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Letting Go When They’re All Grown Up

It’s always hard to say goodbye. It seems like yesterday they were so small, and over the years they’ve had their ups and downs. You’ve watched them mature and get stronger, and now they are the envy of their peers.

So is now the right time to sell them? Or should you give them away?

No, I’m not talking about your kids. I’m talking about Apple stock you bought at $50 a share back in 2005, or Exxon Mobile which was gifted to you with a $5 per share cost basis.

Appreciated securities in your portfolio can be a blessing and a curse. They could represent an over-allocation to a single stock or a tax liability waiting to happen. On the flip side, they could be the appropriate asset to gift to your favorite charity or leave to family as part of your estate. Here are three strategies that you may want to consider (along with your financial advisor, attorney and accountant) when determining if or when to let go:

  • Donate to a charity – If you are charitably inclined, you could donate the appreciated securities directly to a charity or a donor-advised fund. This is more tax-efficient than donating cash, because you can potentially deduct the full fair market value of the stock without having to realize the capital gain and incur a tax liability.
  • Leave to family – If you want to avoid realizing the gain and can afford to bear the concentrated risk of the position (i.e. you will not need it for your own living needs), holding onto appreciated securities to pass on at your death may make sense. Under current tax law, the stock will get a step-up in cost basis at your death and your beneficiaries may then be able to liquidate the position with little or no tax consequences.
  • Harvest to reduce risk – If you will eventually need the proceeds from the security to fund your living expenses, selling other securities in your portfolio with unrealized losses can be one way to offset some gains realized over time as you trim down the position. Reducing the position while your taxable income is low may also be a good strategy, or selling it down prior to a capital gains tax increase. If you’re going to reduce the risk over time to spread out the capital gain, you may want to consider a collar option strategy to mitigate risk.Letting go of winning stocks (or kids) can be a tough emotional decision. Work with your advisor and your accountant to determine if these or other strategies are appropriate given your individual circumstances.

Important Disclosure Information
Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This article is not a substitute for personalized advice from RegentAtlantic. This information is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

Please remember that RegentAtlantic does not provide legal or tax advice. Please discuss your individual situation with your legal or tax advisor prior to implementing any of the strategies discussed in this article.

Important disclosure information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable.

Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request.

This article is not a substitute for personalized advice from RegentAtlantic. This article is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.

RegentAtlantic does not provide legal or tax advice. Please consult with a legal and or tax professional of your choosing prior to implementing any of the strategies discussed in this article.

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