How High-Performing Execs Approach Year-End: As Capital Allocation Strategy, Not Tax Compliance

Shannon Lynch is Principal & Senior Wealth Advisor at Compound Planning who specializes in tech founders and executives dealing with ISOs, RSUs, and pre-IPO positioning. Reed Nothwang is VP, Wealth Advisor who works extensively with law firm partners managing year-end distributions and cash balance plans. Their insights reveal a fundamental opportunity in how high-performers approach year-end tax planning.

Most people treat year-end tax planning like a December deadline — but that reactive approach could cost you. 

A year-round capital allocation strategy is how you build long-term wealth while keeping enough cash on hand when you need it.

If you establish clear priorities for where your capital should flow, watch market opportunities throughout the year, and line up your financial decisions with your life goals, you’ll see better tax efficiency and be able to build wealth more effectively. 

Key takeaways: 

• Treat tax planning as a year-round capital allocation strategy, not a December scramble.
• Establish a clear "order of operations" for your money before you need it. 
• For high-stakes situations like liquidity events, timing and coordination are critical. 

Missed Opportunities for Wealth-Building and Tax Efficiency

Let’s get specific about what might happen throughout the year, and the impact that could have on your taxes and wealth-building. 

Changes in charitable giving 

Charitable giving often happens organically throughout the year — you switch churches, commit to a major donation, adjust your giving priorities — without it occurring to you to call your advisor. By December, those opportunities to structure the gifts tax-efficiently have already closed.

For example, you could have donated appreciated stock instead of cash, bunched donations to exceed the standard deduction, or timed gifts to offset capital gains.

Market volatility throughout the year

Market volatility creates opportunities throughout the year, including  tax-loss harvesting during dips and strategic buying during downturns.

In a year when markets are up 13%, 14%, or even 15%, waiting until Q4 means there's not much left to harvest. The windows close quickly, and you can’t capture them retroactively.

For example, in April 2025, there was a 20% market pullback that presented a perfect window for tax-loss harvesting.  

Market downturns also create opportunities for Roth conversions: when you convert assets during a temporary dip, you're moving more shares into your Roth for the same tax cost, and all the recovery growth happens tax-free.

Major life transitions and purchases 

If you’re buying a house, having a baby, renovating before a child arrives, or approaching Medicare eligibility, there could be tax planning implications. You’ll need to get ahead of those well in advance.

The timing matters. 

For example, if you need to raise significant cash for a major purchase and you're on Medicare, your advisor might structure the capital gains realization across two years instead of one. This prevents a temporary income spike that would increase your Medicare premiums for the following two years.

Other life transitions have similar planning windows: buying a house might require strategic liquidity planning to manage capital gains across multiple years. A baby on the way could affect your dependent care FSA elections. By December, the most tax-efficient timing windows have already closed.

Approaching liquidity events 

If you’re benefiting from an IPO, an acquisition, or any other type of liquidity event, early planning makes a significant difference.

The liquidity event itself creates the assets that need estate protection, but the trusts and structures need to be in place beforehand. Transferring assets at the right moment is really important for minimizing state taxes and transferring wealth outside of your taxable estate. 

And when founders with QSBS-eligible stock wait until a term sheet arrives, it’s often too late to execute the full extent of an estate planning strategy. Without early planning, you'll miss critical tax benefits and lose the opportunity to protect assets from estate taxes through trusts.

Create an Order of Operations for Your Money 

High performers don’t wait for the last minute; they make year-round capital allocation decisions that treat dollars as strategic assets.

Think of it like an order of operations. Where are you allocating capital? What accounts are the most important? When does each allocation need to happen? That way, when December rolls around, you're not making emotional decisions. Instead, you allocate your money according to a plan you've already set. 

Here's how that order of operations looks in practice for tech founders and employees, for law firm partners, and corporate execs:

Considerations for Tech Founders & Employees

If you're holding equity compensation or founder stock, estate planning and liquidity event timing should be core parts of your capital allocation strategy.

First, take care of your tax bills. Set aside money for next year's quarterly estimated payments before you invest anything else. If you have RSUs vesting, the automatic withholding usually isn't enough. And if you're exercising NSOs or ISOs, there's often no automatic withholding at all, so you'll be responsible for paying those taxes yourself. Cover your taxes and debt first, then allocate what's left toward long-term investments.

Second, get your estate structures in place before a liquidity event, not after. If you're heading toward an IPO or acquisition, start working with your estate and business attorneys well before a term sheet shows up. The key is timing: moving assets into trusts before the transaction can shield significant wealth from estate taxes. Wait until after, and those opportunities are gone.

For founders with QSBS-eligible stock: Timing becomes even more important. If you gift stock into a charitable remainder trust after the acquisition terms are locked in instead of before, you lose major tax benefits. Coordinate with your estate and business attorneys to understand the exact terms and timing of your liquidity event

Always set aside money for next year's quarterly tax payments before investing the rest. Your capital should only go toward long-term portfolio construction after your debt and taxes are covered.

Considerations for Law Firm Execs

Think of it like a capital hierarchy. Work with your advisor to establish a firm order of operations for capital allocation in Q4, even before knowing exact year-end numbers. 

First, establish your capital priority list in October, even if you don't know your final distribution amount yet. For example, a law firm partner expecting between $1.2 and $1.5 million in January should start planning as early as October. You can build a calculator with your advisor that accounts for different scenarios based on potential point levels. Then, plug in the actual numbers once the firm shares them in December. 

Second, address high-interest debt and tax obligations before investing. If you have a high mortgage rate, use your expected distribution to negotiate better rates with multiple lenders. Set aside funds for your first few quarters of estimated tax payments before allocating the rest to long-term portfolio construction. This ensures your immediate financial obligations are covered before committing capital elsewhere.

Third, optimize your benefit plan contributions. Many companies and law firms offer both mandatory and optional retirement plan contributions for their partners and executives. Cash balance plans are particularly tricky: the contribution level you elect in your first year stays locked in for your entire career at that firm.

Sit down with your firm's benefits administrator before year-end to understand what's mandatory versus discretionary, so you don't under-contribute in a way you can't fix later. Check in with your advisor to see if they can help facilitate the conversation, or ask them for the exact information they’ll need from your firm.

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It’s important to handle immediate needs first (taxes or debt), then prioritize your near-term goals (major expenses for the next fiscal year), followed by your long-term wealth-building goals. 

Once you've covered your immediate needs, work with your advisor to establish an order of opportunities for the rest of your capital. Establishing your order of operations early means December is just about plugging in final numbers, not making emotional decisions under pressure.

You can create a personal finance dashboard and talk to a Compound Planning advisor here.

Balancing Short-Term Needs Against Long-Term Compounding 

High performers often find balance between prioritizing immediate cash flow needs while protecting long-term outcomes. They don’t treat short and long-term goals as competing priorities — even small investments in high-spend years lead to compounding growth. 

Immediate needs should get priority when necessary: If you’re buying a house or you’re having a baby, you’ll need to make sure there’s liquidity available. Long-term portfolio changes should take a backseat. Your advisor can help assure you that you’re still on track to achieve your long-term goals, even if you prioritize capital elsewhere today.      

Maintain baseline long-term contributions in high-spending years: Executives in their 30s and 40s might rationalize skipping retirement contributions because they don’t plan on retiring until their 60s, but even modest contributions compound over time.

For example, if you save $25,000 over the course of the next three years, then in 20 years that money could grow to a couple hundred thousand dollars. Your advisor can help show you the impact of pausing or maintaining contributions.

Your Year-Round Plan

If you’re thinking holistically about your tax plan, stay in regular contact with your advisor as life unfolds.

Throughout the year, as they happen, let your advisor know about life changes, charitable giving adjustments, and major purchases. Without keeping your advisor in the loop, you'll miss opportunities to structure these decisions for better tax outcomes. Plus, you can work together to watch the markets for tax-loss harvesting windows.

Think of October as your planning checkpoint, when you create your capital allocation priority list with your advisor. This gives you enough time for scenario planning, coordination with any third-party stakeholders like attorneys, and benefit plan analysis before the year ends.

FAQs

When should I start my year-end tax planning?

October is the ideal time to begin year-end planning conversations with your advisor. This gives you enough time for scenario planning, coordination, and benefit plan analysis before the holidays. But truly effective tax planning happens year-round. You should communicate with your advisor throughout the year about life changes, charitable giving adjustments, and major purchases as they happen, so you can make strategic decisions in real-time.

What's the difference between optimizing for maximum liquidity versus tax reduction?

These two goals don't always align, and it's important to clarify your priority before making decisions. For example, if you're facing a secondary sale opportunity or liquidity event, taking maximum cash now will likely result in higher immediate taxes, while strategies that reduce taxes (like gifting stock into trusts or timing charitable donations) might limit your available liquidity. Using Compound's Equity Simulator can help you visualize the real cost of each approach and make an informed decision based on your goals.

Why is early planning so critical for tech founders with QSBS-eligible stock?

The timing window for maximizing tax benefits on QSBS stock is strict — and if you miss it, you miss it. If you're approaching an acquisition or IPO, you need to coordinate with your estate and business attorneys well before a term sheet arrives. Early planning also allows you to properly structure trusts and protect assets from estate taxes, which becomes much harder once the liquidity event has already occurred.

🛈 Join us live for a Compound Conversation on Tuesday, October 29, at 2pm ET (or watch it on demand, if you can't make it) for a deep dive into everything you need to know about year-end tax planning.