Strategies

Tax-aware strategies, with the trade-offs printed next to them.

Each approach below is described the same way: how it works, where it may fit, and what it can cost in flexibility, liquidity, risk, or fees. None of them is right for everyone, and most are wrong for someone. The work is choosing which, if any, belong in your plan, and in what order. Looking for your situation rather than a strategy? Start with Solutions.

Read this first

This page describes strategies in general terms. It is not a recommendation of any strategy, product, or fund, and it is not tax or legal advice. Tax descriptions reflect federal law as of October 6, 2026, which may change, including retroactively. State treatment varies. Whether any strategy is appropriate depends on facts specific to you, and every strategy that involves tax or legal judgment requires your CPA and attorney.

GROUP 01

Concentrated stock positions

A large, low-basis position carries two problems at once: single-company risk, and an embedded gain that makes reducing that risk expensive. These approaches address one or both, in different ways and at different prices.

01

Staged, tax-budgeted diversification

Instead of one large sale, the position is reduced over several tax years against a defined annual gain budget. Sales are coordinated with realized losses elsewhere in the portfolio, with your other income in each year, and with any trading windows that apply to you.

Where it may fit

Most concentrated holders, as a baseline to compare every other approach against. Often combined with the strategies below.

Material limitations

The unsold portion keeps its single-company risk for the entire unwind, and the stock can fall while you wait. Spreading sales assumes future tax rates and your future income, neither of which is known. Gains are still taxed when realized.

02

Exchange funds

You contribute appreciated stock to a private partnership alongside other investors who contribute different stocks. In return you hold an interest in the combined, more diversified pool. When the structure meets the requirements of Section 721, the contribution is generally not a taxable event. After a holding period, typically at least seven years, you can take a diversified basket of securities out.

Where it may fit

Holders of a single large position who can leave that capital untouched for seven years or longer and who meet the fund's eligibility requirements, which are typically high.

Material limitations

The capital is effectively locked up for the holding period. Your original low basis carries over, so tax is deferred, not eliminated. The fund must hold a portion of illiquid assets, often real estate, to qualify. You accept the fund's portfolio, its fees, and its manager. A fund may decline your stock or cap how much it accepts. Returns may trail a broad index.

03
IRS guidance issued September 28, 2026

Section 351 ETF exchanges

An investor contributes a portfolio of appreciated securities to a newly launched exchange-traded fund in exchange for its shares. When the contributed portfolio is already diversified enough to pass a statutory test (no single issuer above 25 percent of value, and the five largest together at or below 50 percent), the exchange is generally intended to be tax-deferred. The fund can then rebalance inside the ETF structure.

Where it may fit

Investors holding a collection of appreciated individual stocks, or an older separately managed account, who want to move into a fund structure without selling first.

Material limitations

This does not solve a single-stock problem, because the portfolio must already pass the diversification test. On September 28, 2026 the IRS issued Revenue Ruling 2026-20, which treats certain ETF seeding arrangements as taxable exchanges, and Notice 2026-62, which flags related strategies for possible future action. This is an area of active IRS scrutiny. Funds launched this way are often new and small and may be merged or closed. Basis carries over, so tax is deferred, not eliminated.

04

Collars and option overlays

Options on the position can set a floor under its value (protective puts), generate income in exchange for capping upside (covered calls), or do both at once (a collar). A hedged position can also support borrowing, which can provide liquidity without a sale.

Where it may fit

Holders who need to reduce downside exposure now but are not ready, or not permitted, to sell, including some executives during restricted periods where company policy allows hedging.

Material limitations

Collars and calls give up upside above the cap. Options carry market, liquidity, and counterparty risk, and calls can be assigned early. Hedges that remove too much risk can be treated as a constructive sale under Section 1259, triggering the tax you were trying to defer, and straddle rules under Section 1092 can defer losses. Many companies prohibit insiders from hedging their stock. Options are not suitable for all investors.

05

10b5-1 trading plans

For executives and other insiders, a Rule 10b5-1 plan sets the terms of future sales in advance, while you are not in possession of material nonpublic information. Sales then execute on schedule, including during periods when you could not otherwise trade.

Where it may fit

Officers, directors, and employees subject to blackout periods who want a disciplined, documented path out of a position.

Material limitations

Plans are subject to mandatory cooling-off periods before the first trade, limits on overlapping plans, and good-faith requirements. Changing or cancelling a plan has consequences. A plan does not reduce the tax on any sale. Plan design is a securities law matter that requires company counsel and your own attorney.

06

Charitable vehicles

Giving appreciated shares directly, or through a donor-advised fund, generally avoids realizing the gain on those shares. A charitable remainder trust goes further: you contribute low-basis stock, the trust can sell it without immediate tax at the trust level and diversify, and you receive an income stream for a term or for life, with the remainder passing to charity.

Where it may fit

Households with charitable intent, particularly in a high-income year or ahead of a sale. Gifts made before a sale is effectively agreed are treated very differently from gifts made after.

Material limitations

These gifts are irrevocable: the assets are no longer yours. Deductions are subject to AGI limits, and for 2026 and later, federal law adds a floor of 0.5 percent of AGI for itemizers and limits the value of itemized deductions for taxpayers in the top bracket. Trust income is taxed to you as it is paid out. Trusts carry legal, administrative, and appraisal costs and require your attorney and CPA.

GROUP 02

Ongoing portfolio tax management

The decisions that recur every year: what to hold where, when to realize gains and losses, and how to rebalance without creating a tax bill that undoes the reason for rebalancing.

07

Direct indexing and tax-loss harvesting

Rather than owning an index fund, you own the individual stocks in a separately managed account designed to track an index. Because each position has its own cost basis, losses in individual names can be realized throughout the year even when the index is up, and used to offset gains elsewhere in your plan. The account can also exclude specific stocks, including your employer's.

Where it may fit

Investors with realized gains to offset, including from a concentrated position being unwound, and investors who need to avoid adding to an existing exposure.

Material limitations

Harvesting generally defers tax rather than eliminating it, because it lowers cost basis and can increase the tax on a later sale. Opportunities tend to diminish as an account ages. Wash-sale rules apply across all of your accounts, including a spouse's and IRAs. The account will not match the index exactly, and costs are higher than an index fund.

08
IRS guidance issued September 28, 2026

Tax-aware long/short strategies

An extension of direct indexing that adds short positions and leverage, for example holding 130 percent long and 30 percent short. Additional positions create more opportunities to realize losses, which can make it possible to offset larger gains, including gains from diversifying a concentrated position.

Where it may fit

Investors with large embedded gains who understand and accept leverage and short-selling risk and have the liquidity to support it.

Material limitations

Leverage and short positions can magnify losses, and short losses are theoretically unlimited. These strategies carry higher fees, margin requirements, and complexity, and can trail a long-only portfolio. Realized losses reduce basis, so tax is generally deferred, not eliminated. IRS Notice 2026-62 identifies certain derivative-based tax-aware strategies in managed accounts and partnerships for possible future action. Every strategy should be reviewed against that guidance.

09

Asset location and tax-aware rebalancing

Different assets are taxed differently. Placement across taxable, tax-deferred, and tax-exempt accounts affects what each holding costs to own. Rebalancing can be done with new cash, withdrawals, and losses before resorting to sales that realize gains.

Where it may fit

Any household with more than one type of account. It is usually the least exotic decision on this page and one of the most frequently overlooked.

Material limitations

The benefit depends entirely on your tax rates, holding periods, and future withdrawals, none of which are certain. Placement can reduce future flexibility, and delaying rebalancing to avoid tax can leave a portfolio further from its target risk for longer.

GROUP 03

Business owners and liquidity events

The years before a transaction are usually where the most planning latitude exists, and the window tends to close as a deal gets closer.

10

Qualified small business stock (Section 1202)

Gain on the sale of qualifying C-corporation stock acquired at original issuance can be partly or fully excluded from federal income tax. For stock issued after July 4, 2025, the exclusion is 50 percent after three years, 75 percent after four, and 100 percent after five, subject to a per-issuer limit of the greater of $15 million (indexed for inflation) or ten times basis. The company's gross assets cannot exceed $75 million (indexed) when the stock is issued. Stock issued earlier remains under the prior rules, including a five-year holding period and a $10 million limit.

Where it may fit

Founders, early employees, and investors in C corporations, especially when planning starts years ahead of a sale. Coordination with entity choice, gifting, and trust planning is a legal and tax matter.

Material limitations

Qualification depends on tests at both the company and shareholder level that must be met for most of the holding period, and many businesses are excluded by industry, including most professional services and financial services. Redemptions and certain transactions can disqualify stock. State treatment varies. Unexcluded gain on stock held less than five years is taxed at a higher rate. The determination belongs to your CPA and attorney.

11

Pre-transaction sequencing

The order of decisions before a sale can change the after-tax result of the same underlying deal: entity and account structure, whether and when to make gifts to family or trusts, charitable transfers before an agreement is reached, installment terms, and how proceeds will be invested on day one.

Where it may fit

Owners who expect a sale, recapitalization, or other liquidity event in the next one to five years.

Material limitations

Many steps must happen well before a deal is agreed to be respected for tax purposes, and some transactions will not allow the lead time. Many structures are irrevocable. Deal terms, buyer requirements, and law can change. Every structural step requires your attorney and CPA; this practice coordinates the investment side.

12

Qualified opportunity zones

Capital gains reinvested in a Qualified Opportunity Fund within the required window can be deferred, and appreciation on the fund investment can be excluded from tax if it is held at least ten years. Under the law as amended in 2025, investments made on or after January 1, 2027 receive a rolling five-year deferral, a 10 percent basis increase after five years (30 percent for qualifying rural funds), and the ten-year exclusion. Gain deferred under the original program must be recognized by December 31, 2026.

Where it may fit

Investors with a realized gain who have an appetite for long-term, illiquid real estate or operating business investments in designated areas.

Material limitations

Qualified Opportunity Fund investments are generally illiquid, concentrated, and carry real estate or operating business risk, including loss of the entire investment. The tax benefits depend on holding periods, the fund's continued compliance, and rules that are still being implemented, including new zone designations. A tax benefit does not make a weak investment a good one.

GROUP 04

Liquidity and alternatives

Ways to access capital without selling, and asset classes whose tax character and liquidity need to be planned around.

13

Securities-based lending

A line of credit secured by a portfolio can provide liquidity for a purchase, a tax payment, or a bridge to a transaction without selling appreciated assets and realizing gains.

Where it may fit

Households with a defined, temporary liquidity need and a large, diversified taxable portfolio.

Material limitations

If the collateral falls in value, the lender can demand more collateral or sell securities without notice, potentially at an unfavorable time and creating the tax you were trying to avoid. Interest rates are usually variable. Borrowed funds generally cannot be used to buy securities. Borrowing against a concentrated position compounds its risk.

14

Alternative investments

Private credit, private equity, and private real estate funds can play a role in some portfolios. Each produces income with a different tax character, and that character, together with liquidity terms, drives where and whether they belong. Private credit, for example, often produces ordinary income that may be better held in a tax-deferred account.

Where it may fit

Qualified investors who can commit capital for long periods and tolerate limited transparency and delayed tax reporting.

Material limitations

Alternative investments are speculative, generally illiquid, and involve substantial risk, including loss of the entire investment. They carry higher fees, valuations that may not reflect market prices, and tax reporting that can delay your filing. They are available only to investors who meet eligibility requirements and are not suitable for every investor.

GROUP 05

Planning beyond the portfolio

The decisions that usually matter most to an after-tax, after-estate-tax outcome are not investment selections at all. They are timing, structure, and coordination.

15

Roth conversion planning

Converting pre-tax IRA or 401(k) assets to a Roth IRA means paying ordinary income tax now in exchange for tax-free qualified withdrawals later, no required minimum distributions for the original owner, and an asset heirs can inherit income-tax-free. The planning is in the sizing: how much to convert each year to fill lower brackets without crossing Medicare premium (IRMAA) thresholds or the net investment income tax, how state tax applies, and paying the tax from outside the account.

Where it may fit

Households in the years between retirement and required distributions, business owners in a low-income year, and families who want to leave tax-free assets to heirs.

Material limitations

Conversions cannot be undone. The tax is due in the year of conversion, can push income into higher brackets, and can raise Medicare premiums two years later. The benefit depends on future tax rates and your future income, which are unknown. Five-year holding rules and the pro-rata rule for after-tax IRA money apply. New Jersey taxes conversions as income.

16

Trust and estate strategy

For 2026 the federal estate, gift, and generation-skipping transfer tax exemption is $15 million per person ($30 million for a married couple), indexed for inflation and no longer scheduled to fall. Planning focuses on what to give, when, and in what structure: annual exclusion gifts, spousal lifetime access trusts, grantor retained annuity trusts, and sales to grantor trusts, among others. The work here is modeling the cash flow and investment effects of each option, then making sure trusts are actually funded and accounts are titled and beneficiaried the way the documents intend.

Where it may fit

Families whose estates may exceed the exemption, families expecting assets to grow substantially, and New Jersey residents planning around the state inheritance tax.

Material limitations

Trusts are drafted by your estate attorney; this practice does not draft documents or give legal advice. Many structures are irrevocable and reduce your access to and control of the assets. Gifted assets generally do not receive a step-up in basis at death. Valuations can be challenged. Grantor trusts leave you paying the trust’s income tax. Law can change.

17

Dynasty trusts and generation-skipping planning

A dynasty trust is designed to hold assets for multiple generations. When generation-skipping transfer tax exemption is allocated to it, the assets can generally pass to grandchildren and later generations without estate or generation-skipping tax at each generation. The design choices are long-term: which state’s law governs the trust, who serves as trustee, how distributions are decided, and an investment policy built for a horizon of decades rather than years.

Where it may fit

Families with wealth intended for grandchildren and beyond, often combined with family governance and education about how the trust works.

Material limitations

Dynasty trusts are irrevocable and complex, carry ongoing trustee and administrative costs, and depend on state law. Errors in allocating generation-skipping exemption can be costly and hard to correct. Assets in the trust generally do not receive a step-up in basis. Family circumstances change over decades in ways a trust may not anticipate. All drafting and situs decisions belong to your attorney.

18

Retirement income and withdrawal sequencing

The order in which taxable, tax-deferred, and Roth accounts are drawn on changes the lifetime tax bill on the same spending. Planning coordinates withdrawals with Social Security timing, required minimum distributions (beginning at age 73, or 75 for those born in 1960 or later), Roth conversions, and qualified charitable distributions from IRAs after age 70½.

Where it may fit

Households within ten years of retirement, or already retired with assets in several types of accounts.

Material limitations

Every income plan rests on assumptions about longevity, returns, inflation, spending, and tax law, all of which will differ from reality. Plans need regular revision. No withdrawal strategy assures that assets will last.

19

Equity compensation planning

RSUs, incentive stock options, non-qualified options, and employee stock purchase plans are each taxed differently. Planning covers when to exercise, how alternative minimum tax applies to incentive stock options, whether an 83(b) election fits an early-exercise grant, how holding periods affect a sale, and how new grants add to concentration in a single company.

Where it may fit

Executives and employees whose compensation is a meaningful part of their net worth, especially at companies approaching a liquidity event.

Material limitations

Exercising options can require cash and create tax, including AMT, before any shares are sold, and the stock can fall afterward. Trading windows and company policies limit timing. An 83(b) election cannot be reversed and is lost if not filed on time. Tax determinations belong to your CPA.

Questions

Questions people ask about these strategies

How can I diversify a concentrated stock position without a large tax bill?

In most cases the tax cannot be avoided entirely, but it can be managed. Common approaches include selling in stages across tax years against a gain budget, offsetting gains with harvested losses, contributing shares to an exchange fund, hedging with options, giving appreciated shares to charity or a charitable remainder trust, and, for insiders, using a 10b5-1 plan. Each carries trade-offs in risk, liquidity, cost, and complexity, described on this page.

When does a Roth conversion make sense?

A Roth conversion tends to be worth evaluating when your current tax rate is lower than the rate you expect later, for example in the years between retirement and required minimum distributions, in a year with unusually low income, or when you want to leave heirs tax-free assets. The analysis should include tax brackets, Medicare premium thresholds, state tax, and how the tax will be paid. Conversions cannot be undone.

What is a dynasty trust?

A dynasty trust is an irrevocable trust designed to last for multiple generations. When generation-skipping transfer tax exemption is allocated to it, assets in the trust can generally pass to grandchildren and later generations without estate or generation-skipping tax at each generation. Its design, situs, and trustees are legal decisions made with an estate attorney.

What changed in estate planning for 2026?

Beginning January 1, 2026, the federal estate, gift, and generation-skipping transfer tax exemption is $15 million per person, or $30 million for a married couple, indexed for inflation in later years, with a 40 percent top rate. The change is permanent unless Congress changes the law. New Jersey has no estate tax but still imposes an inheritance tax on transfers to certain beneficiaries, such as siblings, nieces, and nephews.

What is QSBS and who qualifies?

Qualified small business stock under Section 1202 is stock in a qualifying C corporation acquired at original issuance. Gain on its sale can be partly or fully excluded from federal tax, depending on when the stock was issued and how long it was held. Qualification depends on tests at both the company and shareholder level, and many industries are excluded.

Which of these, if any, fit your situation?

That question is what a first conversation is for. It usually takes thirty minutes, and the goal is to identify which trade-offs actually matter in your situation.

Schedule a call