Looking for an opinion. What technique would you use for this question?

A couple, Carol and Al French, in their mid-60s, New York State residents, have seen their net worth balloon from $3 million to more than $6.5 million during the last four years, chiefly through rapid appreciation of a stock portfolio primarily invested in large-capitalization growth stocks. The client had read articles in financial publications about the near total confiscation of IRAs upon the death of the last to die of the account holder or spouse. The client has approximately $1.25 million in these types of plans, with his wife listed as the beneficiary. He had planned to hold the stock portfolio for life in order to get a step up in basis, avoiding capital gains taxes for himself and his heirs. He also planned to name his wife as beneficiary of all IRAs in order to assure her of a source of income if she survived him. The client also had a number of charitable bequests in his will.

The client had more than 40% of his investment holdings in a single large cap stock and was growing concerned about the lack of diversification. He wanted to diversify his portfolio while avoiding federal and state long-term capital gains taxes. Calculations determined that there were potentially tremendous net after tax benefits available to the client's children if they, rather than the spouse, were named as primary beneficiary on some or all of these IRAs. However, the client remained concerned about his wife's financial well-being if his IRAs were left solely to the children.

The client had several competing objectives:

1. Diversifying the investment portfolio, selling off $1-1.5 million of the single large-cap stock which dominated the portfolio. (He would still maintain over $1 million of that stock after these sales.)
2. Minimizing and, if possible, avoiding capital gains tax on the sale of any stock.
3. Assuring sufficient cash flow for the rest of the client's and wife's lives (about 30 years).
4. Minimizing transfer and income taxes so that the children and grandchildren receive the greatest amount of net assets possible from the estate.

What estate planning techniques might they use to address their objectives?