize your overall tax burden.
   Why this matters: Strategic asset transfers are a powerful strategy in estate planning, particularly when preparing for a liquidity event. These strategies help you manage and transfer wealth efficiently, minimizing the potential tax burden on your estate and ensuring that your assets are distributed according to your wishes.
4. Charitable contributions: Consider incorporating charitable giving into your financial plan, whether through a donor-advised fund (DAF) or other giving structures, to support causes meaningful to you. Contributing appreciated assets like stock to a DAF, for instance, allows you to avoid capital gains tax on the appreciation while receiving a charitable deduction for the full market value of the asset. For some, charitable remainder trusts (CRTs) may also provide tax-efficient ways to donate while creating a potential income stream, though other options may be worth exploring based on your goals.

   Why this matters: Charitable giving is, first and foremost, about making a meaningful impact on causes close to your heart. Integrating philanthropy into your financial plan can also help you manage tax considerations—providing savings that let you direct more resources toward the organizations and issues you value most. By working closely with your wealth manager, you can craft a charitable strategy that aligns with both your philanthropic and financial goals.

And don’t forget…

Set aside some “fun money”: Amidst all the spreadsheets, tax strategies and serious financial planning, it’s easy to forget that wealth is also meant to be enjoyed. So go ahead—give yourself permission to splurge a little! Whether it’s that dream car you’ve always wanted, a luxurious vacation to an exotic locale a new hobby that you’ve been itching to explore or even making a generous gift to someone you care about who could use a boost, setting aside some fun money is about more than just spending—it’s about celebrating an incredible milestone in your life.

Post liquidity event considerations

The decisions you make after a liquidity event are just as pivotal as those leading up to it. One of the first steps after a liquidity event is managing your concentrated stock or concentrated equity to diversify and protect your wealth. A well-executed wealth preservation after a liquidity event strategy, coupled with effective risk management for concentrated stock holdings, ensures your wealth is secure in the long term. This process involves diversification strategies that spread your risk across various asset classes like real estate, bonds and private equity.

Here’s how you can continue to take care of your financial future:

1. Build a diversified portfolio.
2. Protect your wealth and identity.
3. Regularly review estate documents.
4. Commit to ongoing financial reviews.

Building and maintaining a diversified portfolio

Now that your liquidity event is behind you, it’s time to think beyond the concentrated stock that may have brought you here. A crucial next step is diversifying your investments across different asset classes—like stocks, bonds, real estate and private equity. This strategy spreads out risk and creates a balanced portfolio designed to meet your income needs today while fueling growth for the future. Your wealth manager will work with you to tailor this diversified portfolio to your unique goals, ensuring it aligns with your risk tolerance and long-term objectives. This approach not only protects your financial well-being but also positions you to enjoy the lifestyle you’ve envisioned for years to come.

Why this matters: Holding onto concentrated stock can feel comfortable, especially if it’s been the source of your success. But diversification is key to reducing risk and creating a more stable financial future. By spreading your investments across various asset classes, you’re better equipped to weather market fluctuations and pursue new opportunities, all while maintaining the income you need to live the life you’ve imagined.

Protecting your wealth and identity

A significant increase in wealth can bring new risks, making it more important than ever to protect what you’ve earned. This isn’t just about insurance—it’s about peace of mind. Reviewing and updating your property, casualty and umbrella insurance policies will help ensure they reflect your current financial situation. Additionally, setting up trusts and other entities can provide a layer of protection for your assets, ensuring that they’re transferred according to your wishes and shielded from potential creditors.

As your financial profile grows, so does your visibility, which can make you a target for identity theft or fraud. Consulting with security experts to enhance both your personal and digital security is a proactive step in safeguarding your identity and protecting your home. By taking these precautions, you’re not just securing your wealth—you’re securing your future.

Why this matters:
Wealth brings freedom, but it also comes with responsibility. Protecting your assets and identity ensures that your financial success isn’t overshadowed by unexpected risks. By staying ahead of potential threats, you can enjoy the rewards of your hard work without unnecessary worry.

Reviewing estate documents

A liquidity event is a significant milestone that often signals a new phase in your financial journey. Your estate planning should also consider the value and structure of your equity compensation, ensuring it aligns with your broader financial goals. This makes it the perfect time to revisit your estate planning documents, including wills, trusts and powers of attorney. As life changes—whether through marriage, the birth of a child, or simply a shift in your financial circumstances—your estate plan should evolve too.

Post-liquidity, it’s also an opportunity to consider incorporating advanced estate planning strategies, like trusts for wealth transfer, which can help minimize tax exposure and maximize the value passed on the heirs. Estate planning for high-net-worth individuals can ensure that your newfound wealth is managed efficiently and according to your long-term goals. Establishing tools like Grantor Retained Annuity Trusts (GRATs) and Charitable Remainder Trusts (CRTs) can also help minimize tax exposure and maximize the value passed on to heirs or charitable causes.

Why this matters:
Advanced estate planning techniques like GRATs and CRTs help high-net-worth individuals protect their wealth from excessive taxes and ensure it transferred efficiently. By incorporating these strategies, you not only secure your financial legacy but also make meaningful contributions to charitable causes if desired.

Committing to regular financial reviews

Wealth management is an ongoing process that requires continuous attention and adjustment. As your life evolves and market conditions change, revisit your financial plan to ensure it remains aligned with your goals. Regular reviews with your wealth manager are essential to keeping your financial strategy on track. These meetings allow you to reassess your portfolio’s performance, consider new opportunities and adjust your plan as necessary to stay on course toward your long-term objectives.

Don’t navigate a liquidity event alone

Navigating a liquidity event can be complex, with decisions that have far-reaching implications for your financial future. But you don’t have to go it alone. Our team of dedicated financial professionals at Aspiriant is here to guide you through every step—from understanding what’s most important to you and the impact your liquidity event has on that to crafting a personalized strategy that considers market conditions, tax implications and your unique financial goals.

Start a conversation today

Ready to take control of your financial future? Let us help you turn this pivotal moment into a powerful foundation for lasting wealth.

For employees:
Are you an employee facing your first IPO? Schedule a consultation to discuss and explore tax-efficient strategies.

For founders and executives:
For founders and executives, our team specializes in liquidity event planning to protect and grow your wealth. Let us help you navigate the complexities and secure your legacy.

For those exploring exit strategies:
Planning an exit? Our experienced team can help you develop a comprehensive strategy that aligns with your long-term financial goals while minimizing tax burdens.

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