Every year around tax time, we inevitably receive an influx of individuals that come to us asking questions about their personal tax situations. Some currently have financial advisors, and others don’t. The one thing they all lack is someone with the expertise to assist them in tax efficiency. As a financial advisor, our job is about so much more than simply creating a portfolio of investments for our clients – our purview extends from before your money is even made to after it is spent. Helping those preparing for retirement and those who are already retired is the center of our business. Unsurprisingly, tax strategy is one of the most frequent and critical issues we deal with throughout that process. Failure to create a tax efficient strategy can significantly impede your savings efforts and even delay your retirement. We’ve helped thousands of individuals keep as much of their hard-earned money out of Uncle Sam’s pocket as possible over the years. As Judge Learned Hand famously wrote:
"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. Nobody owes a patriotic duty to pay more than the law demands."
From an investment perspective, it’s not just about what you make, it’s about what you keep. Our goal is not just to help our clients achieve robust performance; it is to ensure that their returns are achieved in the most tax-efficient manner possible – allowing them to go home with the maximum amount at the end of the day. Our proactive tax planning finds more tax-deductible items, creates tax-advantaged situations and teaches you how to reduce taxes for greater savings in future years. In some cases, the tax savings we identify are greater than our fees, fully offsetting the cost of our services. Our comprehensive process includes:
- Using Tax-Efficient assets- By choosing tax-efficient funds for you, we reduce the taxes owed on annual capital gains or other distributions - significantly improving your bottom-line results.
- Intelligent Asset Location Decisions to Improve Tax-Efficiency- Strategically placing your investments in the appropriate taxable, tax-deferred and tax-free accounts is one of the most effective ways to minimize your tax burden over time.
- Harvesting Losses Proactively for Tax Savings- At any time, a given investment within a portfolio may fall as others rise. By skillfully choosing investments to sell at a loss, we can potentially neutralize much of the tax liability for investments that have appreciated.
- Tax-Conscious Distribution Strategies- An often-overlooked part of managing taxes is an analysis of the client’s spending habits and the source of the funds. We seek to determine if future expenditures from accounts that create an income tax liability (such as a traditional IRA) will push our client into an abnormally high tax bracket. If an issue arises, we create a workaround to avoid that tax pitfall.
- Creating Donor-Advised Funds for Appreciated Securities- Donor-advised funds provide a simple way for investors to get immediate tax deductions and avoid capital gains tax liability on appreciated assets. We set up a personal donor-advised fund in your family name, then you decide where and when to make gifts to your charities.
- Funding Alternative Investments with Generous Tax Deductions- Investing in certain alternative investments with flow-through profit or loss can result in sizeable write-offs for high-net-worth clients. Additionally, certain business interests can also serve to mitigate or eliminate tax liabilities that arise when converting traditional IRAs to Roth IRAs.
- Tax-Free Gifting Strategies- Our clients use family gifting strategies to remove assets from their taxable estates. These strategies help reduce future estate taxes, and benefit your family members immediately.
- Planning Strategies to Reduce Inter-Generational Taxes- Federal and state taxes can significantly reduce the assets available for heirs. Even with higher estate tax exemption limits instituted recently, strategic estate planning can be critical to maximizing the share that future generations will enjoy.
- Investing in College Saving Plans- With tuition inflation averaging >5% a year, you cannot afford to subject your education savings to unnecessary taxes. The right college savings plan can help ensure that you save effectively and efficiently. It also gives you a state tax deduction if applicable.
We will gladly work cooperatively with your CPA or tax preparer. Alternatively, you may prefer that we coordinate your tax preparation with one of the CPAs in our network. Our partners provide income tax-preparation with a focus on proactive planning and deduction maximization. For new clients, our partners may find overlooked deductions and recommend amending prior tax returns to claim overlooked deductions.
Please note: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own CPA or tax professional before engaging in any transaction.