BROKER-DEALER | ESTATE PLANNING | HOW I SOLVED IT | INSURANCE | INVESTING | REAL ESTATE | RETIREMENT | TAX PLANNING
Too Much Of A Good Thing
This advisor used a charitable remainder unitrust to help a client unload company stock . By Karen DeMasters
AFTER A 51-YEAR-OLD MASSACHUSETTS MAN WAS handsomely compensated with company stock during his years of employment at a publicly traded data warehouse firm , he became wealthy on paper . But he wondered what might befall him financially if something unforeseen happened to his company .
Seventy-five percent of this client ’ s $ 10 million liquid net worth and half of his overall estate of $ 15 million was tied up in his company ’ s stock . And he had more stock vesting in the next few years if he kept working there . Much of the stock had appreciated considerably , but it had a very low cost basis , which is what would have been used to determine his capital gains tax if he sold it outright . That would mean a big tax hit .
The client was also at an age where he was thinking about exploring other employment opportunities , as well as considering future retirement options , inheritance possibilities for his children and a charitable legacy .
With all of these thoughts in his head , the man understandably had many questions , and wasn ’ t getting satisfactory answers from his financial advisor . That ’ s when he was introduced by an estate planning attorney to Edward R . Jastrem , director of financial planning at Heritage Financial Services in Westwood , Mass .
“ He knew he was looking at taxes , taxes and more taxes if he sold , which made him unsure how to diversify , which is one of his primary goals ,” Jastrem says . “ He had wealth , but that could have changed with so much of it tied up in his company ’ s stock . He also wanted a clearer picture about his ability to leave the company if he wanted to do something new .”
Simply leaving wasn ’ t a great option either . “ If he left the firm now , he would leave $ 1 million to $ 1.5 million on the table in unvested stock ,” Jastrem says .
Enter Heritage Financial
Heritage Financial has more than $ 2 billion in assets under management after growing from $ 400 million 15 years ago . The firm serves clients with an average net worth of $ 5 million .
Jastrem met with his new Massachusetts client four times , and
30 | FINANCIAL ADVISOR MAGAZINE | MARCH 2023 WWW . FA-MAG . COM