The decision to sell a legacy stock holding – especially one that has strong family emotive connections or brought important wealth – can be extremely difficult.  Further, the sale requires thoughtful planning by tax, estate and investment counsel to avoid or offset unnecessary taxes or transaction costs.  Once some or all of the stock position is sold, an actively managed portfolio should be funded that can provide for the realization of losses to offset the legacy holding’s gain while offering lower risk through diversification. 

Hold or Sell Decision on the Legacy Stock

  •   Difficulty in understanding the outlook for the industry or specific company
  •   Limitations with managing stock concentrations
  •   Concentration in a stock offers high risk and high potential reward
  •   Diversified portfolio offers less risk and more market-like (lower) returns

  Hold:  Manage the risk

  •   With very high confidence in future growth of the company
  •   By building a diversified portfolio around the existing legacy position over time
  •   By deferring the gains if constant or falling tax rate environment

  Sell:  Diversify the risk

  •   Due to a lack of confidence in future growth of the company
  •   By building an actively managed, diversified portfolio with long-term objectives 
  •   In anticipation of rising capital gains tax rates

Legacy Stock Liquidation Planning

  •   Capital gain budgeting over several years to minimize the impact
  •   Diversification through selection of the right long term portfolio
  •   Tax-Aware techniques
  •   Communicating with tax counsel early and often
  •   Serial gain realization as budgeted
  •   Harvesting of new portfolio losses to offset the legacy gain
  •   Optimized tax-lot management of all holdings 

Gifting of Highly Appreciated (low basis) Shares 

  •   Gifts to family members or charity
  •   Trust and estate planning around gifts

At Clearview, we carefully budget the legacy holding capital gain realization and the generation of realized losses (in an actively managed portfolio) designed to offset the gain.  In cases where the legacy holding is to be held, we build a diversified, actively managed, client-tailored portfolio solution over time.