With wealth comes unique financial planning challenges. Learn how a financial advisor specializing in tax strategies for wealthy individuals and couples can help.
If you’ve accumulated considerable wealth throughout your lifetime, it’s common to have questions about how you can enjoy a comfortable retirement while leaving a legacy for your family and any charitable organizations you choose to support.
And among high-net-worth individuals and couples, taxes often rank among the greatest risks threatening your ability to preserve wealth and achieve your estate planning goals.
Preserving Your Wealth with Effective Tax Strategies
In the Q&A below, you’ll gain insights from financial advisors who work with high-net-worth individuals and couples to help them implement smart tax planning strategies. With their expert guidance coordinated with professionals like accountants and estate planning attorneys, you can feel confident you’re taking the steps necessary today to preserve your wealth for the next generation and beyond.
You’ll likely find dozens of nearby financial advisors well-suited to help you reach your money goals with a personalized plan. But it may be more difficult to find a financial advisor specializing in tax planning strategies for high-net-worth individuals and couples.
Fortunately, many financial advisors offer virtual services so you can meet online no matter where you (or they) live. This means you can choose to hire a specialist financial advisor who lives hundreds of miles away if you decide their specialized knowledge and experience is a better fit to help with your unique financial planning needs.
In this article, we’ll introduce you to specialist financial advisors who you may want to contact to learn more about their services and how they can work with you to develop a personalized plan.
Resources To Help You Choose A Financial Advisor
Q&A: Financial Advisors Specializing In Tax Planning Strategies For Wealthy Individuals And Couples
Six Questions with Justin Porter, CPA, PFS, CFP, J.D.
We asked Atlanta-based financial advisor and tax planning expert Justin Porter to answer six questions to help us understand the benefits of tax planning strategies for high-net-worth individuals and couples interested in preserving their wealth.
Q: What is an example of a common yet complex financial and tax-related challenge unique to high-net-worth individuals and couples? What types of financial and tax strategies can you use to overcome this challenge?
Justin: The newest challenge for families who wish to pass on wealth to the next generation is having a large balance in a tax-deferred retirement account (IRA, 401(k), 403(b), etc.). The SECURE Act was passed in 2019, which changed the rules on inherited retirement accounts.
Now, your children will only have a maximum of 10 years to take distributions from the inherited accounts. The shortened RMD period can force them into higher tax brackets.
The simplest solution to the problem is to act now and design a distribution or Roth conversion strategy during your lifetime to arbitrage the tax rates. When that doesn’t solve the problem entirely, there are more advanced trust strategies to create an artificial “stretch” on the RMDs.
Q: For high-net-worth individuals who are unsure whether or not they need the help of a financial advisor for tax planning strategies vs. just working with their accountant, what guidance can you provide to help them make a more informed and educated decision?
Justin: I’ve been on both sides of the fence as a practicing Certified Public Accountant (CPA) early in my career and now as a financial advisor. As a CPA, I noticed that I was generally focused on planning for this year and next year. I rarely had the tools or information to plan over a longer time horizon. As a financial advisor, I get to see the big picture, but now I don’t have the tools to dig as far into the weeds on annual planning strategies.
High net worth families generally need both a CPA and a financial advisor. The good news is that most financial advisors don’t charge for a consultation. Spend some time interviewing a few and asking for specific recommendations. They should be able to provide you with a handful of recommendations after spending an hour with you. You can then make an informed decision on whether they can add value to your situation.
Q: How do the advanced tax planning services you offer high net-worth individuals distinguish your firm from other advisory or accounting firms?
Justin: Issue spotting and quarterbacking. When I was working in an accounting firm and later a law firm, there were many times when the client would share a critical piece of information after it was too late to solve the problem.
As a financial advisor, I get to see my clients a lot more frequently throughout the year. That allows me to prevent problems before it’s too late. I use my background in tax (CPA), law (JD), and finance (CFP®) to spot issues and bring them to the attention of the client and their subject matter expert to craft a solution.
Q: Following Congressional passage of the SECURE Act in 2019, how have tax planning strategies for high net worth individuals been affected?
Justin: The SECURE Act ended the stretch IRA and, in most circumstances, accelerated RMDs on inherited retirement accounts. The best approach to solve the accelerated RMDs problem is to plan intergenerationally. High net worth families have done this for decades for gift tax and estate planning. Now they need to do the same for income taxes.
Consider the income tax rate of the parents from now through the end of their lifetime and the future income tax rate of the kids to create a tax rate arbitrage. Roth conversions are a great tool when the parent’s tax rate is lower than the tax rate of the kids. Just make sure you factor in taxes on social security income, Medicare surcharges, and capital gains taxes.
Q: For high net worth individuals and couples approaching retirement age, are there particular tax planning strategies you often recommend at this stage of life?
Justin: Pre-retirees typically are at the highest earning period of their lifetime. That makes tax deferral strategies the top priority, especially if they can retire a little early. Usually, you want to push as much into deferred comp, retirement plans, and IRAs as possible.
When your income and tax rate drop after retirement, you can take distributions or, in some cases, convert the funds to tax-free Roth accounts at a lower marginal rate.
Q: Is there a particularly memorable experience or a moment you recall with a high net worth client when you first decided advanced tax planning services for the wealthy was an area you wanted to specialize in?
Justin: I was working in a CPA firm at the time, preparing a set of returns that included a few family businesses, an individual return, a few trusts, and a private foundation. When the partner explained how everything fit together, I was hooked. I knew I wanted to be the one designing those strategies in the future.That’s also when I decided to go to law school to better understand estate planning and asset protection strategies that, in most cases, are just as important as tax planning.
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