The Frank Duke PST Distribution Strategy

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The Frank Duke PST Distribution Strategy offers Procter & Gamble (P&G) employees a powerful way to optimize their retirement assets. Named after Frank Duke, a former P&G employee, this two-step approach leverages the Profit Sharing Trust (PST) and IRS tax provisions to potentially boost after-tax value. By pairing Net Unrealized Appreciation (NUA) with a 60-day rollback, it’s tailored for retirees seeking tax efficiency and flexibility from their PST holdings.

What Is the Frank Duke Method?

The Frank Duke method is a two-step process that leverages the IRS’s Net Unrealized Appreciation (NUA) rules and a 60-day IRA rollback to help you maximize the after-tax value of your PST holdings. Here’s how it works:

  • Step 1: Take a lump-sum distribution from your PST after a qualifying event (such as retirement or reaching age 59½). Split the distribution by rolling most assets into an IRA, while transferring P&G shares—typically preferred shares with a low $6.82 per share cost basis—into a taxable brokerage account using the NUA provision.

  • Step 2: Within 60 days, roll back a portion of the taxable account shares (often exceeding the cost basis) into an IRA. This maneuver can offset the ordinary income tax due on the cost basis, while the remaining shares in the taxable account benefit from long-term capital gains treatment when sold.

For NUA basics, see our post: vaultis.com/procterandgamble/nua

Key Benefits for P&G Employees  

  • Significant Tax Savings: By shifting the appreciation in your P&G shares from ordinary income tax rates (which can reach up to 37%) to long-term capital gains rates (typically 15–20%), you can potentially save thousands of dollars in taxes.

  • Diversified Account Types: The strategy creates both taxable and tax-deferred accounts, offering flexibility for retirement income and investment management.

  • Enhanced Flexibility: Access to a taxable account allows for more flexible withdrawals and broader investment options compared to the PST.

  • Improved Estate Planning: The ability to manage distributions and account types can support more effective estate and legacy planning.

How the Strategy Works: A Step-by-Step Example

Let’s look at a scenario with the following key details: 5,882 P&G preferred shares, each with a $6.82 cost basis, and a current market value of $170 per share (total value: $1 million).

  • Step 1: Take a lump-sum distribution from your PST. Roll most assets into an IRA and move the 5,882 preferred shares to a taxable account via NUA. The cost basis ($40,115 = 5,882 shares × $6.82) is taxed as ordinary income in the year of distribution.

  • Step 2: Within 60 days, roll back at least $40,115 worth of shares from the taxable account to your IRA. This offsets the ordinary income tax hit, while the remaining shares—now worth nearly $960k—are eligible for long-term capital gains treatment when sold.

This approach can result in substantial tax savings and greater control over your retirement assets.

Advanced Planning: Charitable Giving with a Donor-Advised Fund (DAF)

For P&G retirees with philanthropic goals, the Frank Duke method can be paired with a Donor-Advised Fund (DAF):

  • After executing the NUA strategy, donate appreciated P&G shares to a DAF.

  • Receive a charitable deduction for the full market value of the shares, offsetting the ordinary income from the cost basis.

  • Avoid capital gains tax on the appreciation, allowing your charitable contributions to grow tax-free within the DAF.

This combination aligns tax efficiency with your charitable legacy.

Important Considerations

  • Timing Is Critical: The lump-sum distribution must follow a qualifying event (retirement, age 59½, or death) to qualify for NUA treatment.

  • 60-Day Rollback Window: The IRS enforces this deadline strictly. Missing it can forfeit the tax benefits.

  • Precision Required: Errors in execution can result in lost tax advantages. Professional guidance is highly recommended.

Is the Frank Duke Strategy Right for You?

The Frank Duke PST Distribution Strategy is a powerful tool for P&G employees seeking to maximize their retirement assets. However, its complexity demands careful planning and expert execution. At Vaultis Private Wealth, we specialize in helping P&G professionals navigate these decisions, ensuring you make the most of your hard-earned benefits.


Disclosures:

The information in this blog is for educational purposes only and is not intended as personalized financial, tax, or legal advice. The Frank Duke PST Distribution Strategy may not be suitable for everyone, as individual financial goals, risk tolerance, and circumstances differ. Consult a qualified financial advisor, tax professional, or legal advisor before acting to evaluate your specific situation and determine if this strategy fits your needs. Past performance does not guarantee future results, and all investments involve risks, including the potential loss of principal. Tax laws and regulations may change, potentially affecting the strategies described. Vaultis Private Wealth does not guarantee the accuracy, completeness, or outcome of this information and is not affiliated with Procter & Gamble, which does not endorse this content.