Options to Help You Turn Concentrated Stock into Philanthropic Efforts and Family Security

Executives tend to accumulate a healthy number of company stock shares over time. Most wealth advisors warn against the inherent risk a single stock concentration presents, so consider turning your concentrated stock into an opportunity for your family or favorite philanthropic organization.

Below are some common approaches to explore with your team of advisors if you wish to transfer wealth to your family or donate to an organization.

1. Gifting to Family

Gifts can be made in cash, securities, or other assets. As long as the total market value of your gift does not exceed $18,000 per recipient in a calendar year, the transfer is tax-free. Any amount over $18,000 will incur a gift tax. The donor is generally responsible for paying the gift tax, but the gift recipient may agree to pay the tax under special arrangements.^[1]

You can leverage your Lifetime Gift Tax Exclusion amount if you desire to gift more than $18,000. This credit can be applied to the total value of gifts given during an individual’s lifetime. In 2024, the lifetime gift tax exclusion is $13.61 million. This means an individual can provide gifts up to $13.61 million over their lifetime without paying any gift tax. (Note: this figure is set to sunset at the end of 2025.)

2. Donor-advised Fund

A donor-advised fund is a charitable investment account that allows you to contribute assets to a public charity while immediately receiving an upfront tax deduction. Delivering low-basis stock to one of these vehicles can be a home run if you’re charitably inclined. Donor-advised funds are the fastest-growing charitable giving vehicle in the United States because they are one of the easiest and most tax-advantageous ways to give to charity.^[2]

3. Charitable Remainder Trust

A charitable remainder trust (CRT) is an irrevocable trust that generates a potential income stream for you while the remainder of the donated assets go to your favorite philanthropic organizations. Typically, the trust can sell donated stock without paying capital gains taxes and reinvest the proceeds to provide you income for living expenses or other needs.

Conclusion

If you’ve been acquiring and holding company stock for several years, its growth has likely allowed you to be generous. Maximize its value by choosing to use it in a way that supports your financial, family, and charitable goals.

Interested in learning about other options to unravel value from concentrated stock? Read our blog “Unlock Hidden Value: How to Maximize Your Concentrated Stock,” and remember that a Sequoia Financial Group advisor is just a click away to help you achieve your goals.

Sources:

1. https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
2. https://www.fidelitycharitable.org/guidance/philanthropy/what-is-a-donor-advised-fund.html?immid=PCD&account=GOOGLE&campaign=Donor+Advised+Primer&adgroup=Donor+Advised_Donor+Advised+Fund+Tax&gad_source=1&gclid=CjwKCAjw9cCyBhBzEiwAJTUWNSYEiFkdyEcPn2SusKU7vocOUVg8V-zfuB19sSCaVFTGHijM7OzX4BoCa7UQAvD_BwE&gclsrc=aw.ds