Estate Tax Planning

Jessica L. Cafferata, JD, CFP®, CDFA®, Callan Capital

Estate planning is an evolving and perpetual process although not often thought of in this manner. Chances are, when you finalized your documents, you stored them securely and may not have seen your documents since. Estate and tax laws constantly change, warranting review of your estate plan. Your wealth impacts your experiences, relationships, and community, and your values and relationships evolve and change over time. Estate planning requires upkeep, review, comprehension, and flexibility. See below for an overview of the Federal Estate Tax Exemption and three estate planning considerations.

Federal Estate Tax Exemption

Estate planning documents should be reviewed at least every five years and more frequently if you experience major life changes and as significant tax and estate laws pass. As of 2022, the federal transfer tax exemption for estate, gift and generation skipping transfer tax is $12.06MM per person ($24.12MM per married couple) with a 40% top tax rate and indexing for inflation. The tax applies to the portion of the decedent’s estate that exceeds the federal exemption level. Keep in mind that states can also have state estate tax exemptions that differ from the federal estate tax exemption value. The Tax Cuts and Jobs Act (TCJA) doubled the estate tax exemption through 2025. Many Americans are not currently subject to estate tax. However, starting in 2026, legislation mandates the exemption revert to the 2018 exemption amount of $5MM thereby extending the tax to more people. To shelter assets and appreciation from estate tax, consider a bypass trust (also known as a credit shelter trust). A bypass/credit shelter trust is an irrevocable trust that upon the death of the trust creator or settler, assets specified in the trust agreement are transferred to the trust passing free from federal or state estate tax. In addition, a bypass/credit shelter trust provides other benefits such as probate avoidance, enhanced creditor protection and ensuring that assets pass to intended beneficiaries. 

Estate Planning Considerations

Update Documents – For those with estates valued at less than the federal estate tax exemption and not subject to state estate tax, it may make sense to consider a disclaimer trust. A bypass/credit shelter trust created by disclaimer is optionable and the surviving spouse determines whether to disclaim inheriting an asset outright. If the spouse disclaims, the bypass trust funds, and the surviving spouse determines how much to fund it. Older drafted documents often have mandatory funding with a preset formula clause. 

Increase Lifetime Gifting – The IRS and Treasury clarified that the government will not “claw back” full exclusion amount gifts or partial exclusion amount gifts that are greater than the exclusion amount in effect at death. This applies for gifts given between 2018 and 2025 for someone who passes away in 2026 or beyond creating a unique opportunity for lifetime gifting before the exemption decreases. 

Portability – Unused estate tax exemption is portable between spouses if the surviving spouse timely files an estate tax return. Portability is permanent but there is a last deceased spouse rule than forfeits the exemption transferred to the surviving spouse if the new spouse predeceases. Keep in mind that most states do not allow portability of state estate tax exemptions and the generation-skipping transfer tax exemption is not portable. You can do both, applying the exclusion to the bypass/credit shelter trust and transferring “left over” exclusion via a portability election. Whether to rely on portability, fund a bypass/credit shelter trust, or do both is an important income and estate planning decision to discuss with your attorney. 

Disclaimer: Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities-based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at 

There’s Still Time to Get a Tax Break for Donations to Charity

With just a few weeks left in 2021, you may be thinking about how to approach your charitable giving plan. Several tax-conscious strategies for charitable giving – including gifts of appreciated stock, qualified charitable distributions, and donor-advised funds – remain effective in the current environment. Here we highlight some opportunities for charitable giving between now and December 31 that may help you achieve your charitable goals and maximize your income tax savings.

Gifts of Appreciated Stock A charitable contribution of appreciated securities – such as stocks, bonds, and/or mutual funds that have realized significant appreciation over time – is one of the most tax-efficient ways to give.  By giving the gift of appreciated stock that you’ve held for more than a year, you receive a double tax benefit:

  • You avoid capital gains tax on the appreciation that would be due upon sale.
  • You can receive a charitable income tax deduction for the current fair market value of the property – up to 30 percent of adjusted gross income.
  • You can carry forward any unclaimed portion of the deduction for up to five additional years, subject to the annual limit.

Make a Qualified Charitable Distribution (QCD) from an IRA A QCD is a direct transfer of funds from your IRA, payable directly to a qualified charity, as described in the QCD provision in the Internal Revenue Code. QCD’s may be particularly appealing if your client has a few other itemized deductions or if they are near their charitable deduction limitations. A QCD must meet the following requirements:

  • You must be at least 70½ years old at the time you request a QCD. If you process a distribution prior to reaching age 70½, the distribution will be treated as taxable income.
  • For a QCD to count toward your current year’s RMD, the funds must come out of your IRA by your RMD deadline, which is generally December 31 each year.
  • Funds must be transferred directly from your IRA custodian to the qualified charity.
  • The maximum annual distribution amount that can qualify for a QCD is $100,000. This limit would apply to the sum of QCDs made to one or more charities in a calendar year. If you’re a joint tax filer, both you and your spouse can make a $100,000 QCD from your own IRAs.
  • The account types that are eligible for QCDs include:
    • Traditional IRAs
    • Inherited IRAs
    • SEP IRA (inactive plans only)
    • SIMPLE IRA (inactive plans only)

Donor Advised Funds. DAFs allow donors to maximize the tax efficiency of their charitable giving by generating a tax deduction when it’s most valuable to the donor, then allowing for distributions out of the DAF to charities over years to come.  Current rules allow for one to deduct up to 60% of AGI for cash contributions and 30% for appreciated stock as well as receive fair market value for the contribution of assets. Additionally, funds in your DAF account can be invested and grow over time, thus enhancing (tax-free) the gifts that will ultimately be made to an operating charity. Other reasons financial advisers are high on including a DAF in one’s overall financial portfolio include:

  • Creating a legacy DAF that can help reduce estate taxes.
  • Funding a DAF while approaching retirement so one could get the tax deduction while they were still making a high income.
  • Creating an account for children to give separately and “learn” how to be a strategic giver.
  • Using a DAF in connection with another operating charity to meet the unique 2020 and 2021 100% AGI tax deduction made possible by the CARES Act.

Callan Capital does not provide legal or tax advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with securities-based financing, residential and commercial financing, and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at

Trump v. Biden Tax Plans

The US presidential election is shaping up to be likely one of the most contentious and consequential in modern history, making its potential policy, growth and market implications top of mind. Although President Trump hasn’t released a formal plan yet, he has generally expressed his intent to preserve, and expand on, the Tax Cuts and Jobs Act (TCJA) passed in 2017. Joe Biden has put forward a few proposals to raise revenue, as well as several proposals to provide targeted tax breaks for lower- and middle-class individuals while increasing taxes on those making over $400,000 per year as well as corporations. It’s also important to keep in mind the fundamental role of Congress in passing tax legislation.  Depending on the makeup of the White House, Senate, and House of Representatives, passing tax legislation may be challenging. Below we have summarized the key points of each parties’ tax proposals.

Generally, it is not advisable to take any action now based on what might happen in the November election. However, we do know that regardless of the outcome of the elections; the winners won’t be taking office until 2021. It is prudent to have a strategy in place that you can execute if needed as the timeline will be tight, especially during a pandemic.

If Democrats take control of the White House and both chambers of Congress, year-end tax planning for high earners in 2020 will likely be all pulling forward as much income and as many deductions as possible. One of the most impactful pieces of Biden’s tax policy is the increase in taxes on capital gains for those earning over $1 million per year. If a taxpayer has income plus capital gains in a year that, when added together, exceed the $1 million mark, all capital gains above $1 million would be subject to ordinary income tax rates, as opposed to the current top capital gains rate of 20%. One way for high earners or those looking to sell highly appreciated assets to avoid those gains being taxed at the proposed new top rate of 39.6% is to sell those assets and realize gains in 2020–before the potential change in rates becomes effective.

Another major piece of Biden’s legislation would be the reduction of the estate tax limit. Clients who have estates over $5 million per person or who own hard-to-value assets, such as a private business, may wish to engage in gifting while the lifetime gifting limit is at $11.58 million per person. The IRS has already stated that it won’t ‘claw back’ previous transfers of assets if the exemption amount goes back to its pre-TCJA levels, so a client could choose to make a large gift now and lock in that higher exemption amount without triggering any transfer taxes.

Once a lower limit is in effect, clients will need to begin exploring more complex wealth transfer vehicles such as the use of Grantor Retained Annuity Trusts (GRATs), Charitable Lead Annuity Trusts (CLATs), and sales to Intentionally Defective Grantor Trusts (IDGTs).

Year-end Roth IRA conversions could also become a particularly attractive option for some high earners, as Roth conversions represent an easy way for a taxpayer to pull forward what would otherwise be future income into the current year. In this strategy, an individual would convert a portion of their traditional tax-deferred IRA into a tax-free Roth IRA and pay the taxes on the conversion in 2020. Once converted, Roth IRA distributions are tax-free while traditional IRA distributions remain taxed as ordinary income.

There are a lot of variables to consider and predictions, while helpful for planning, are only forecasts about what might be expected to happen in the future. We recommend you start planning now and wait until after the election to take action, if at all. We believe election year tax planning should be about speeding up or slowing down something you were already thinking about doing anyway. Don’t allow fear to cause you to take actions you would not have considered otherwise because even if your political calculations prove correct, that does not mean the expected tax policy will automatically follow. Anything can happen in politics. Our best advice is to start planning now but stay resilient and incorporate flexibility into your plans so they can accommodate different outcomes.

Important Disclaimer

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at The S&P 500, or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices, and many consider it to be one of the best representations of the U.S. stock market.


The Paycheck Protection Program (“PPP”) authorizes forgivable loans to small businesses to pay their employees during the COVID-19 crisis. The following contains recommended strategies for using those funds in compliance with the rules of the program.

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if certain criteria are met and the money is used for specific qualifying expenses. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.The loan amount is based on 2.5 times your average monthly payroll up to a maximum of $10mm. Payroll includes U.S. based  W-2 employees up to $100k per employee. Sole proprietors should use 2019 Schedule C income to determine loan amount.

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. You should consult with your local lender as to whether it is participating in the program. 

Once you have been approved for the funds and the distribution is made to your account, you have 8 weeks to meet the criteria for loan forgiveness under the program. If you do not meet the requirements, a portion or all of your distribution will convert into a 2 year loan at 1% interest with a 6-month deferral. 

Here are some tips to ensure compliance and maximum forgiveness with the PPP rules:

To receive loan forgiveness, you have 8 weeks starting on the day the loan is disbursed into your account to spend the funds on qualifying expenses.

At least 75% of your loan must go towards:

  • Gross pay;
  • ER paid health care;
  • ER match retirement;
  • State unemployment tax;
  • Severance pay

Up to 25% of your loan may go towards:

  • Rent
  • Business loan interest
  • Utilities

Maximize qualified expenditures during the 8-week period to meet the 75% requirement by paying wages more frequently, making retirement contributions, and early bonuses if necessary. Be sure not to exceed the 100k cap on total gross wages. If you cannot meet these expense requirements, the portion of your loan deemed not forgivable will convert into a 2 year loan at 1% with a 6 month deferment period.

It’s important to track these expenses to ensure you do qualify for maximum forgiveness on the loan. It is the borrower’s responsibility to provide proof of qualifying expenses. First, we recommend you set up a separate bank account to track what your spending for future audits to avoid claw backs and disallowed costs. A clear audit trail with separate dedicated bank account easiest way to go. Where possible, avoid commingling of funds with your existing business assets. If you have already deposited the funds into your regular business account, we recommend you move the funds you have not yet used into a separate account and create a clear audit trail of the funds you have already spent as well as the transfer into the new account. Also, be sure to write down the reasons your businesses needed the loan to support your attestation that your business was impacted by Covid-19. In the event of an audit, you will want to have clear evidence that your business was adversely affected.

There are two major reductions that can effect your loan forgiveness. Loan forgiveness will be reduced if either of the following occurs:

Employees who made less than $100,000 of compensation in 2019 have their compensation reduced by 25% or greater or the number of full-time employee equivalents is less than the same number of employees during either (you may choose the more favorable period):

     February 15, 2019 through June 30, 2019; or

     January 1, 2020 through February 29, 2020.

Treasury Department has stated that you can hire employees back by June 30, 2020 and still qualify for forgiveness.

Avoid double dipping into other programs designed to help small business. The Employee Retention Credit is not allowed if you take a Payroll Protection Program loan. In general, higher average payroll tends to favor using the PPP, while lower salaries may make using the Employee Retention Credit a better move. In either case, you cannot use both. If you have all or a portion of your PPP loan forgiven, you cannot use the deferral of payroll taxes provision. If you receive a PPP loan and use it to pay your own compensation, you likely will not qualify to receive unemployment assistance until the loan has ‘run out’.

Do not misuse PPP funds. If you realize you made an error, contact your bank to remedy the error immediately. Misuse of PPP funds is subject to criminal penalties.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at

Raising Financially Responsible Kids

Research shows that kids as young as 3 years old can grasp the ideas of saving and spending. The sooner parents start  teaching and talking to their kids about money, the more comfortable kids will be with these concepts. Creating financially aware children entails teaching them that wealth is not only tied to money, but also resources they  develop over time. For example, material resources such as homes, cars and computers and non-material resources  such as skills, health and knowledge all contribute to a full, rich and happy life. Below are money lessons and tips for activities that can be taught to kids of every age.


Teachable Moment: You may have to wait to buy something you want.  This is a difficult concept for people of all ages to learn! In our current culture of “instant gratification,” where kids are  bombarded with hundreds of advertisements per day, it is important for kids to learn that for most purchases that are  not necessities, they have to save money first in order to buy the item.

Tactical Tip: Create three jars – each labeled “Saving,” “Spending” or “Sharing.” Every time your child receives money, divide the  money equally among the jars. Have them use the spending jar for small purchases, like candy or stickers. Money in the sharing jar can go to someone you know who needs it or be used to donate to a friend’s cause. The saving jar should be for more expensive items. In addition, have your child set a goal, such as buying a toy. Make sure it’s not so pricey that they won’t be able to afford it, since you want to ensure their success. If your child has an expensive goal, come up with a matching program to help them reach it in a reasonable time frame. Help them proactively allocate money to their savings jar in order to buy the item.


Teachable Moment: You need to make choices about how to spend money. At this age, it’s important that kids know that money is finite and that once you spend everything, you don’t have any more to spend.

Tactical Tip: Include your child in some financial decisions. At the grocery store for example, tell them that you choose to buy  generic peanut butter rather than the brand name because it costs 50 cents less and tastes the same. Or, discuss savings, such as buying everyday staples like paper towels in bulk to get a cheaper per-item price. Consider giving your child $5 in the grocery store and have her make choices about what vegetables to buy, within the  parameters of what you need, to give them the experience of making choices with money.  Make a shopping list and sticking to it, not buying anything in addition to the items on the list. Also, try speaking aloud  about how you’re making your financial decisions as a grown-up, asking questions like, “Is this something we really,  really need? Can we go to discount store and get two of these instead of one?” During this age range, talk with kids about philanthropy, giving back and donating their money. Kids love to feel like  they are helping, as it is energizing and exciting to them. Whether they choose to donate some of their allowance to  a charity, or volunteer time doing some sort of community service, these opportunities makes kids feel useful and are great teaching moments. When they are a little older, you could consider bringing them into a conversation with your  financial advisor regarding a Donor Advised Fund to highlight the process of how and where the funds are distributed.


Teachable Moment: The sooner you save, the faster your money can grow from compound interest. Introducing long-term vs. short-term goals at this age will help kids start to think about the future and any action they need to take now.

Tactical Tip: Describe compound interest using specific numbers, since this is more effective than describing it in the abstract.  Explain, “If you set aside $100 every year starting at age 14, you’d have $23,000 by age 65, but if you start at age 35,  you’ll only have $7,000 by age 65.” Consider doing some compound interest calculations with your child on Investor. gov. Here, they can see how much money they’ll earn if they invest a certain amount and it grows by a certain interest  rate. Have your child set a longer-term goal for something more expensive than the toys they may have been saving for.  Start introducing the concept of opportunity costs and trade-offs and long-term savings goals. In addition, consider sharing the family budget, or expenditures vs. income on a weekly, monthly or yearly basis. By showing your kids the cost of living for your family, you are setting a good financial example of one way to maintain  control and responsibility of your money.


Teachable Moment: Bring your child into the college cost conversation and share plans for payment and affordability.

Tactical Tip:  Discuss how much you can contribute to your child’s college education each year. Share with your child in early high  school years what your plans are for payment so that it is tangible in your child’s mind. If full payment from parents  is not an option, consider looking into with your child which private schools are generous with financial aid and how  much in loans your child would potentially have to pay back.


Tactical Tip: Together, look for a credit card that offers a low interest rate and no annual fee using sites like Bankrate or Creditcards. com. Consider placing your child on your credit card to help build their credit and monitor their purchasing and  payment behavior. Explain that it’s important not to charge everyday items so that way if you have an emergency expense that you can’t  cover with savings, you can charge that. Teach them that saving at least three months’ worth of living expenses in  emergency saving is prudent, though six to nine months’ worth is ideal. As mentioned, essential topics in personal finance are not learned in high school or college, so it is essential that parents act as teachers in this area and have money conversations early and often with their kids.

Though bringing your child into a meeting with your financial advisor is a personal decision, in our experience at  Callan Capital we have seen that it is invaluable for teaching your child financial responsibility and planning for the  future. Have your child sit in on the next advisory meeting without revealing account balances. The financial advisor  can give an overview of simple investment concepts such as asset allocation and diversification. As the child gets  older and more comfortable, and perhaps has an investment account of their own, you can start to reveal more details  about your personal financial circumstance with the help of your advisor. We have seen that those families who place  importance on involving children in wealth discussions have greater sustained wealth and a richer family legacy that  those who do not.

Important Disclaimer

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at

Moving for Tax Breaks

In recent years, high-tax states began to suspect a tax-dodging trend as more taxpayers changed residences while still maintaining ties to their former home states. As a result, these states have been more aggressive with their residency audits. Increasingly, states are challenging former residents who attempt to change their domicile to another state.

Although the rules vary among states, generally speaking, most states define a “resident” as an individual who is in the state for other than a temporary or transitory purpose. States consider a person’s “domicile” to be the place of his or her permanent home to which he or she intends to return to whenever absent from the state for a period of time. Most claim the right to tax an individual’s income if they are believed to be a resident and domiciled in that state.

  • Location of employment
  • Location of business relationships and transactions
  • Serving on the board of directors for a business or charity
  • Residence—whether a person’s former residence was sold, rented, or retained, and whether he or she rented or purchased real property in the new state
  • The amount of time spent in the state versus amount of time spent outside the state (183-day rule)
  • Where the taxpayer is registered to vote
  • Location of the school a family’s child attends
  • Memberships in country clubs and social organizations
  • Where charges are incurred, location of bank accounts, investments, and ATM withdrawals
  • Freeway fast-lane pass charges
  • Records of airline frequent-flier miles
  • Jurisdiction issuing a driver’s license, vehicle registration, professional license, or union membership
  • Church attendance and membership
  • Location of doctors, dentists, accountants, and attorneys
  • Official mailing address and where mail is received

Each state also has specific rules that can trigger audits. Three major red flags are 1.) a significant increase in taxable income in the year of residency change; 2.) a spouse with a different state of residency; and 3.) filing a resident state return in the first year after a move and then filing a non-resident state return the next year.

Taxpayers have the burden of proving which states they spend time in during the year. If you live elsewhere but travel on a regular and frequent basis to another state, it is a good idea to maintain a diary that clearly indicates the dates you are in a specific state, accompanied by supporting records such as transportation tickets and receipts.

Just as establishing as many ties as possible to the new state can be helpful when a change of domicile is desired, it’s also helpful to try and sever ties to the old domicile. When domicile challenges arise, they almost always revolve around the old state being unwilling to give up its status as “domicile,” rather than an issue of the new state refusing to accept that status.

Unfortunately, there’s no single bright-line test that can be used to “prove” a change in domicile, because it’s based on a determination of “intent” that simply isn’t always clear. But the good news is that there is a long list of “dos” and “don’ts” that individuals can follow to help give themselves the best opportunity at proving a bona fide change that can result in lower income taxes, lower real estate taxes, enhanced creditor protection, and other valuable benefits.

Important Disclaimer

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at

Protect Your Privacy



Pre-Transaction Considerations

In any industry, preparing for a liquidity event requires a great deal of strategic vision and technical expertise. The earlier you start mapping out your vision for what you want to achieve financially and understanding your resources, the more flexibility and leverage you have in shaping the outcome. For those that are in the pre-transaction phase, or have secured first or second round funding, there are specific items to consider:


Work Optional Lifestyle

Determine your “numbers” and think about where you want your wealth to go: work to articulate your desired lifestyle post-liquidity event and then determine the amount of wealth needed to achieve that vision. Whatever your goals— retiring early, buying a vacation home, spending more time traveling, or funding your children’s college education— you need to quantify the cost of those goals and then determine the present value of the assets needed to fund this lifestyle. Essentially, all of your wealth will end up in one of four buckets: funding your lifestyle, transferring wealth to your children and other loved ones, supporting charities or paying taxes.


What if Scenarios

Test your assumptions (scenario planning): perhaps the biggest variable in planning for a liquidity event is the valuation of your equity. To help you understand the range of potential outcomes, we recommend that you have your advisors run calculations to show how much after-tax wealth you would receive under best-case, base-case, and worst-case valuations.


Compensation Packages

Understand your executive compensation package: technology entrepreneurs and executives often receive multiple forms of compensation, including traditional equity, stock options, restricted stock, employee stock purchase plans, deferred compensation, and life insurance. Each of these forms of compensation has a unique set of tax consequences, downside risk and upside potential when it comes to generating liquidity.



Take advantage of valuation discounts: one of the most powerful pre-transaction planning strategies has to do with the fact that your equity likely will have a lower valuation before the transaction than the valuation used for the transaction. By transferring equity to children or other loved ones before the transaction valuation has been determined, the subsequent appreciation occurs outside of your estate, increasing the amount that you can transfer to loved ones without incurring estate tax. Many business owners choose to make these transfers through a grantor retained annuity trust (GRAT). Transferring shares to take advantage of the valuation discount, however, isn’t without risk. If the transaction valuation ends up being higher than you anticipated, then you may end up transferring more wealth than you intended. Conversely, if the transaction valuation ends up being significantly lower than you anticipated, this may mean that you didn’t retain enough wealth to fund your lifestyle goals.


Health Coverage

When selling a business or going through a certain liquidity event, you may lose health insurance coverage. Finding coverage on your own can be stressful, but there are considerations to be aware of such as where to find a plan, what to look for in a plan and costs and coverage associated with each plan. For a good summary of considerations, you can read our health care whitepaper here.



Important Disclaimer:

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services. For more information, please refer to our most recent Form ADV Part 2A which may be found at

10b5-1 Planning for Corporate Executives

Along with running a successful company and answering to shareholders, corporate executives of public companies have something else to worry about — their significant equity positions in their own companies, and generally complex compensation packages. Used properly, a 10b5-1 plan is a tool that can help executives strategically plan and execute concentrated equity position sales.


What It Is and Why You Need It

Rule 10b5-1 was established by the Securities Exchange Commission (SEC) for insiders of publicly traded corporations to sell their stock at predetermined dates and prices. If properly designed and implemented, a 10b5-1 trading plan can provide a corporate executive with an affirmative defense against insider trading as well as an opportunity to sell their stock during periods they would normally be restricted (blackout periods). These plans, available from the custodian where the stock is housed, can provide a great way for executives to diversify their holdings in a flexible manner consistent with their financial objectives.

Though 10b5-1 plans are flexible for the executive — they can be cancelled at any time — the plans can only be initiated while the executive is in an open window and is not in possession of non-public, i.e. inside, information. The plans must specify the amount, prices, and date of the shares to be sold.


Important Plan Elements

There are important elements and dates that need to be outlined in a plan:

  • Plans should be in place at least one year after adoption date and should not exceed two years. These plans can be cancelled at any time but canceling and replacing a plan should be avoided if possible.
  • The adoption date is the date the executive and the issuer sign the plan. New 10b5-1 plans need to be adopted while the executive is in an open window and is not in possession of nonpublic information.
  • The effective date is the date the first trade is initiated.
  • The termination date is typically no longer than 2 years from the adoption date. Insider trading restrictions set forth by both the SEC and individual companies have become more stringent and arduous for executives that receive a significant portion of their compensation in the form of restricted stock or stock options.



We’ve noticed the following trends that savvy companies and executives institute:

  • Cooling periods mandate a length of time during which trading is prohibited after a plan is adopted. Plans typically have a cooling period between the adoption date and the effective date. A normal cooling period is 30-90 days for a new plan. If an executive is cancelling and replacing a plan, this generally involves waiting at least 90 days from the date of cancellation, and generally involves a new cooling period after adoption. This could lead to 6 months of blocked trading.
  • Although executives can sell in an open window, it is preferable to only use the 10b5-1 plan for officers and directors to sell stock. It should also be the exclusive defense against insider trading.
  • Some companies establish plans concurrent with their initial public offering (IPO), when all information is publicly disclosed. This provides the executive with extra protection against insider trading because the cooling period needs to exceed the underwriter lock up (greater than 6 months). The longer the cooling period, the less likely it is for shareholders to make the claim that an executive has acted on inside information

Establishing a plan concurrent with an IPO is particularly important for companies with constantly evolving non-public information, such as certain life science companies involved in drug trials. In situations like this, executives might have limited windows for selling stock absent of a 10b5-1 plan.

It is important to ensure that the brokerage account registration that the stock will go into matches the title stock being sold. For instance, individual accounts need to be established for shares resulting from RSUs and options because they are in individual form when issued. This also ensures that the form 4 and 144 will match.

Because of more rigid insider trading policies, 10b5-1 plans have become a common practice for corporate executives who work with an advisory firm. 10b5-1 planning, under the umbrella of financial planning, has emerged as a way to help executives be more strategic in their planning, protect themselves against insider trading and diversify their wealth. Since the plans can be complex, most executives receive guidance from the investment advisory firm with which they work.


Important Disclaimers

This blog is powered by Callan Capital, LLC. The information contained in this blog is provided for general informational purposes, and should not be construed as investment advice. Any links provided to other server sites are offered as a matter of convenience and are not intended to imply that Callan Capital, LLC endorses, sponsors, promotes and/or is affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise.

Callan Capital, LLC may from time to time publish content in this blog and/or on this site that has been created by affiliated or unaffiliated contributors. These contributors may include Callan Capital, LLC employees, other financial advisors, third-party authors, or other parties. Unless otherwise noted, the content of such posts does not necessarily represent the actual views or opinions of Callan Capital, LLC or any of its officers, directors, or employees. The opinions expressed by guest bloggers and/or blog interviewees are strictly their own and do not necessarily represent those of Callan Capital, LLC.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors.  For more information, please refer to our most recent Form ADV Part 2A which may be found at

Year End Planning

As 2018 comes to a close, we are actively discussing the following year end planning items with our clients. Year-end tax planning must take into account each taxpayer’s unique situation and goals. Please consult with your tax adviser to devise a tax-saving plan that most effectively meets your needs and takes into account the latest tax rules.

Required Minimum Distributions (RMDs)

For those over 70 ½, you are required to take a required minimum distribution from your retirement account. If you are a client of Callan Capital, we are processing your distribution and it will be complete in early November. If you would like to take your distribution before November, please let us know.

Charitable Strategies

Donating to charity can be a fantastic tax-savings strategy since you are in control of when and how much you give.  Consider a charitable IRA rollover, which allows clients over 70 ½ to donate up to $100,000 per year to a charity directly from their IRA and avoid paying taxes on the distribution. The charity benefits from the donation and the individual satisfies their RMD.

Clients who would like to donate to charity and expect to be in a lower tax bracket next year may want to consider contributing future charitable gifts through a Donor Advised Fund (DAF). A DAF is a philanthropic vehicle established for donors who want to make a charitable contribution and receive an immediate tax benefit. A donor contributes to the fund as frequently as they want and then grants to their charity of choice when they are ready.

Gifting to Non-Charitable Entities

The IRS allows each person to give $15,000 to each non-charitable beneficiary such as non-spouse family members every year.  This annual limit does not accrue into future years if it’s not utilized.  In addition to the annual exclusion, individuals can give up to $11.18 million (married couples can give $22.36 million) over a lifetime before owing gift taxes.  For gifts to 529 plans, the IRS allows 5 years of annual gifting to be accelerated for a total of $75,000 upfront ($150,000 for a married couple).


Disclaimer: Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. For more information, please refer to our most recent Form ADV Part 2A which may be found at

The tax information provided in this document is for general informational purposes only—it is not meant to be used, and cannot be used, by individuals to avoid federal, state or local tax penalties. Taxation varies depending on an individual’s circumstances, tax status and transaction type; the general information provided in this guide does not cover every situation—for complete information on your personal tax situation, you should always consult with a qualified tax advisor.