How tech executives with concentrated holdings avoid capital gains taxes
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Company founders and early employees sitting on massive stock holdings are increasingly looking for ways to spread out their wealth without getting hit by hefty tax bills, according to financial advisors at major wealth management firms. The recent surge in technology stocks has created fortunes for workers at successful companies. But having most of your money tied to a single company’s performance can be dangerous. Many financial advisors recommend that no single investment should represent more than 10% of someone’s total wealth. Rob Romano, who leads capital markets investor solutions at Merrill, described the situation facing these clients as a double-edged sword. “It represents both the biggest risk and biggest opportunity for that client,” he explained. How exchange funds help avoid tax hits People looking to spread their investments around typically face large capital gains taxes when selling stock they’ve owned for years. Exchange funds, which shouldn’t be mixed up with ETFs, offer a different approach. These funds, sometimes called swap funds, work by combining stock from different investors into one pool. Contributors get a stake in the fund based on what they put in. After sitting in the fund for a required period, usually seven years, investors can take out a mix of different stocks worth the same as their share of the fund. The concept dates back to the 1970s, but these funds have become more popular lately as markets continue climbing, driven largely by excitement around artificial intelligence. Eric Freedman, who oversees investments at Northern Trust’s wealth management operation, said publicly traded tech companies are handing out more stock-based pay to keep up with hot AI startups competing for workers. These funds typically hold 80% of their money in stocks and try to match major market indexes like the S&P 500 or Russell 3000. The Internal Revenue…
Filed under: News - @ January 9, 2026 6:22 pm