Sophisticated strategies for high-net-worth individuals
As a successful individual, you know that building your net worth takes more than simply increasing your income. It requires minimizing your taxes, so you get to keep more of what you earn. But as tax law becomes more complex, tax planning becomes more difficult. You
need to think farther ahead, employ more sophisticated strategies and take advantage of every tax break you can.
To help you save as much as possible, this guide discusses recent tax law changes and presents a broad range of strategies for reducing your income tax liability. It also shows how to tie together your business and personal financial goals, how to tax-efficiently build up funds for education or retirement and how to transfer wealth to loved ones. But it simply can’t cover all possible tax planning strategies. So be sure to contact a tax advisor to find out which would work best for you.
Content and Excerpts –
Tax Rates [Page 2] – Probably the first thing that comes tomind when you think of your income tax rate is your regular tax bracket. (See Chart 1.) This shows your marginal rate—the rate that applies to your next dollar of ordinary income. ordinary income includes salary and bonuses, self-employment and business income, interest, taxable retirement plan distributions, andmore.
Timing & AMT [Page 4] – It’s important to review your income and deductible expenses for the year to date well before Dec. 31 so that you can take action before Jan. 1 to ensure the most favorable tax result. This may include timing both income and deductible expenses where possible.
Executive Compensation [Page 4] – Executives (and other key employees) often are compensated with more than just salary, fringe benefits and bonuses. They also may be
rewarded through more sophisticated methods with more complicated tax consequences, such as nonqualified deferred compensation (NQDC), stock options and restricted stock. But tax perils can come with these valuable rewards. To avoid them, awareness is key.
Investing [Page 10] – Investments come in a variety of types and tax treatments, and investment income can include both earnings while you own an asset (interest or
dividends) and gain upon its sale. Understanding the tax cost can help you compare investment choices and make tax-smart investment decisions, which is especially important with the market as volatile as it’s been.
Business Ownership [Page 16] – The ultimate goal of a business isn’t just to be profitable; it’s to build wealth for its owners. So if you’re an owner, you must make an effort to tie your business strategies to your personal tax and estate planning goals.
Charitable Giving [Page 18] – Giving to charity is one of the best tax planning opportunities available because you can enjoy not only a sizable tax deduction, but also the satisfaction of doing good. Plus you can control the timing to best meet your needs. Well-planned gifts also can save estate tax while allowing you to take care of your heirs in the manner you choose.
Education & Children [Page 21] – Whether you have concerns about the escalating costs of a quality education or you simply like to make the most of tax-advantaged savings vehicles where available, you’ll appreciate the benefits Section 529 plans and Coverdell Education Savings Accounts (ESAs) offer. And whether you’re a parent or a grandparent, you’ll want to consider other strategies that can get the children in your life on the road to tax-advantaged saving.
Retirement [Page 24] – A variety of tax-advantaged retirement plans are available to help you build the wealth you need to live the retirement lifestyle you desire. Even if you’re already there, these plans can be an important part of your investment portfolio. And everyone with retirement plan assets needs to watch out for the tax pitfalls that may accompany their tax benefits.
Estate Planning [Page 28] – you’ve spent a lifetime building your wealth, and you’d like to provide for your family and perhaps even future generations after you’re gone. With proper planning, you can do just that—regardless of whether the estate tax repeal scheduled for 2010 is extended or made permanent.
Tax Strategies Checklist [Page 32] – If you have any questions about the topics covered in this guide, or if you want more information on how they relate to you, please fill out this worksheet and e-mail, fax or mail this form to your tax advisor for more information, or call to discuss your tax planning needs.