Most individuals focus on retirement savings, stock market investments, and debt management when it comes to financial planning. However, many financial plans omit a critical approach that may have a major influence on long-term asset preservation – tax avoidance.
Income taxes are a reality of life for most individuals, and they may eat a large portion of your profits. However, there are tactics you may employ to reduce your tax obligation, such as utilizing trusts and private placement life insurance instead of utilizing 401-Ks and IRAs like everyone else.
Many financial plans don’t go beyond fundamental measures and do not explore more complex techniques for decreasing income taxes. High-income earners, for example, may benefit from establishing trusts and private placement life insurance policies. Similarly, implementing a tax-efficient investment plan can reduce the impact of taxes on investment gains.
Transfer taxes, on the other hand, are sometimes neglected entirely in financial planning. These include estate taxes, gift taxes, and generation-skipping transfer taxes, which can eat up a considerable percentage of an individual’s fortune. While most individuals will not be subject to these taxes, those with large assets may be.
A well-crafted estate plan is essential for avoiding transfer taxes. This can involve measures such as establishing a trust, making annual donations to family members, and utilizing the annual gift tax exclusion. You can lower the size of your inheritance and the impact of transfer taxes by transferring assets to heirs during your lifetime.
In essence, if you want to construct a really complete financial strategy, you must examine tactics for avoiding both income and transfer taxes in addition to the basics of saving and investing. Working with Matthew Jennings, JD, MBA, EA, RFC®, CEP®, CES™, aka Tax King Matt who specializes in these areas can help you create a plan that maximizes your wealth preservation while also assisting you in achieving your long-term financial objectives.