Advisors also need to consider one last issue. Given the historically low capital gains tax rates, it may make sense for some clients to simply sell their stock outright rather than attempt to defer taxes through an exchange fund. "While deferring taxes is often a good idea," says Saul Simon, president of Simon Financial Group in Piscataway, N.J., "some clients may benefit even more by selling their stock now and taking advantage of these capital gains tax rates. After all, there's no guarantee rates will stay this low forever."
David A. Twibell, J.D., is president of Flagship Capital Management, an investment advisory firm in Colorado Springs, Colo. He can be reached at (719) 785-4832 or www.flagship-capital.com.