By Blaine Thiederman MBA, CFP, Progress Wealth Management
March 23, 2023
Achieving a liquidity event, such as an IPO or acquisition, is a monumental milestone in any entrepreneur’s journey, signifying the culmination of years of dedication and hard work. While this period is undoubtedly thrilling, it also introduces a plethora of new considerations and decisions that can significantly impact your lifestyle, family, and financial future.
As we embark on this transformative phase, crafting a comprehensive financial plan tailored to your long-term ambitions becomes paramount. Here’s a roadmap to guide you through these pivotal times:
Assessing the Impact on Your Lifestyle and Family
The initial step involves introspection about your future aspirations. Whether it’s retirement, pursuing new ventures, funding educational pursuits for your loved ones, acquiring real estate, or making philanthropic contributions, identifying your goals is crucial. Engaging with a financial advisor early on ensures that your plan aligns with your and your family’s needs and aspirations.
Building Your Financial Dream Team
Feeling overwhelmed is natural, but assembling a team of experts can alleviate stress and streamline the planning process. This team should include:
- Financial Advisor: An advisor will craft a diversified investment portfolio and develop a cash-flow strategy that sustains your lifestyle and secures future income.
- CPA: Early tax planning is essential for minimizing immediate and future tax liabilities. Collaborating with your CPA, advisor, and estate planning attorney to devise a tax-efficient strategy is key.
- Estate Planning Attorney: Defining your legacy and deciding how to manage, distribute, and protect your wealth requires thoughtful estate planning. This includes charitable giving and ensuring your assets are passed on according to your wishes.
Tax Planning Considerations
Understanding the tax implications of a liquidity event is imperative. Collaborating with your financial advisor and CPA to uncover strategies to reduce tax liabilities is crucial. Knowledge of how different portions of your windfall are taxed—whether as ordinary income or subject to long-term capital gains tax—can significantly affect your strategy.
Philanthropic Strategies for Giving Back
For those inclined to contribute to charitable causes, several strategies can enhance your impact:
- Donor Advised Funds (DAF): DAFs offer an efficient way to manage charitable giving, allowing for immediate tax deductions and the ability to grant funds over time.
- Philanthropic Planning Professionals: A dedicated professional can help tailor your giving to reflect your values, ensuring your philanthropic efforts are both meaningful and impactful.
Next Steps After a Liquidity Event
While we’ve touched on several key strategies, remember that your situation is unique. The most effective plan will be custom-tailored to your personal and financial objectives. This is a thrilling chapter in your life, and it’s natural to have questions.
At Progress Wealth Management, we’re here to support and guide you through this journey. If you’re navigating the aftermath of a liquidity event or planning for one in the future, let’s discuss how we can align your financial plan with your life’s goals and aspirations.
Ready to shape your financial future post-liquidity event?
Contact Blaine Thiederman at Progress Wealth Management for a personalized consultation.
Principal Advisor, Progress Wealth Management
Empowering your financial transformation with expert advice and personalized strategies.