Independent Thinking®
From Zero to Sixty: Navigating a Liquidity Event
November 21, 2025
When a liquidity event catapults someone from modest means to the ranks of the ultra high net worth, life can feel changed overnight. Exhilaration, anxiety, exhaustion — it’s an almost overwhelming mix at a time when so much is at stake.
Let’s take a step back to ensure the best possible outcome. The earlier personal wealth planning begins, the better. Assembling an advisory team and establishing lifestyle and legacy goals while the IPO, business sale, or equity monetization is still on the horizon — or at least well before the transaction closes — can potentially save millions of dollars, as shown in the three case studies “Planning Early vs. Late: Three Case Studies”, all drawn from real-life examples. Early preparation can also reduce stress, allowing successful individuals and families to adjust to the change and enjoy their good fortune.
As key members of the advisory team, Wealth & Fiduciary Advisors help articulate those goals, mindful that personal and professional circumstances will continue to evolve. Together with a Portfolio Manager, they manage liquidity and investments to achieve these goals in close coordination with the bankers and corporate lawyers managing the deal, as well as personal trust and estate attorneys and accountants.
Wealth & Fiduciary Advisors can also identify and liaise with insurance brokers, philanthropic advisors, family governance consultants, and other specialists as needed. Their collaboration ensures that decisions are not made in silos but as part of a cohesive plan. Additional personal support — including coaches and peer networks — can be invaluable for navigating this significant life transition. The psychological and emotional stress that can accompany a sudden financial windfall (sometimes referred to as “sudden wealth syndrome”) is real — but it can be managed or even avoided.
Once the team is assembled and goals are established (no easy task), there are several key pre-liquidity strategies to consider:
Transfer Equity to Trusts: If the company’s stock is likely to appreciate significantly, gifting shares to irrevocable trusts before the event can remove the value of the stock and future appreciation from the estate. Trust planning strategies — such as grantor retained annuity trusts and sales to intentionally defective grantor trusts — can be powerful wealth transfer tools. If section 1202 qualified small business stock, or QSBS, is involved, trust planning can also help multiply the potential income tax benefits.
Consider Valuation Discounts: Prior to a sale, company stock may be eligible for valuation discounts (for example, due to lack of marketability and lack of control), which can enhance the effectiveness of gifting strategies.
Plan Charitable Strategies: Funding a donor-advised fund or charitable remainder trust pre-liquidity allows for the donation of appreciated shares, resulting in an upfront deduction and reduction or deferral of capital gains.
Review Liquidity and Cash Flow Needs: Many people approaching transitions underestimate the taxes due at closing, which can create unfortunate liquidity mismatches. It’s critical to project post-tax cash flow needs before engaging in substantial gifting to family members or charity.
Ensure Advisory Alignment: The Wealth & Fiduciary Advisor, trust and estate attorney, and accountant need to be in communication well before term sheets are signed, so documents and structures are coordinated and ready to implement.
As far in advance as possible before closing a transaction is often the best window to lock in sophisticated planning. Once the wealth is realized, the focus shifts to execution:
Clarify Tax Position: Calculate actual after-tax proceeds, considering federal, state, and local tax obligations.
Implement Legal Structures: Establish revocable living trusts, irrevocable trusts, and family entities, as appropriate.
Secure Risk Management: Evaluate asset protection structures and make sure to obtain sufficient liability and life insurance.
Adopt an Investment Policy Statement (IPS): Define portfolio goals, spending rates, and risk parameters.
Update Personal Documents: Revise wills, healthcare proxies, and powers of attorney.
A substantial liquidity event can feel overwhelming, leaving little time for thoughtful personal planning. But the risks of neglecting this planning — possibly millions in unnecessary taxes, fractured estates, and lost opportunities — are far too great. For anyone anticipating or experiencing such a shift, the key to long-term success lies in building the right team, planning early, and acting with intention.
Planning Early vs. Late: Three Case Studies
The Tech Executive at IPO
A 32-year-old married tech executive’s company will likely go public, and she anticipates realizing $60 million in liquidity. By engaging in nontaxable spousal gifting, her spouse transferred $13.99 million of pre-IPO stock into a Spousal Lifetime Access Trust, or SLAT, for the benefit of the tech executive and their children when the shares were privately valued at a steep discount. This foresight enabled the couple to shift nearly $14 million out of their taxable estates, saving $5.6 million in gift, estate and generation-skipping transfer, or GST, taxes — and all future appreciation of those assets will be exempt from gift, estate and GST taxes. In addition, the tech executive would continue to have access to the assets in the SLAT for the rest of her life to the extent that she ever needed them for her health, education, maintenance or support.
Early, proactive trust planning before liquidity can dramatically reduce future estate tax burdens.
The Private Equity Partner’s Carried Interest
A 38-year-old private equity partner held a $30 million carry distribution. Because he anticipated a liquidity event, he set up a donor-advised fund and contributed a portion of his appreciated fund interests several months prior to the distribution. This move allowed him to avoid capital gains tax on those interests and created a large charitable deduction, offsetting a significant portion of his tax liability.
Early philanthropic planning can reduce income tax in the year of liquidity while advancing charitable goals.
The Prepared Entrepreneur
A 35-year-old entrepreneur in California plans to sell her consumer goods business for $50 million. Without pre-transaction planning with her qualified small business stock, she would pay nearly $16 million in combined federal and state income taxes. By changing her residence to Nevada and setting up a nongrantor trust prior to the sale, she will avoid a 13.3% California state income tax, will not owe any federal or state income taxes on $10 million in capital gains, and the nongrantor trust will avoid federal and state income taxes on $10 million in capital gains. Her experience underscores the importance of acting early — before liquidity limits flexibility.
Flavia Trento and Ryan Fox joined Evercore Wealth Management in 2025 as Partners and Portfolio Managers. They can be contacted at [email protected] and [email protected], respectively.