You’re Approaching Liquidity — But Is Your Life Ready Yet?

It’s almost paradoxical. 

Liquidity events don’t happen overnight. Going public, being acquired, transitioning your business to the next generation — all are laborious, time-intensive processes. Yet, these financial inflection points have a way of sneaking up on people. 

Not only financially but also psychologically. 

For starters, it changes expectations; yours and everyone else’s. It upends how you think about work, risk, family, and the rest of your life. And while many people prepare extensively for the financial mechanics of a liquidity event, far fewer pause to ask a more foundational question:

Is my life ready for this?

Let’s explore what it means to prepare for liquidity, financially and emotionally.

How a Liquidity Event Changes More Than Your Net Worth

In a way, liquidity is formulaic and procedural. 

Shares convert to cash. A business sale closes. A valuation converts into real money. Your net worth jumps (sometimes dramatically) and your financial flexibility reaches new bounds.

What many people don’t anticipate is how liquidity changes the context of your life.

Before liquidity, your future is largely hypothetical. Goals sit somewhere on the horizon. Work is the organizing force because it has to be.

After liquidity, suddenly, more doors are open and that freedom introduces a host of reality-bending questions:

If I don’t need to work this hard anymore, why am I?

If I’ve achieved lifelong financial security, what am I supposed to do now?

How do I want to spend my time and energy?

At the same time, family members may see new possibilities — for instance, a cousin mentions a business idea they’d love your backing for. Colleagues may treat you differently. Friends may ask questions (subtle or direct) about generosity, lifestyle, or “what’s next.”

None of this shows up in a valuation model.

And because these questions surface simultaneously, liquidity can actually feel destabilizing even when it’s unequivocally positive. The uncertainty, now, pertains to identity and direction.

That’s why it’s imperative to plan ahead. 

Decide What Changes and What Stays the Same

Liquidity gives you something most people haven’t had in years: the ability to change almost everything about your life.

Work, lifestyle, spending, risk, generosity, geography — you name it. That can create an unspoken pressure to act quickly, simply because you can. But successful transitions to this new phase of life are usually calculated and sequenced, versus all at once. 

Start by separating what you actually want to change from what you want to preserve.

For example, ask yourself:

• What gives my life structure that I’d like to keep?
• What parts of my day-to-day life are limited by work or other obligations?
• What’s going well that I don’t want to disrupt?
• Where do I want more flexibility — time, location, workload, responsibility?

To give you an idea, let’s compare two different post-liquidity paths:

Path A: A founder sells their company for $15M, immediately buys a $4M vacation home in Tahoe, upgrades to a $3M primary residence, and commits to private school tuition for three kids. Within 18 months, they realize they miss the structure and engagement of work, but they’ve locked in $300K+ in annual fixed costs that limit their flexibility to explore lower-paying but more meaningful work.

Path B: Another founder with similar proceeds keeps their existing home, tests part-time consulting for a year, and gradually increases discretionary spending as they gain clarity on what they actually want. Two years later, they’ve found a rhythm that balances engagement with flexibility and they haven’t shut any doors.

Reversible vs. Irreversible Decisions

Some decisions are easy to test and adjust. Others are much harder to unwind.

More reversible:

• Taking a sabbatical or extended time off
• Reducing work hours or shifting to part-time
• Increasing discretionary spending (travel, hobbies, experiences)
• Renting in a new location to test whether you’d want to move permanently

Less reversible:

• Buying a second home (especially in a high-cost market)
• Relocating permanently (especially if it means leaving professional networks)
• Making large gifts to family members
• Committing to fixed annual expenses (private school, country club memberships, ongoing financial support)

The less reversible the decision, the more important it is to wait until you have clarity. By defining the anchors and inflection points of this next phase, everything else is easier to plan: spending, investing, diversification, tax strategy, and even generosity.

The Six-Figure (or Seven-Figure) Elephant in the Room: Taxes

There’s no avoiding it. Taxes are the most immediate consequence of a major liquidity event. A good problem to have (the cost of success, if you will) but still a problem that needs solving.

Many people approaching liquidity significantly overestimate their post-tax proceeds. What looks like $10M in a term sheet might be $6-7M after federal and state taxes, depending on the structure. If you don’t distinguish this upfront, you may overestimate how much flexibility you actually have.

Key Tax Variables

How will it be taxed? Long-term capital gains, ordinary income, or a mix? A founder selling shares held longer than a year faces capital gains treatment (up to 20% federal, plus 3.8% NIIT, plus state). An executive with equity compensation could see a meaningful portion taxed as ordinary income (up to 37% federal), even though both experience the same liquidity event.

What financial decisions are irreversible? Sale structure (asset sale vs. stock sale) can swing the after-tax implications by hundreds of thousands or even millions of dollars. That choice is effectively permanent once a deal is signed. Similarly, an initial public offering (IPO) that closes in December versus January may shift substantial tax liability into a different year, which matters even more if you plan to step back from work shortly after.

What can you control? Depending on your situation and timing, strategies like charitable giving vehicles, estate planning structures, or coordinated investment placement can meaningfully reduce your tax burden. But many of these tools are only available before the transaction closes.

Tax planning for liquidity is imperative. Understanding your after-tax position shapes everything else: how much you can spend, what lifestyle is sustainable, and how much flexibility you have to design Life After Work on your terms.

Estate and Wealth Transfer Planning Starts Before Liquidity

The single most critical factor in estate planning before a liquidity event is timing.

Of course, the exact mechanics depend on your situation. Entrepreneurs selling private businesses face one set of constraints. Senior executives and early employees with concentrated equity face another.

Either way, once the “event” is official, it’s actually too late to take advantage of many estate planning tools.

So, what can you do to prepare?

For Founders and Private Business Owners: Freezing Value Before It Spikes

Once you sign a Letter of Intent (LOI) or enter a binding agreement, the IRS generally views the transaction as “imminent.” At that point, valuation discounts largely disappear, because the value of your shares is effectively the sale price.

However, if you act before a sale is on the horizon, it’s possible to legally transfer ownership at a significantly lower appraised value (sometimes 30–40% lower), allowing substantial wealth to move out of your taxable estate before the liquidity “pop” occurs.

Independent appraisers can apply “discounts for lack of marketability” and “lack of control.” For instance, a $10 million block of stock might be appraised at $6.5 million for gift tax purposes. You gift the $6.5M value, but the recipient effectively receives $10M+ of actual proceeds upon sale.

Several estate planning tools are commonly used in this window:

Grantor Retained Annuity Trusts (GRATs): Shares are placed into a trust, and you receive an annuity back. If the stock appreciates faster than the IRS hurdle rate (which is historically low), the excess growth passes to heirs with little or no gift tax impact. This makes GRATs well suited for high-growth assets ahead of a sale.

Intentionally Defective Grantor Trusts (IDGTs): Shares are sold or gifted to a trust where you continue paying the income taxes. That tax payment acts as an additional, indirect transfer of wealth, allowing assets to compound inside the trust without tax drag.

Spousal Lifetime Access Trusts (SLATs): Assets are gifted to a trust with your spouse as the beneficiary, removing them from your taxable estate while preserving household access if needed.

Keep in mind, if you wait until the deal is “practically certain” (typically interpreted as after the LOI is signed), the IRS may rule that you effectively sold the stock before donating it. You would then be forced to pay the capital gains tax even though you donated the stock.

For Tech Executives With Concentrated Equity: Planning Before Liquidity Becomes Irreversible

For tech executives with RSUs, the dynamics are different.

There is no LOI window, no valuation discount, and no ability to freeze value at an artificially low price. Equity is priced transparently, and income is generally recognized automatically as shares vest.

However, there’s still a “point of no return.” Once RSUs vest or shares are sold, the income is realized and many planning options narrow immediately. 

For executives, pre-liquidity readiness should focus on:

• Funding donor-advised funds or charitable trusts with stock, avoiding capital gains tax on donated shares and supporting philanthropy goals
• Using estate tax exemptions before net worth spikes
• Structuring trusts in advance so post-liquidity assets flow into an intentional framework rather than ad hoc accounts
• Addressing concentration risk early by diversifying assets

The specific tactics differ, but the principle is the same: the best time to plan is before the event itself.

Liquidity Tests Relationships. Plan for That Too.

Newfound wealth changes the relationships around you. Sometimes subtly, sometimes dramatically.

Family members may see new possibilities or new expectations. A sibling mentions a business idea they’d love your backing for. An adult child assumes you’ll now cover their graduate school tuition or help with a down payment.

Spouses may have different ideas about what this wealth means. One partner sees the opportunity to scale back work immediately; the other wants to stay fully engaged. One envisions significant lifestyle upgrades; the other prefers to maintain continuity. Neither is right or wrong, they’re just differences in how people process financial security and life transitions.

Even friendships shift. Some friends may ask questions that feel awkward, even if well-intentioned. Others may become more distant, uncertain how to relate now that your financial circumstances have changed. Some may even have expectations about generosity — picking up checks, funding group trips, or contributing to causes — that may or may not align with your own priorities.

You may find yourself facing a different set of questions:

• Who pays for what now? Does liquidity mean you’re expected to cover family dinners, vacations, or major purchases for extended family?
• How much support is reasonable? If you help one family member, are you setting an expectation that you’ll help all family members equally?
• What level of generosity is expected, and by whom? Friends, colleagues, and even acquaintances may subtly position requests or gauge your willingness to give.

You don’t have to predict or pre-solve every interpersonal issue, but it doesn’t hurt to prepare. 

That starts with alignment at home. Conversations with a spouse or partner about priorities and boundaries can prevent friction later. What does “change” actually mean for your household? What stays the same? What decisions need joint agreement?

While these questions are understandably uncomfortable, they’re far easier to address in advance, as opposed to during or after your liquidity event.

Preparing for What Comes After the Windfall

It’s natural to view a liquidity event as ending — the finish line after years of effort.

Except it’s really a beginning.

Yes, financial planning is a necessity. How you invest proceeds, diversify risk, manage tax consequences, and structure long-term cash flow will shape your financial future for decades. Investment strategy is even more consequential, because the margin for error (and opportunity) widens.

But money is only half the equation.

Liquidity also unlocks something many high achievers haven’t had in years: time. Time without urgency. Time without obligation. Time to decide how work fits into your life, if at all.

That combination, wealth and time, is powerful. And it deserves intentional planning strategies.

At BEW, we call this next phase Life After Work.

It’s not about retiring immediately or reinventing yourself overnight. It’s about designing a financial plan that supports freedom, optionality, and purpose. That might mean continuing to work in a different capacity, stepping back gradually, launching a new venture, or exploring entirely different pursuits.

If you’re approaching a liquidity event and want to ensure both your finances and your life are ready, check out our guide: Retirement Redefined: Your Guide to Life After Work.