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Dec 1, 2011 12:00 PM
Executive Decisions
Building a legacy with company stock
Corporate executives who amass large amounts of company stock face some unique wealth-transfer challenges — and opportunities. Large holdings of a single stock are inherently risky because stock is a volatile asset class that can lose all its value. However, single stocks lend themselves to certain wealth-transfer strategies and can help executives build legacies for gifts to charities and to heirs.
Nevertheless, single stocks come with extra risks attached. To address the risk of single stock concentration, without needlessly diminishing the potential reward, we apply a “core and excess capital” framework. Core capital is the amount your client needs to support his lifestyle for the rest of his life, based on probability calculated to an extremely high degree of confidence. Once your client reaches his core capital goal, he should protect this amount by investing it in a diversified portfolio. Any assets that exceed core capital represent excess capital and can be invested more aggressively, creating the opportunity to take greater risk with stock-based compensation in pursuit of the greatest potential reward.
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Topics of Interest
| Estate Tax | Donor Advised Funds |
| GSTs | Family Offices |
| Private Foundations | Life Insurance |
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Topics of Interest
| Estate Tax | Donor Advised Funds |
| GSTs | Family Offices |
| Private Foundations | Life Insurance |
| 2010 Tax Act News | Industry Trends Surveys |
E-Newsletter Signup
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