Profit Preservation: Tax-Deferred Strategies for Selling Your Business

Admin • March 8, 2024

You’ve built a thriving business and poured your heart and soul into it, and now it’s time to sell and reap the rewards. Congratulations! That’s a monumental step, not just in terms of the immediate financial windfall but also for your long-term financial health. It’s an exhilarating, albeit slightly nerve-wracking, phase. 

But before you pop the champagne and sail off into the sunset, let’s talk strategy, specifically tax strategy. Yes, I know “tax” isn’t the most thrilling word in our vocabulary, but stick with me because Uncle Sam has his eye on a piece of the pie. 

Selling a business can trigger a significant tax bill, leaving you feeling like you just worked hard for someone else. Understanding and leveraging tax-deferred opportunities can significantly impact how much of that sale you get to keep and grow over time. 

What Does Tax-Deferred Mean?

Tax-deferred means you can delay paying taxes on investments and their earnings until you withdraw the money. This allows your money to grow tax-free, potentially leading to significant savings. Often, when money is withdrawn during retirement, you will be in a lower tax bracket.

Here’s an example: Imagine you sell your business for $1 million, resulting in a $500,000 capital gain. If you were to pay taxes on that amount right away, it could leave a hefty dent in your pocket. But by utilizing a tax-deferred strategy, you can hold onto that money and invest it, allowing it to grow tax-free until you withdraw it later. The longer you leave it untouched, the more it can compound, leaving you with a much larger sum.

Tax Strategies for the Savvy Seller

There are several tax-deferred opportunities available that can help you minimize your tax burden. Let’s explore some options you might want to consider.

1. Seller Financing

Have you ever thought about being the bank? In seller financing, you extend credit to the buyer to purchase the business. The buyer pays you back over time with interest. The catch? You don’t get all your money upfront. Still, it can spread the tax burden over several years, potentially keeping you in a lower tax bracket and reducing the immediate tax hit.

Pros:

  • Spreading sale proceeds over several years minimizes annual capital gains taxes for tax benefits.
  • Seller financing can speed up the closing process since there’s no waiting on the bank’s loan approval.
  • Offering seller financing widens the potential buyer pool.
  • Sellers may command a higher sales price because they’re offering financing.
  • Seller financing generates consistent interest income for sellers.

Cons:

  • One of the most significant risks for sellers is the buyer defaulting on the loan. 
  • Deferred full payment to sellers.
  • Crafting a seller financing agreement requires legal assistance to ensure the contract protects both parties. This can add to the transaction’s costs and time.
  • Sellers manage loans and address payment issues.

2. Installment Sales

Similar to seller financing , installment sales allow you to defer taxes by receiving the proceeds over time. You only pay taxes on the portion of the gain you receive each year. This can be a great way to manage your tax liability and keep more money working for you over the sale period.

Pros:

  • Pay tax only on received installment profits, deferring tax liability.
  • Installment sales enhance buyer accessibility beyond traditional financing.
  • Earn interest on financed amounts for additional income.

Cons:

  • Risk of buyer loan default.
  • Delayed full payment of sale proceeds.
  • Potential for lower future income if interest rates rise.
  • Possible decline in property value over time, complicating resale after default.

3. Qualified Opportunity Funds (QOFs)

This program was established by the federal government in 2017 and designed to spur economic development in specific areas. If you reinvest your capital gains into a QOF operating in a designated Qualified Opportunity Zone (QOZ), you can defer paying taxes on those gains until you sell your investment, or until December 31, 2026 — whichever comes first. 

You must reinvest your capital gains within six months of selling your business. If you hold the investment for at least five years, you can exclude a portion of your original capital gains from taxation. If the investment is held for at least ten years, any capital gains from the future sale of the investment are returned to you tax-free.

Pros:

  • Defer taxes on QOF gains until Dec 31, 2026, or upon sale/exchange.
  • 10% gain exclusion for QOFs held over 5 years; 15% for over 7 years.
  • After 10 years, QOF investments can grow tax-free.
  • QOF investments boost distressed areas with new jobs and development.
  • Opportunity to make a positive impact in at-need communities.

Cons:

  • As with any investment, there’s no guarantee of a return, and investing in distressed areas may carry higher risks.
  • There are strict regulations to qualify for the tax benefits, including how and when funds are invested and managed.

4. Real Estate 1031 Exchange

If your business includes real estate, a 1031 exchange allows you to defer capital gains taxes by reinvesting the proceeds from the sale of your property into the purchase of another property. Also known as a “like-kind” exchange, the IRS lets you sell one property and reinvest the proceeds in another similar property while deferring taxes on your gain. 

With careful maneuvering, real estate investors can use 1031 exchanges to keep deferring taxes indefinitely through strategic property swapping.

Pros:

  • Defer capital gains taxes on the sale.
  • By deferring taxes, investors can potentially acquire larger or more valuable properties, allowing their portfolio to grow.
  • Properties exchanged through 1031 may be inherited with a stepped-up basis, negating capital gains tax.

Cons:

  • The rules governing 1031 exchanges are complex; failing to adhere to them can result in a significant tax liability.
  • Strict timing pressures quick decisions, risking less favorable choices.
  • Not all real estate transactions qualify for a 1031 exchange. 

5. Charitable Remainder Trust (CRT)

Feeling philanthropic? A CRT allows you to contribute a portion of your business sale proceeds to a trust, which then pays you (or another beneficiary) a stream of income for a term of years or for life. After the term ends, the remainder goes to your chosen charity. This strategy can offer immediate tax deductions and reduce estate taxes while supporting a cause close to your heart.

For example, let’s say you sold your business for $5 million and contributed $2 million in proceeds to a CRT. The CRT could then pay you a set percentage of $2 million yearly, say 5%, equaling $100,000 annually. After your death, the charity of your choice would receive the remaining assets in the CRT.

Pros:

  • Claim an immediate tax deduction in the year you set up the trust and transfer assets into it.
  • If the CRT is funded with appreciated assets, assets within the trust can be sold without incurring capital gains tax at the time of the sale. This allows the full value of the assets to be reinvested by the trust, potentially increasing the income generated for the beneficiaries.
  • CRTs provide an income stream for the beneficiaries. 
  • Beyond the financial benefits, you can support causes and organizations important to you.

Cons:

  • CRTs are irrevocable; beneficiaries or terms of the trust cannot be changed.
  • Setting up and managing a CRT can be complex, requiring legal and financial expertise.
  • Income received depends on the trust’s investment performance. Poor investment performance can reduce the income stream and the ultimate charitable donation.

Let Five Pine Wealth Help You With Tax-Deferral Strategies

Smart tax planning is crucial, and every situation is unique. It’s essential to carefully evaluate your options and seek professional advice before making any decisions.

Remember, navigating the complexities of tax law can be tricky. Five Pine Wealth Management has experienced advisors who can help you determine the best tax-deferral opportunities for your situation. To schedule a meeting, send an email or give us a call at 877.333.1015.

Selling your business is a considerable achievement and the start of a new chapter. Celebrate your success, explore your options, and make informed decisions to maximize the rewards of your entrepreneurial journey.

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Rebuilding Wealth After Divorce: A Complete Guide to Your Financial Fresh Start

November 21, 2025
Key Takeaways Divorced spouses married 10+ years can claim Social Security benefits based on their ex’s record without reducing anyone else's benefits. Splitting retirement accounts requires specific legal documents (QDROs for 401(k)s) drafted precisely to your plan's requirements. Investment properties and taxable accounts carry hidden tax liabilities that significantly reduce their actual value. No one gets married planning for divorce. Yet here you are, facing a fresh financial start you never wanted. Maybe you’re 43 with two kids and suddenly managing on your own. Or you’re 56, staring down retirement in a decade, wondering how you’ll catch up after splitting assets down the middle. We get it. Divorce is brutal, emotionally and financially. And the financial piece often feels overwhelming when you're still processing everything else. According to research , women's household income drops by an average of 41% after divorce, while men's falls by about 23%. Those aren't just statistics. They're the reality many of our clients face when they first come to us. But here's something we've seen time and again: While you can't control what happened, you absolutely can control what happens next. Financial planning after divorce isn't just damage control. With the right approach, it can be the beginning of a more intentional and empowered relationship with your money. Here’s how to get there: First, Understand What You’re Working With Before you can move forward, you need a clear picture of your current financial situation. Start by gathering every financial document related to your divorce settlement: property division agreements, retirement account splits, alimony or child support arrangements, and any debt you’re responsible for. Then create a simple inventory: What you have: Bank account balances Investment and retirement accounts Home equity Expected alimony or child support income What you owe: Mortgage or rent obligations Credit card debt Car loans Student loans This baseline gives you something concrete to work with. You can't build a plan without knowing where you're starting from. Social Security Benefits for Divorced Spouses This one surprises people. If you were married for at least 10 years, you may be entitled to benefits based on your ex-spouse's work record, even if they've remarried. You can claim benefits based on your ex’s record if: Your marriage lasted 10+ years You’re currently unmarried You’re 62+ years old Your ex-spouse is eligible for Social Security benefits The benefit you can receive is up to 50% of your ex-spouse’s full retirement benefit if you wait until full retirement age to claim. Importantly, claiming benefits on your ex’s record doesn’t reduce their benefits or their current spouse’s benefits. If you’re eligible for both your own benefits and your ex’s, Social Security will automatically pay whichever amount is higher. What About Splitting Retirement Accounts in Divorce? Retirement accounts often represent one of the largest assets in a divorce settlement. Understanding how to handle the division properly can save you thousands in taxes and penalties. The QDRO Process For 401(k)s and most employer-sponsored retirement plans, you’ll need a Qualified Domestic Relations Order (QDRO). This legal document outlines the plan administrator's instructions for splitting the account without triggering early withdrawal penalties. QDROs must be drafted precisely according to both your divorce decree and the specific plan’s rules and requirements. We’ve seen clients lose thousands of dollars because their QDRO wasn’t accepted and had to be redrafted. Work with an attorney who specializes in QDROs. The upfront cost will be worth it to avoid expensive problems later. What About IRAs? Traditional and Roth IRAs can be split through your divorce decree without a QDRO. The transfer must be made directly from one IRA to another (not withdrawn or deposited) to avoid taxes and penalties. Tax Implications to Consider When you receive retirement assets in a divorce, you’re getting the account value and its future tax liability. A $200k traditional 401(k) isn’t worth the same as $200k in a Roth IRA or home equity, because of the different tax treatments. Many settlements divide assets dollar-for-dollar without considering how those dollars are taxed, so make sure yours addresses these differences. Dividing Investment Properties and Taxable Accounts Retirement accounts aren’t the only assets that require careful handling. If you own real estate investments or taxable brokerage accounts, the way you divide them matters. The Capital Gains Dilemma Let’s say you own a rental property purchased for $200k and is now worth $400k. Selling it as part of the divorce triggers capital gains tax on that gain, potentially $30,000-$60,000, depending on your tax bracket. Some couples avoid this by having one spouse keep the property and buy out the other’s share. This defers the tax hit, but you’ll want to ensure the buyout price accounts for future tax liability. Taxable Investment Accounts Brokerage accounts can be divided without triggering taxes if you transfer shares directly rather than selling and splitting proceeds. However, not all shares are equal from a tax perspective. Smart divorce settlements account for the cost basis of investments. These decisions require coordination between your divorce attorney, a CPA who understands divorce taxation, and a financial advisor who can model different scenarios. We remember a client whose settlement gave her a rental property “worth” $350,000. But the $80,000 in deferred capital gains owed when selling wasn’t accounted for. She effectively received $270,000 in value, not $350,000, a massive difference in her actual financial position. Building Your New Budget and Savings Strategy Living on one income after years of two requires adjustment. Start with your new essential expenses: housing, utilities, groceries, transportation, insurance, and any child-related costs. Then look at what’s left: this is where you begin rebuilding your financial cushion. Rebuilding Your Emergency Fund If you had to split or use your emergency savings during the divorce, rebuilding should be your first priority. Aim for at least three months of expenses, then work toward six months. Even $100 a month adds up to $1,200 each year. Maximize Retirement Contributions This feels counterintuitive when money is tight, but if your employer offers a 401(k) match, contribute at least enough to get a full match. Otherwise, you’re leaving free money on the table. If you’re over 50, take advantage of catch-up contributions. For 2025, you can contribute up to $23,500 to a 401(k), plus an additional $7,500 in catch-up contributions. If you're between 60-63, that catch-up increases to $11,250. Address Debt Strategically Post-divorce debt looks different for everyone. If you accumulated credit card debt while covering legal fees or temporary living expenses during divorce proceedings, prioritize paying these off once your settlement funds are available. Updating Your Estate Documents Updating beneficiaries and estate documents, a critical step, is sometimes overlooked. Check beneficiaries on: Life insurance policies Retirement accounts Bank accounts with payable-on-death designations Investment accounts Beneficiary designations override what’s in your will. We’ve seen ex-spouses receive retirement assets years after a divorce simply because the account owner failed to update beneficiaries. Address your will, healthcare power of attorney, and financial power of attorney, too. You're Not Starting from Zero Rebuilding wealth after divorce is about creating a financial foundation that supports the life you want to build moving forward. You have experience, earning potential, and time. It’s not a matter of if you can rebuild, but how efficiently you’ll do it. If you’re navigating financial planning after divorce, we can help. At Five Pine Wealth Management, we work with clients through major life transitions, creating practical strategies tailored to your specific situation. Call us at 877.333.1015 or email info@fivepinewealth.com to schedule a conversation. Frequently Asked Questions (FAQs) Q: Will I lose my ex-spouse's Social Security benefits if I remarry? A: Yes. Once you remarry, you can no longer collect your ex-spouse’s benefits. However, if your new marriage ends, you may claim benefits based on whichever ex-spouse's record is higher. Q: How long after divorce should I wait before making major financial decisions? A: Most advisors recommend waiting 6-12 months before making irreversible decisions like selling your home or making large investments. Focus first on understanding your new financial situation and letting the emotional dust settle. Q: Should I keep the house or take more retirement assets in the settlement?  A: This depends on your specific situation, but remember: houses have ongoing costs like property taxes, insurance, maintenance, and utilities that retirement accounts don't. We help clients run scenarios comparing both options, factoring in everything from cash flow needs to long-term growth potential, before deciding what makes sense for their situation.

401(k) Millionaire: Proven Strategies to Reach 7 Figures in Your Retirement Account

October 17, 2025
Key Takeaways Maxing out your employer match provides an immediate 50-100% return and is the easiest way to accelerate your 401(k) growth. Reaching $1 million in your 401(k) depends more on consistent contributions over time than on being the highest earner or picking winning investments. High earners can potentially contribute up to $70,000 annually through a mega backdoor Roth conversion if their employer plan allows after-tax contributions. Hitting seven figures in your 401(k) might sound like a pipe dream, but it's more achievable than you think. With the right 401(k) investment strategies and a disciplined approach, becoming a 401(k) millionaire is within reach for many mid-career professionals. Let's walk through exactly how you can get there. The Math Behind Becoming a 401(k) Millionaire Before we discuss strategies, let's look at the numbers. Understanding the math helps you see that reaching $1 million isn't about getting lucky — it's about time, consistency, and thoughtful planning. Starting Age Annual Contribution Balance at 65* 30 $15,000 $1.5 million 30 $20,000 $2 million 40 $25,000 $1.3 million *Assumes 7% average annual return Time matters, but it's never too late to build substantial wealth if you're willing to prioritize your retirement savings. 7 Steps to Build Your 401(k) to Seven Figures Now that you understand the math, let's break down the specific strategies that will get you there. Step 1: Max Out Your Employer Match (The Easiest Money You'll Ever Make) If your employer offers a 401(k) match, contributing enough to capture it fully is the absolute first step: it’s free money that provides an immediate 50-100% return on your investment. Let's say your employer matches 50% of your contributions up to 6% of your salary. If you earn $150,000 and contribute $9,000 (6% of your salary), your employer adds $4,500. That's a guaranteed 50% return before your money even hits the market. Not taking full advantage of an employer match is like turning down a raise. Make sure you're contributing at least enough to capture every dollar your employer offers. Step 2: Gradually Increase Your Contribution Rate Once you've secured your employer match, the next step is increasing your personal contribution rate over time. For 2025, the 401(k) contribution limit is $23,500 (or $31,000 if you're 50 or older with catch-up contributions). Here's a practical approach: Every time you get a raise or bonus, direct at least half toward your 401(k). If you get a 4% raise, bump your contribution by 2%. Many plans now offer automatic annual increases. If yours does, set it to increase your contribution by 1-2% annually until you hit the maximum. You'll barely notice the change, but your future self will thank you. Step 3: Master Tax-Advantaged Retirement Accounts Through Strategic Contributions Traditional 401(k) contributions reduce your taxable income now, which is ideal if you're in a high tax bracket today. Roth 401(k) contributions don't reduce current taxes, but withdrawals in retirement are tax-free — valuable if you're earlier in your career or expect a higher income later. A hybrid approach works for many of our clients. Step 4: Optimize Your 401(k) Investment Strategies Your contribution rate matters, but so does what you're investing in. We regularly see clients who contribute aggressively but choose overly conservative investments that don't provide enough growth. Keep costs low . Target-date funds and index funds typically offer the lowest expense ratios. Every 0.5% in fees you avoid can add tens of thousands to your retirement balance over 30 years. Rebalance annually . Market movements throw your allocation off balance. Set a reminder once a year to review and rebalance your portfolio back to your target allocation. Avoid the temptation to chase performance . Last year's top-performing fund is rarely this year's winner. Stick with broadly diversified, low-cost options. Step 5: Consider a Mega Backdoor Roth Conversion If you're a high earner who's already maxing out regular 401(k) contributions, a mega backdoor Roth conversion can accelerate your retirement savings. Here's how it works: Some employer plans allow after-tax contributions beyond the standard $23,500 limit. The total contribution limit for 2025 (including employer contributions and after-tax contributions) is $70,000 ($77,500 if you're 50+). If your plan permits, you can make after-tax contributions up to that limit, then immediately convert those contributions to a Roth 401(k) or roll them into a Roth IRA. This gives you tax-free growth on substantially more money than the regular contribution limits allow. Not all plans offer this option, and the rules can be complex. Check with your HR department to see if your plan allows after-tax contributions and in-plan Roth conversions or rollovers. Step 6: Avoid These Common 401(k) Mistakes Even with great 401(k) investment strategies, mistakes can derail your progress toward seven figures. Avoid: Taking loans from your 401(k) . While it might seem convenient, you're robbing yourself of compound growth. The money you borrow stops working for you, and you're paying yourself back with after-tax dollars. Cashing out when changing jobs . Rolling over your 401(k) to your new employer's plan or an IRA allows your money to continue growing tax-deferred. Cashing out triggers taxes and penalties that can set you back years. Panic selling during market downturns . Market volatility is normal. The clients who reach $1 million are those who stay invested through ups and downs, not those who try to time the market. Step 7: Stay Consistent (Even When It's Boring) The path to becoming a 401(k) millionaire isn't exciting (and that’s a good thing!). The most successful savers aren't those who constantly tweak their strategy or chase the latest investment trend. They're the ones who set up automatic contributions, review their allocation once a year, and otherwise leave their 401(k) alone. Let Five Pine Help You Build Your Million-Dollar Plan Reaching $1 million in your 401(k) is absolutely achievable with the right strategy and discipline. Whether you're just starting your career or playing catch-up in your 40s and 50s, the steps remain the same: maximize contributions, optimize your investments, take advantage of tax-advantaged retirement accounts, and stay consistent. At Five Pine Wealth Management , we help clients build comprehensive retirement strategies that go beyond just their 401(k). We can analyze your current contributions, recommend optimal allocation strategies, and help you coordinate your employer plan with other retirement accounts. Want to see what your path to seven figures looks like? We help clients build these roadmaps every day. Email us at info@fivepinewealth.com or give us a call at 877.333.1015. Let's talk about your specific situation. Frequently Asked Questions (FAQs) Q: Should I prioritize maxing out my 401(k) or paying off debt first? A: Start by contributing enough to capture your full employer match — that's an immediate 50-100% return you can't get anywhere else. Beyond that, prioritize high-interest debt (credit cards, personal loans) since those interest rates typically exceed investment returns. Q: Should I stop contributing during market downturns to avoid losses? A: No — continuing to contribute during downturns is actually one of the best strategies for building wealth. When prices are lower, your contributions buy more shares, setting you up for greater gains when the market recovers. Q: I'm 55 with only $300K saved. Is it too late to reach $1 million?  A : While reaching exactly $1 million by 65 might be challenging, you can still build substantial wealth. Maxing out contributions, including catch-up ($31,000/year), could get you to $750K-$850K depending on returns. Disclaimer: This is not tax or investment advice. Individuals should consult with a qualified professional for recommendations appropriate to their specific situation.