June 2, 2026
Concentrated employer stock represents the largest single asset on the balance sheet of many executives at publicly traded companies. Financial planning conversations around concentrated equity tend to focus on tax timing, liquidity, and diversification. The piece that often receives less attention is estate planning with concentrated stock.
Delaying the conversation about estate planning can be costly. Appreciated equity can be a powerful asset to move into an estate planning structure early, before additional appreciation makes transfers more expensive or complicated. Executives working with a coordinated team of financial, tax, and legal advisors may find that the decisions made now meaningfully shape what gets transferred to the next generation and how.
Estate Planning Considerations Created by Concentrated Equity
A diversified portfolio can often be distributed or transferred with relatively straightforward planning. A concentrated position in a single company stock introduces additional variables: embedded capital gains, ongoing vesting, insider trading restrictions, and the risk that the position continues to appreciate faster than it can be moved.
For executives, this means that concentrated stock risk is not only a portfolio problem. It is an estate planning variable that can influence gifting strategies and the ultimate after-tax value passed to heirs.
The Step-Up in Basis and Why It Matters for Concentrated Stock
Under current federal tax law, assets transferred at death generally receive a step-up in cost basis to fair market value. For a concentrated position with significant embedded gains, this can eliminate a substantial capital gains liability for heirs. Whether that outcome is optimal depends on the executive’s overall estate size, liquidity needs, and charitable goals, but it is a factor that should be evaluated in coordination with a CPA and estate attorney.
Executives who plan to hold shares through death for the step-up benefit may need to balance that objective against concentrated stock risk and the overall health of the estate. Holding a large position without a plan can create a different set of problems, particularly if the company’s value declines before the estate is settled.
Concentrated Stock Gifting Strategies to Consider With Your Advisors
For executives who want to transfer wealth during their lifetime, concentrated stock gifting strategies can help reduce the size of a taxable estate while also addressing concentration risk. Several structures may be worth discussing with a qualified estate attorney and CPA:
- Grantor Retained Annuity Trusts (GRATs): a structure that may allow appreciation above a hurdle rate to pass to heirs with reduced gift tax consequences
- Charitable Remainder Trusts (CRTs): can provide income to the donor while transferring remaining assets to charity, potentially with tax benefits on appreciated stock
- Donor-Advised Funds: a more straightforward vehicle for gifting appreciated shares to charity, potentially reducing income in high-vesting years
- Irrevocable trusts: depending on structure, may remove assets from the taxable estate while potentially preserving some control or benefit for family members
Each of these involves trade-offs around liquidity, control, and tax treatment. The right approach, if any, depends heavily on individual circumstances and should be evaluated with qualified legal and tax counsel. SAM coordinates alongside your CPA and estate attorney as part of our planning process.
Integrating Estate Planning Into the Equity Compensation Timeline
One of the most common planning gaps executives face is treating equity compensation and estate planning as separate conversations. Vesting schedules, liquidity events, and retirement timing all intersect with estate planning in ways that can affect how much value ultimately transfers and at what tax cost.
For executives with significant unvested equity, the estate planning picture will look materially different in three years than it does today. Planning ahead can create space to act before appreciation or vesting events narrow the options. Estate planning with concentrated stock tends to work best when it is reviewed regularly alongside the rest of the financial plan, not as a one-time document that sits unchanged for years.
If you are an executive with significant employer equity and want to understand how estate planning fits into your broader financial picture, contact Spectrum Asset Management to start the conversation.
Disclaimer: This material is for informational and educational purposes only and should not be construed as investment, legal, or tax advice. Estate planning strategies involve complex legal and tax considerations; all decisions should be made in consultation with a qualified estate attorney and CPA. All investing involves risk, including the potential loss of principal. Nothing herein constitutes an offer to enter into an advisory relationship. Spectrum Asset Management, Inc. (SAM) is an SEC-registered investment adviser headquartered in Newport Beach, California. SAM is not affiliated with any other firm using a similar name.
Third-Party Website Disclosure: Links to third-party websites are provided for informational purposes only. Spectrum Asset Management, Inc. does not control or endorse the content of external sites and is not responsible for their accuracy or completeness.
