For families with concentrated stock positions—whether from company stock, restricted shares, or privately held businesses—wealth transfer is about more than passing down assets. It’s about balancing tax strategy, market risk, and family legacy in a way that protects and preserves what you’ve built.

Managing these portfolios requires careful coordination of tax laws, timing, and diversification strategies. Here’s how families can approach the complexities of concentrated wealth to support a smooth and tax-efficient transition to the next generation.

Understanding the Estate Tax Lifetime Exemption

The estate tax lifetime exemption is one of the most powerful tools in wealth transfer planning. It allows you to pass a set amount of assets to heirs without triggering federal estate taxes. While the exact exemption amount can change with new legislation, it remains a cornerstone of estate planning for families with significant holdings.

Because this figure is subject to political and economic shifts, flexibility is key. A long-term estate plan should:

• Stay current with evolving tax laws.
• Time asset transfers strategically when conditions are favorable.
• Diversify and allocate assets thoughtfully to avoid surpassing exemption thresholds.

Working closely with a financial advisor and estate attorney can help ensure your plan adapts as laws and family needs evolve.

The Power of a Step-Up in Basis

One of the most valuable benefits in estate planning for appreciated assets is the step-up in basis.

When assets are transferred at death, their cost basis—essentially, the value used to calculate capital gains—is adjusted to their current market value. This means heirs can sell inherited assets at or near their stepped-up value with little or no capital gains tax.

For families holding long-term stock positions or business shares with a very low original cost basis, this can translate into significant tax savings.

That said, understanding which assets to hold and which to gift during your lifetime is key. In some cases, it may be wise to retain highly appreciated assets to preserve the step-up advantage—while strategically gifting or diversifying others to manage risk.

The Risks of Concentrated Positions

While holding onto concentrated positions may offer tax advantages, it also increases market and liquidity risk. A single downturn in one company, industry, or market sector can substantially impact your overall wealth.

To strike the right balance, consider:

• Risk tolerance: How much market fluctuation can your family comfortably withstand?
• Liquidity needs: Do you have enough diversified assets to cover living expenses, taxes, and philanthropic goals without selling concentrated holdings?
• Market outlook: Periodic reviews of your holdings can help determine when it may make sense to reduce exposure or hedge risk.

A thoughtful diversification strategy can help protect your family’s financial stability—without losing sight of long-term tax opportunities like the step-up in basis.

Guiding Heirs and Trustees

Effective wealth transfer doesn’t end with asset allocation—it depends on clear communication and thoughtful guidance for heirs and trustees.

Consider documenting your intentions and strategies in writing. Outline:

• Which assets should be retained versus sold.
• The rationale behind these decisions (for example, taking advantage of the step-up in basis).
• How to balance liquidity, taxes, and risk when managing inherited assets.

A clear framework helps prevent confusion and ensures heirs understand the purpose behind your estate strategy. It can also prevent costly missteps, such as selling assets prematurely or triggering unnecessary tax events.

Why Diversification Still Matters

Even when concentrated holdings have performed well, diversification remains essential to long-term wealth preservation.

A well-diversified portfolio:

• Reduces exposure to single-stock volatility.
• Helps maintain stability across changing market cycles.
• Supports sustainable distributions and generational growth.

For families with large stock positions, diversification doesn’t necessarily mean selling everything. Tools such as exchange funds, charitable remainder trusts, or structured sales can help manage risk while deferring taxes or supporting philanthropic goals.

Planning for a Smooth Transition

Transferring concentrated wealth successfully requires more than tax efficiency—it calls for a cohesive strategy that aligns financial structure, family education, and long-term vision.

By combining these elements, families can:

• Minimize estate and capital gains taxes.
• Protect wealth from market volatility.
• Provide heirs with clarity, guidance, and confidence.

Working with a fiduciary advisor can help ensure each decision—whether it’s when to gift, what to sell, or how to structure trusts—is made with the full picture in mind.

The Bottom Line

Managing concentrated stock positions is a complex but rewarding part of estate planning. By understanding tools like the estate tax exemption and step-up in basis—and balancing them with thoughtful diversification—you can preserve both your assets and your legacy.

At Navalign Wealth Partners, we help families design strategies that balance tax efficiency, risk management, and multigenerational goals. Whether you’re reviewing your estate plan or preparing heirs for future responsibilities, our team can help guide you through the process with clarity and care.

Contact Navalign Wealth Partners to build an estate plan that protects your wealth and empowers future generations.