Collective and Valur partner to turn unicorn employee stock into lifetime income

By combining Collective’s Exchange Fund with Valur’s Charitable Remainder Trusts, unicorn employees turn their shares into a lifetime of cash distributions and charitable giving

NEW YORK, May 30, 2024 (GLOBE NEWSWIRE) -- Collective Liquidity, Inc. and Valur Inc. today announced they are now working together to enable employees to use their illiquid unicorn shares to create a lifetime of annual income. The solution offered by Collective and Valur’s collaboration is unique. The employee first exchanges shares tax-free for a limited partnership (LP) interest in Collective’s Exchange Fund. The employee then contributes the LP interest into a Valur charitable remainder trust. Over time, the employee can redeem the LP interest in the trust for cash tax-free. They can use the cash to make other investments pre-tax and/or take annual cash distributions. The employee also receives an immediate tax deduction when they contribute the LP interests to the trust. At the end of the trust’s life, the employee donates the trust’s assets to a charity of their choice.

For example, an employee that paid $100,000 to exercise stock options on unicorn shares that are now worth $1mm, could exchange the shares for a $1mm LP interest in the Exchange Fund. They would then contribute that LP interest into their trust. Unlike a stock sale, no tax would be triggered on the $900,000 gain by either the exchange or the creation of the trust. The employee would receive an immediate tax write-off of about ~$100,000. In subsequent years, they would also be able to redeem their LP interest tax free in the trust to fund cash distributions to themselves and/or make other investments by the trust. If the employee opted to have the term of the trust be their lifetime and they lived another 50 years, the sum of their annual distributions would be approximately $5.1m after taxes or $2.5m more than if they hadn’t used the trust and exchange fund (see assumptions below1).

Mani Mahadevan, CEO and Founder of Valur said: “we are very excited to pair our charitable remainder trusts with Collective’s Exchange Fund. Collective’s fund provides unique liquidity for unicorn shares and so enables the trust to fund distribution and further diversification within the trust tax-free.”

Greg Brogger, CEO and Co-Founder of Collective said: “The team at Valur has done an amazing job of making charitable remainder trusts easy to understand and easy to set up. We are very pleased to be offering them to unicorn employees alongside our suite of integrated wealth management solutions.”

Collective Liquidity provides unicorn shareholders with the financial tools and products they need to effectively manage their wealth. Collective’s wealth management solutions enable diversification, liquidity and wealth creation over the long-term, generating dramatically better financial outcomes for Collective’s clients.

Valur democratizes access to advanced tax-mitigation strategies that historically have been limited to well-established family offices due to their cost and complexity. Valur offers these sophisticated tools at a fraction of the usual overhead. Our platform empowers financial advisors, CPAs, and their clients with the knowledge and means (Valur’s platform) to easily set up and manage tax-advantaged vehicles to reduce their ordinary income, capital gains, qualified small business stock (QSBS), and estate taxes.

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The information contained herein relating to the Collective Exchange Fund, L.P. (the "Fund") is not final and is subject to change and has been prepared solely for informational purposes. It does not constitute an offer to buy or sell an interest in the Fund or the provision of any investment management or advisory services.

Nothing contained herein constitutes investment, legal, tax or other advice, nor is it to be relied on in making an investment or other decision.

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1 This assumes the Exchange Fund appreciates an average of 12.5% annually. For reference, Cambridge Associates reported in 2022 that their U.S. venture capital index returned 19.3% annually over the trailing 10 years and 28.1% annually over the trailing 25 years.