📈10b5-1 Plans: From Legal Protection to Long-Term Diversification

☕ Good morning SenseMakers!

If you’re sitting on a mountain of equity, you already know the basics: diversify, steer clear of insider trading traps, and set up a 10b5-1 plan. But here’s the thing, too many execs treat these plans like a compliance checkbox.

Done right, a 10b5-1 plan does more than keep you out of legal hot water. It can smooth your cash flow, minimize taxes, and even protect your reputation in the market.

Because let’s face it, if you’ve got a pile of RSUs vesting, you will need to sell at some point. The only question is whether those sales look haphazard…or like part of a bigger strategy that signals confidence and protects your wealth.

I’ve seen what happens without one. A leader with 70% of their net worth in company stock watched a tech selloff wipe out seven figures overnight. No 10b5-1 plan meant they couldn’t sell during blackout windows, and they paid the price.

The smarter play? Use those inevitable sales as a tool. With the right structure, you can turn forced liquidity into deliberate wealth-building instead of tax headaches or bad optics.

The basics: What’s a 10b5-1 plan?

RSUs feel like free money, until you realize they create forced income events. When shares vest, the IRS counts it as income whether you sell or not. 

Miss your open trading window? You could be stuck holding concentrated stock, hoping the market doesn’t turn on you.

That’s why so many execs end up on the emotional rollercoaster: “Should I hold? Should I sell? What if earnings crush it next quarter?” 

Meanwhile, the tax bill doesn’t care. A 10b5-1 plan takes emotion out of the equation. 

Think of a 10b5-1 plan as your pre-approved playbook for selling stock.

You set it up when you’re “clean” (no material nonpublic info in hand) and it spells out exactly how your broker will sell shares later. Once it’s live, trades run on autopilot, even if you’re in a blackout window or sitting on inside knowledge.

It’s your legal “affirmative defense” if regulators or headlines ever question your trades.

Here’s how it can look in practice:

1. “Sell 10,000 shares on the 1st of each month, but only if the stock is over $250.”

2. “Sell $150,000 worth of shares each quarter, spread across multiple days.”

It’s not random cashing out, but a rules-based system that keeps your selling disciplined, compliant, and, if you use it right, strategic.

RSUs: golden ticket or concentrated risk trap?

If today’s topic hits home, you’re going to love this.

Adam Crawford from Candor recently joined me on the Making Sense of Your Money Podcast. He and his team have created a platform designed to eliminate the hassle of managing RSUs. Their system connects directly to your RSU custodian, automatically sells shares, and seamlessly moves the proceeds into a diversified portfolio—all without you having to lift a finger.

We cut through the noise to talk strategy: where automation can save executives millions, how to avoid concentration risk, and why delegation beats “DIY” when your wealth is on the line.

If you’ve ever felt RSU-rich but portfolio-poor, this conversation is worth a listen.

🛠️ What a smart plan actually looks like

Forget the myth that 10b5-1s are rigid. Done right, they’re strategic blueprints. 

You get to decide:

• ⏰How much stock to sell and how often

• 📈Price floors (so you’re not dumping at the lows)

• 💰Liquidity pacing (cash when you need it, not when the market says so)

• 📚Tax alignment (pairing sales with deductions or loss harvesting)

When RSUs vest, they’re already taxable as ordinary income, you don’t get a break by holding them longer, just more risk.

Think of it as dollar-cost averaging in reverse: instead of buying a little each month, you’re selling in measured bites, gradually reducing concentration risk.

Every Form 4 filing tells a story. A single $5M dump can look like you’ve lost faith, but a steady cadence of sales? That looks like smart diversification to investors, board, and colleagues. 

A well-structured plan turns necessary sales into background noise.

🔀 Staggered plans  

The SEC shut down overlapping 10b5-1s (where a person has multiple plans that allow for trades during the same period) in 2023, but that doesn’t mean you’re locked into a blind conveyor belt. 

Advanced execs stagger plans (rolling sales forward in cycles), distributing risk across multiple trading windows instead of watching one monolithic plan trigger all at once.  

Picture two RSU layers: 40% under a 12-month plan, another starting fresh after the first expires. Both are compliant, neither creates a liquidity cliff. 

This design blunts the downside if markets skid mid-cycle, and it kills nasty optics that come from single large insider dumps.  

That’s execution risk diversification. Real wealth defense comes down to how you sell. A staggered strategy builds rolling exposure, liquidity streams, and tax patterns that bend with markets instead of breaking under them. 

💡 Making Sense of 10b5-1

A 10b5-1 plan is one of the best defenses against concentrated stock risk, but it’s not the whole playbook. Most executives juggle stock options, performance shares, and complex bonus structures that can be just as risky if unmanaged.

Here’s the bottom line:

1. Know how much liquidity and diversification you need.

2. Build a rules-based selling schedule with your advisor.

3. Automate it through a 10b5-1 plan so it runs in the background.

I’ve sat across the table from executives who’ve faced the same challenge you’re staring at now: too much wealth tied to one ticker. Some had plans in place and watched their portfolios grow steadily. 

Others didn’t, and a single blackout period or market shock cost them thousands to, unfortunately, millions. 

The folks who win here aren’t the ones who just file safe harbor paperwork, but the ones who look to turn regulatory constraints into portfolio advantage every chance they get. 

As always, I hope this helps you to Prioritize Your Version of a Rich Life.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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