For many high-net-worth families, financial stress doesn't come from a lack of wealth — it comes from not being able to access it when needed.
Executives with concentrated stock positions, business owners between liquidity events and professionals with most of their assets in retirement accounts often find themselves "asset-rich but cash-poor."
Even with a multimillion-dollar net worth, they might feel financially constrained when navigating major expenses, unpredictable markets or significant life changes.
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The consequences of poor liquidity planning can be substantial. I've seen clients forced to sell investments during downturns, realize unnecessary tax liabilities or make short-sighted financial moves under pressure.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
In some cases, a lack of liquidity during estate settlement or following the unexpected death of a spouse has caused serious disruption to a family's financial stability.
Why liquidity planning matters
Recognizing this tension between your net worth and day-to-day flexibility is the first step. The next is understanding how to proactively build liquidity into a long-term wealth strategy.
Liquidity planning aims to keep a portion of your wealth readily accessible — either in cash or through structured options such as flexible credit or thoughtfully managed investment holdings. It serves as a bridge between long-term financial goals and short-term financial needs.
Many high-net-worth families spend years optimizing their finances for retirement or portfolio performance without fully considering how they'll cover immediate needs.
Without a plan, wealth can feel untouchable, and that can be not only frustrating but also potentially destabilizing during times of transition.
When incorporated into a holistic strategy, liquidity planning can reduce or even prevent forced asset sales, improve tax outcomes and empower smarter decisions during volatile or emotionally charged periods.
It also reinforces key areas such as estate readiness, philanthropy and capital opportunity, helping wealth serve not just the future, but the present.
Practical strategies for unlocking liquidity
Once the importance of liquidity is clear, the next question becomes: How can individuals tap into wealth efficiently without derailing their long-term objectives?
Affluent families may consider several strategies that can help free up resources without compromising their broader financial plans.
Flexible borrowing solutions. For short-term needs, borrowing against a diversified investment portfolio — via securities-based lines of credit or margin loans — can provide quick access to funds without triggering capital gains.
These arrangements typically involve minimal underwriting and are best used when repayment is expected within a reasonable time.
In other cases, short-term personal loans arranged through private banking relationships can offer liquidity at competitive rates.
Life insurance policy loans. Permanent life insurance policies with accumulated cash value can serve as a tax-efficient liquidity source. Borrowing against the policy can avoid triggering a taxable event, but it's essential to understand the policy mechanics and repayment terms.
If managed improperly, these loans can reduce the death benefit or create unintended tax consequences.
Equity compensation planning. Restricted stock units (RSUs) and stock options are a common source of illiquidity. Rather than waiting until a large tranche vests to make decisions, individuals can proactively incorporate equity compensation into their overall cash flow and tax strategy.
This includes understanding vesting schedules, holding requirements and executive trading restrictions.
Planning can also involve strategies such as spreading sales across tax years, making charitable gifts or offsetting gains with deductions.
Portfolio rebalancing with purpose. Rebalancing is often seen as a risk-management tool, but it can also be a liquidity lever.
Selling overweight or appreciated assets not only brings a portfolio back in line with its target allocation, but it can also generate needed cash without abandoning the overall investment strategy.
Illiquid asset coordination. Real estate, private equity and other alternative assets often carry restrictions, long holding periods or unpredictable liquidity.
Building these holdings into a long-term cash flow model — by estimating sale years, capital call schedules and redemption provisions — can help avoid liquidity crunches at critical times.
These strategies lay the groundwork for improved flexibility, but to use them most effectively, timing and tax awareness are key.
Making liquidity work smarter: Timing and tax strategies
Even the best liquidity solutions can fall short without thoughtful execution. Timing when and how to access funds can significantly impact taxes and long-term outcomes.
Strategic liquidity planning requires close collaboration with tax professionals to help prevent financial moves inadvertently creating unnecessary liabilities.
Here are several tax-aware strategies that can potentially enhance liquidity planning:
Leverage diverse tax buckets. Maintaining a mix of taxable, tax-deferred and tax-free accounts allows individuals to adapt withdrawals based on their current tax situation.
For example, a need might be funded from a brokerage account one year and from a Roth IRA or line of credit the next — minimizing taxes while preserving flexibility.
Time liquidity events with your tax picture. Realizing gains during low-income years or deferring income during high-income years can reduce the total tax burden.
Strategic timing can also help avoid bumps into higher tax brackets or Medicare surcharge thresholds.
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Use tax-aware liquidation planning. When selling investments is necessary, consider pairing gains with losses or spreading sales across tax years.
A multiyear tax projection can reveal opportunities to minimize capital gains exposure and lower lifetime tax liability.
Plan proactively at year's end. Liquidity becomes especially important in the final months of the year, when families might want to complete Roth conversions, make charitable gifts or pay tax estimates.
Having cash on hand or a tax-efficient borrowing plan helps to execute those decisions with control rather than urgency.
Collaborate across advisers. Integrating the perspectives of wealth advisers and CPAs prepares a full view of the client's financial picture. Coordinated planning helps align tax strategy with investment goals, estate planning and liquidity needs.
With the goal of combining timing, tax awareness and a flexible approach to accessing funds, individuals can reduce drag on their portfolio and improve decision-making without compromising long-term objectives.
The missing link between wealth and freedom
Ultimately, liquidity is more than just a cash reserve — it's a source of confidence and control. Being "wealthy on paper" doesn't guarantee financial freedom, especially if assets aren't structured to support real-life needs.
With a thoughtful, tax-aware liquidity plan in place, affluent families can use their wealth intentionally, not just to build a strong future, but to live with clarity and flexibility today.
Related Content
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- How to Create a Retirement Plan That Checks All Your Boxes
- What the Great Wealth Transfer Means for Financial Advisers
- A Checklist for High-Net-Worth Individuals: How to Protect and Grow Your Wealth
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