Placing concentrated stock in a trust may make sense when an estate is on track to exceed the $15 million federal exemption, when the position is expected to appreciate faster than the rest of the estate, or when charitable goals and capital gains exposure intersect. The tradeoff at the center of every vehicle is the same: gifting appreciated stock during life removes future growth from the taxable estate but saddles the recipient with your low cost basis, while holding it until death preserves the Section 1014 step-up in basis but keeps the full value in the estate. This post covers how the Spousal Lifetime Access Trust (SLAT), the Grantor Retained Annuity Trust (GRAT), the Donor-Advised Fund (DAF), and the Charitable Remainder Unitrust (CRUT) each resolve that tradeoff differently, and how executives decide which structure fits.
What Is the Federal Estate Tax Exemption in 2026 and Who Does It Affect?
The federal estate and gift tax exemption is $15 million per person, or $30 million per married couple with portability, permanent under the One Big Beautiful Bill Act and indexed for inflation beginning in 2027. Amounts above the exemption are taxed at a 40% federal rate. California currently imposes no state-level estate tax.
A VP with $5 million in liquid assets today is well under the exemption. But an executive holding a concentrated position in a high-growth company, plus a home, retirement accounts, life insurance proceeds, and 15 to 25 more years of compounding, can cross $15 million faster than a static snapshot suggests. The planning question is not where the estate sits today but where the trajectory points at life expectancy. For a closer look at what the permanent exemption changed, see our post on what the new $15MM estate tax exemption means if you hold concentrated stock.
Should I Gift Appreciated Stock or Cash to Reduce My Estate?
Gifting cash and bequeathing appreciated stock is often the more tax-efficient pairing, because gifted stock carries over the donor’s original cost basis while inherited stock receives a Section 1014 step-up to fair market value at death. A recipient who receives shares purchased at $10 and now worth $100 inherits a $90 embedded gain if the shares were gifted, but zero embedded gain if the same shares passed through the estate.
The annual gift exclusion allows $19,000 per recipient in 2026, or $38,000 per recipient for a married couple electing to split gifts, without touching the lifetime exemption. Annual exclusion gifts of cash shrink the estate at the margins while appreciated shares stay positioned for the step-up. The calculus flips when the estate will clearly exceed $15 million: at that point, moving the appreciating asset out early, and letting decades of growth compound outside the estate, can outweigh the lost basis step-up. This is a projection exercise that belongs in front of a CPA and an estate attorney together.
What Is a SLAT and Should I Use One?
A Spousal Lifetime Access Trust (SLAT) is an irrevocable trust one spouse funds for the benefit of the other, removing the assets and all future appreciation from both spouses’ taxable estates while the beneficiary spouse retains access to distributions. For a married executive, that indirect access is the feature that distinguishes the SLAT from an outright gift: household spending capacity is preserved even though the assets are legally out of the estate.
SLATs are commonly drafted as grantor trusts, a category that also includes the Intentionally Defective Grantor Trust (IDGT), meaning the funding spouse continues paying the trust’s income taxes. Those tax payments further reduce the estate without counting as additional gifts.
Two cautions define SLAT planning. First, the reciprocal trust doctrine: if both spouses create mirror-image SLATs for each other, the IRS can unwind both and pull the assets back into the estates. Estate attorneys may consider differences in timing, assets, terms, and trustees when addressing the reciprocal trust doctrine. Second, stock gifted to a SLAT keeps its carryover basis and generally does not receive a step-up at death. Funding a SLAT with low-basis concentrated stock locks in that embedded gain for beneficiaries. The permanent $15 million exemption makes 2026 an unusually stable environment to fund one, since the “use it before it sunsets” pressure of prior years is gone and the decision can be made on the merits.
Should I Put Company Stock in a Grantor Retained Annuity Trust?
A Grantor Retained Annuity Trust (GRAT) transfers appreciation above the IRS Section 7520 hurdle rate to heirs free of estate and gift tax, which makes it one of the few vehicles specifically suited to volatile, high-growth assets like a concentrated employer stock position. The executive contributes shares to the GRAT, receives fixed annuity payments back over a set term, and any growth beyond the Section 7520 rate in effect at funding passes to beneficiaries.
In a zeroed-out GRAT, the annuity is calibrated so the taxable gift at funding is at or near zero. If the stock outperforms the hurdle rate, the excess transfers tax-free. If it underperforms the hurdle rate, the intended wealth transfer may not occur, while setup and administration costs remain. That asymmetry is why concentrated stock, with its wide range of outcomes, pairs naturally with the GRAT structure. Executives subject to Section 16 reporting or company trading policies should confirm with counsel how transfers to a GRAT interact with those restrictions before funding. Current Section 7520 rates are published monthly by the IRS.
When Does a Donor-Advised Fund or Charitable Trust Make Sense?
A Donor-Advised Fund (DAF) fits executives who want a charitable deduction in a high-income year, such as a year with a large Restricted Stock Unit (RSU) vest, but have not yet chosen the receiving charities. Contributing appreciated shares held more than one year generates a fair market value deduction of up to 30% of adjusted gross income, with a five-year carryforward, and the embedded capital gain is never recognized.
A Charitable Remainder Unitrust (CRUT) solves a different problem: the executive who wants income from a concentrated position without triggering an immediate capital gain on sale. Appreciated shares go into the CRUT, the trust sells and diversifies them without immediate capital gains tax at the trust level, the executive receives a payout of at least 5% of trust value annually, and the remainder, which must be projected at no less than 10% of the initial contribution, passes to charity. The contributed assets leave the taxable estate. Both vehicles trade control for tax efficiency in different proportions, and our post on charitable planning with employer stock covers how giving strategy fits alongside concentration risk.
How Spectrum Asset Management Helps Executives Evaluate Trust Vehicles
Choosing between a SLAT, a GRAT, and a charitable structure is a projection problem: estate trajectory, basis, hurdle rates, and vesting schedules all interact, and the right answer depends on individual circumstances. Spectrum Asset Management can model financial scenarios and coordinate with your estate attorney and CPA to help you evaluate the tradeoffs with your full balance sheet in view. If your concentrated position is starting to raise wealth transfer questions, contact us to walk through the tradeoffs against your own numbers.
Related FAQs
Generally no. Unvested Restricted Stock Units are a contractual right to future shares, not transferable property, and most equity plan documents prohibit transferring them. Once RSUs vest and shares are delivered, those shares can be retitled to a trust like any other stock, subject to company trading policies and applicable securities rules.
The reciprocal trust doctrine allows the IRS to disregard two trusts that are substantially identical and leave each spouse in roughly the same economic position as before. Estate attorneys typically defend against this by funding the trusts at different times, with different assets and amounts, different trustees, and materially different distribution terms.
Generally no. Assets in an irrevocable trust that are outside your taxable estate do not receive the Section 1014 step-up at death, so beneficiaries inherit your original cost basis. That is the core tradeoff: estate exclusion in exchange for carryover basis on the embedded gain.
If the stock underperforms the hurdle rate, the intended wealth transfer may not occur, while setup and administration costs remain. The annuity payments return the shares to you, no wealth transfers to beneficiaries, and the cost is limited to setup and administration. This asymmetric outcome is why volatile concentrated positions are frequently paired with zeroed-out GRAT structures.
Shares held longer than one year are generally deductible at full fair market value, up to 30% of adjusted gross income in the contribution year, with unused amounts carried forward up to five years. The embedded capital gain on the contributed shares is not recognized. Deduction limits depend on individual circumstances, so coordinate with your CPA before contributing.
By Garrett Peterson, Wealth Advisor | Spectrum Asset Management, Newport Beach, CA | Reviewed August 11, 2026
