When a $3M position isn’t a good thing
How tax‑aware planning helped a retired couple manage $3M in single‑stock risk while navigating RMDs and long‑term taxes.
The couple understood that holding such a large position in one stock increased their exposure to risk. At the same time, selling the stock outright could have triggered significant capital gains taxes. Adding to the complexity, required minimum distributions were beginning to play a larger role in their overall tax picture.
At-a-glance
Concentration risk, required minimum distributions, tax considerations
Integrated strategy focused on tax efficiency and risk management
The team made recommendations designed to address the couple’s single-stock risk and uncovered additional opportunities for improvement.
Cash flow clarity: A Dynamic Cash Flow Illustration was used to model income, spending, and taxes, helping the clients better understand how their decisions could affect their long‑term outlook.
Options strategies: Evaluate various tactics to help manage concentration risk, generate cash flow, and create potential tax efficiencies without forcing immediate stock sales.
Qualified charitable distributions: QCDs were incorporated to help make required minimum distributions more tax‑efficient while supporting the couple’s charitable goals.
Initially, the clients engaged the team to manage $8 million in assets. After seeing the added value of the holistic planning approach, they chose to consolidate an additional $8 million, bringing more of their wealth under one coordinated strategy and simplifying their ongoing financial management.
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This case study is based upon real clients. This content is for illustrative purposes only, may not be representative of any future experience of our clients, and is not intended to provide specific recommendations to any individual. Diversification and asset allocation do not ensure a profit or guarantee against loss. Investing involves risk, including possible loss of principal. Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes, and potential illiquidity. Options involve risk and are not suitable for all investors. Individuals should not enter into option transactions until they have read and understood the option disclosure document titled Characteristics and Risks of Standardized Options issued by the Options Clearing Corporation (“OCC”) which outlines the purposes and risks of option transactions. The option disclosure document can be obtained from your broker, any of the options exchanges or OCC. All investment strategies carry risk, and transactions in options may carry a high degree of risk. Options derive their value from underlying equities or indices, and the derivative value is directly related to the underlying security, thus they carry many, if not more, of the same risks as the underlying equity or index.