Exchange funds aren’t open to the general public. They’re private investment vehicles, which under SEC rules means participation is legally restricted, not just a matter of minimum account size. Three exchange fund eligibility requirements determine whether you qualify: whether you’re an accredited investor, whether you can meet the fund’s minimum contribution, and whether the fund has room for your stock.
What the exchange fund eligibility requirements mean for you
A mutual fund or ETF is open to anyone with a brokerage account and enough cash to buy a share. An exchange fund isn’t. Because it’s a private placement, federal securities law limits who’s allowed to participate at all, regardless of how much you want to invest. This is a legal requirement, not a business preference, and it applies whether you’re contributing to Glidepath or any other exchange fund provider.
The accredited investor standard
To qualify as an accredited investor under current SEC rules, you need to meet one of two tests:
- Income: more than $200,000 in each of the last two years individually, or more than $300,000 combined with a spouse, with a reasonable expectation of the same this year.
- Net worth: more than $1 million, excluding the value of your primary residence.
You only need to meet one of these, not both. If your net worth clears $1 million once you set aside your home’s value, your income level doesn’t matter, and vice versa.
The minimum contribution
Beyond accredited investor status, every exchange fund sets its own minimum contribution. For Glidepath, that minimum is $100,000. This is separate from the accredited investor test above. You can clear the income or net worth bar and still need to have that amount available to contribute in eligible stock.
The requirement most people don’t expect: the fund has to be able to use your stock
Meeting the investor-side requirements doesn’t automatically guarantee a spot. An exchange fund also has to manage what it’s building on the stock side. If the shares you want to contribute are already heavily represented in the fund’s pool, or in greater supply than the fund currently needs, you may be asked to wait for room to open in the fund, or to contribute a smaller amount than you’d planned.
This one is out of your control. It’s about portfolio construction on the fund’s end, and it’s worth knowing about before you assume a specific stock is a guaranteed fit.
What eligibility does not require
A few things people sometimes assume are requirements, but aren’t:
- No extended commitment beyond the standard structure. The seven-year holding period that comes with the tax deferral is a feature of how exchange funds work under Section 721, not an additional eligibility hurdle layered on top.
- No specific stock type required, beyond the fund’s capacity to accept it. Any appreciated position can potentially work, subject to the fund’s current mix.
Meet the requirements and want a way to defer and diversify? See if you qualify for the Glidepath fund.
Exchange fund eligibility at a glance
You generally qualify for an exchange fund if you meet the accredited investor standard ($200,000 individual income, $300,000 joint income, or $1 million net worth excluding your primary residence) and can meet the minimum contribution of $100,000 for Glidepath. The one variable outside your control is whether the fund currently has room for the specific stock you’re bringing.
Ready to find out whether you’re eligible?