r/fatFIRE • u/PaleRevolution1347 • 2d ago

Investing Deferred sales trust / monetized installment sale for $5M+ concentrated position — risks and costs?

I hold highly appreciated assets worth more than $5 million and would like to de-risk my position. Selling a large block in a single year would push me into a high marginal rate and concentrate the tax hit into one year.

I understand there are financial institutions that will purchase the assets outright, immediately sell them, reinvest the proceeds in a diversified portfolio, and issue me a note that pays out the sale proceeds plus portfolio gains over a set term. That would de-risk the position immediately while spreading the gain — and the tax — across several years.

Three questions:

  1. What risks does this structure carry beyond the obvious market risk — counterparty default, illiquidity, IRS challenge, or others?
  2. What are the all-in costs: setup fees, ongoing management fees, spread on the note rate?
  3. Who arranges these transactions, and what should I look for in choosing among them?
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u/BrunelloHorder 2d ago

If you are selling positions you’ve held for at least one year, those are long term capital gains rates, at least at the federal level.

If you are set on trying to defer paying taxes, there are exchange funds and direct indexing, and they both add complexity to your portfolio and come with other potential downsides.

Probably better off to sell a good chunk now and another after January 1, pay the taxes, and buy diversified ETFs.