Visit us on the third floor of Princeton's Forrestal Center at 103 College Road East. The university built that research park off Route 1, and we moved in a few years after it opened. Our clients tend to be past the point where a basic budget and a company retirement plan cover the situation. A number of them work for pharmaceutical firms along the corridor. A few are founders weighing an exit.
The planning gets complicated once the money accumulates. That is where most of our conversations start, with households that have outgrown the standard financial playbook. Portfolio selection is part of it, but the harder questions involve taxes and estate structure, the kind of thing many advisory firms would rather send to someone else.
Equity Compensation and Concentrated Stock
Restricted stock and stock options make up a large portion of executive pay in this area. Each instrument carries its own set of deadlines and tax consequences. Miss one, and the bill can be steep. Incentive stock options present a specific trap: exercising them can trigger the alternative minimum tax before you have sold anything. The risk compounds when a significant share of your wealth is tied to a single company's performance. One weak quarter can set you back considerably.
We build a model around your vesting schedule and your concentration level. The goal is to time the exercises and plan the diversification so you are not caught off guard by a tax bill or a sudden drop in value. Corporate insiders have access to 10b5-1 plans, which let you schedule sales in advance and avoid the appearance of trading on nonpublic information. If you founded the company, the window is narrower. Filing an 83(b) election within 30 days of a grant lets you lock in the current value as your tax basis, before any appreciation occurs. In almost every case, getting this piece right matters more than the next investment decision.
Estate Planning and the New Jersey Inheritance Tax
Most people we talk to are surprised to learn that New Jersey still collects an inheritance tax. The state did eliminate its estate tax in 2018, but the inheritance tax survived. What you owe depends on your relationship to the person who left the money. Spouses, children, parents, and grandchildren are exempt. A niece, a nephew, or an unmarried partner faces a rate of 15-16% starting at the first dollar.
The surprise factor is consistent. Families encounter it every year. There are a few ways to reduce the impact:
- Gifts completed more than three years before death are excluded
- Transfers to a surviving spouse remain exempt
- The state has the authority to freeze an account pending a tax waiver, which can delay even transfers between spouses
The federal estate tax operates under separate rules. The current exemption sits near $15 million per person, which means only a small number of estates will owe anything.
Trusts and the Next Generation
Probate is a public process. A will has to go through it, and that can tie up assets for the better part of a year. A revocable living trust bypasses probate entirely and keeps the distribution terms private. When the estate is large enough, an irrevocable trust can remove assets from your ownership now, so any future appreciation happens outside the taxable estate.
529 plans are another tool that comes up frequently, particularly with grandparents who want to fund education for grandchildren. A special election allows you to front-load five years of gifts into a single contribution. The best structure depends on what you are trying to accomplish, and we adjust the plan whenever the family situation or the tax code shifts.
Tax Strategy Across the Year
New Jersey's top marginal rate is 10.75%. That figure alone makes the timing of a large gain worth careful thought. A few thousand dollars of difference in when or where you recognize income can translate into a meaningfully different tax bill.
Roth conversions make the most sense during a low-income year. If you are between jobs or recently retired, converting IRA dollars at a reduced tax rate lets the entire balance grow without further tax liability. When the market drops, we look for losses you can harvest against gains you have already locked in. After required minimum distributions begin, a qualified charitable distribution moves money from your IRA directly to a qualified charity. That distribution does not count as taxable income.
For consistent annual donors, bunching several years of gifts into a single donor-advised fund contribution can push you past the standard deduction. If you contribute appreciated stock rather than cash, you also avoid the capital gains tax that a sale would have generated.
Domicile is another factor for those who spend part of the year in a state like Florida. New Jersey takes a hard look at residency claims, and the documentation needs to be solid.
Rollovers and the Fiduciary Question
It is common to find retirement savings scattered across two or three old 401(k) plans and an IRA that has not been touched in years. Rolling everything into a single IRA seems like the obvious move, but it deserves a closer look. There are situations where leaving the money where it is makes more sense:
- The plan offers institutional-class funds with lower expense ratios than you could get on your own
- You left the employer at age 55 or older and want to take distributions without the early withdrawal penalty
- The plan includes a stable-value or guaranteed interest option that is difficult to replicate
- You value the stronger creditor protections that federal law provides for 401(k) accounts
There is one question worth asking before any assets change hands: is your advisor legally required to act as a fiduciary? In our practice, the answer is yes. Fiduciary duty means the recommendations have to serve your interests first, not the firm's.
Once the accounts are consolidated, the retirement spending plan becomes more straightforward. The typical sequence is to draw from taxable brokerage accounts first, letting the tax-deferred balances continue to compound. A low-income year might change that order. Having everything under one roof also means a single asset allocation to manage and one set of beneficiary designations to keep current. Calculating required minimum distributions is simpler too, since one custodian can aggregate the totals across multiple IRAs.
Business Succession for Princeton Owners
For many business owners, the company is the largest asset on the balance sheet and the hardest to convert to cash. The tax outcome of selling to a third party looks nothing like the outcome of transferring ownership to the next generation. Either path requires years of advance planning. Waiting for a health scare or a personal crisis to force the decision almost always produces a worse result.
We help structure a buy-sell agreement among the partners and put the funding mechanism in place. Life insurance is the most common funding source. When one owner passes away, the policy pays out enough for the remaining owners to buy the deceased partner's share at the price set in the agreement. Without that liquidity ready, the surviving owners may be forced to sell the business or borrow heavily to settle with the family.
Protection at Higher Income
Employer-sponsored disability coverage has a way of looking adequate on paper and falling short in practice. Most group long-term disability plans cap the monthly benefit well below the employee's actual earnings. On a six-figure salary, that gap can be substantial. An individual supplemental policy closes it.
Life insurance takes on an additional role at higher income levels. The death benefit can provide the liquidity to pay a federal estate tax or to equalize an inheritance among siblings, so the family is not forced to sell property or the business on short notice. Umbrella liability coverage is another layer worth having. The premium is low relative to the additional protection it provides, and it kicks in when a claim exceeds the limits of your underlying auto or homeowner's policy.
Visit the Princeton Office
- Our Princeton office is located on the third floor at 103 College Road East, Princeton, NJ 08540.
- Parking is available on site.
- We advise households across Mercer County and nearby communities. The first consultation usually takes about an hour and has no fee.
- Some clients ask us to manage their investment accounts directly. Others already have a CPA or attorney they trust, and we keep the financial plan consistent with that advice.
- To schedule an in-person or video appointment, call 609-986-2100.