Planning For a Liquidity Event: Steps to Take Before & After

Whether you own a business or hold a substantial equity stake as an executive, a liquidity event can change how your wealth supports your life. Assets tied to one company may become cash or investments that need a new purpose.

Before deciding how to invest the proceeds, consider taxes, near-term commitments, retirement spending and how much concentration you still retain. Planning before the transaction can help you identify decisions that should not wait until the money arrives.

A business sale, merger or public offering can create an opportunity to turn part of your ownership into money you can use. The amount and timing depend on the transaction and any restrictions on selling.

These six steps can help connect the transaction with the life you want your wealth to support.

1. Assemble a Team

Bring the right professionals into the conversation before key decisions are made. Your team may include:

• Financial advisor
• Corporate attorney
• Certified public accountant
• Estate planning attorney

Your transaction may require other specialists as well. Clarify responsibilities early: your corporate attorney and CPA handle transaction and business-tax questions, your estate attorney handles legal estate arrangements, and your financial advisor connects expected proceeds with personal cash flow and investments.

2. Review Your Estate Plan

Review your estate plan with your attorney before a liquidity event changes the size or form of your assets. Check ownership, beneficiaries, existing trusts and family cash needs, and ask which decisions require attention before agreements become binding.

Coordinate the legal documents with your intended investment and giving plans. A trust or other entity should serve a defined purpose rather than be assumed to reduce taxes or avoid probate automatically; our estate-planning checklist covers the main coordination points.

3. Review Your Existing Insurance

A business transition is a useful time to check whether your existing insurance still fits your family and any obligations that will remain. Review what the coverage is intended to protect and whether those needs will change after the transaction.

We review existing coverage as part of personal financial planning; we do not sell insurance.

4. Set Aside Money for Near-Term Needs

Separate near-term commitments from the money intended to support a longer retirement. Leaving the business may mean replacing a salary with a combination of other income, cash reserves and planned portfolio withdrawals, not simply buying investments with the highest yield. Ask yourself:

• How much will you need from your portfolio to support your regular spending?
• Do you have major expenses coming up, such as buying a home or paying medical bills?
• Do you plan to gift part of your wealth to children or grandchildren?

Allow for the transaction's tax bill, debt payments and other known obligations before setting a long-term investment allocation. Your spending needs, time horizon and tolerance for market declines should guide the balance between reserves and invested assets.

5. Build an Investment Plan for What Comes Next

Once you know what needs to stay available, give the remaining money a clear role in your overall portfolio. Connect the investment mix with your spending needs, time horizon and comfort with market declines, while keeping costs in view.

If you will continue to hold company shares, include them in the plan rather than looking only at the new cash. For taxable accounts, consider the tax consequences of changes as you move toward the agreed portfolio.

6. Include Giving in the Plan, If It Matters to You

If charitable giving is part of your goal, discuss it with your attorney and tax preparer early. Giving cash after a sale and transferring a business interest before a sale are different decisions; the timing, recipient, asset and documentation affect the treatment.

Your attorney and tax preparer can help compare giving directly with using a charitable account or foundation, including the timing, costs and paperwork. Gifts of assets rather than cash may require valuation and appraisal work; see the IRS guidance on donated property.

Todd can help incorporate the intended giving into your cash-flow and investment plan, coordinating with the professionals responsible for the legal structure and tax advice.

A business transaction is also a personal turning point. Todd Smurl, CFA, can help connect what comes next with your personal financial plan and investment portfolio.

Book an introductory meeting with Todd to talk about your plans, the decisions ahead and how you want your wealth to support your next chapter.

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain

forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions.

Asset Allocation does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.