HNW Tax Problems

Tax Problems for Affluent Investors

While everyone is subject to taxation on income and investment earnings, high-net-worth individuals pay proportionately higher taxes than their peers in lower income brackets. Consulting with a tax advisor before deciding how best to invest your money can be a critical step in limiting your tax burden.

Better yet, a coordinated effort involving anyone who is advising you on how to manage your assets, such as financial advisors, tax attorneys, and wealth managers, is a more thorough approach. Working together as a team will help to avoid tax problems in the future that occur as a direct result of the financial decisions you make now.

Investing Time in Your Tax Strategy

Putting time into planning your tax strategy, along with helping to avoid common tax problems, is particularly important if you are in a higher tax bracket. Taxes take a big toll on the annual income and earnings of high-net-worth individuals, but financial vehicles that act as tax shelters can help by mitigating or deferring the amount due.

Mutual funds may or may not be a good investment for those in the higher tax bracket. Qualified mutual funds are preferable because capital gains are not taxable. Conversely, non-qualified mutual fund managers can distribute short- or long-term capital gains at their discretion, sticking the investor with a large, unexpected tax bill.

In 2017, the Tax Cuts and Jobs Act increased the threshold of estate and gift tax exemptions to $11.2M for individuals and $22.4M for couples. The total amount allowed under this new law is double what the old threshold was and is scheduled to sunset on 12/31/2025. Now is a good time to review and update your estate planning to take advantage of this lucrative tax shelter for your heirs.

Building the Right Team

Tax planning is a process that is never finished. For one thing, changes to the law can have a wide-ranging effect on investments and particularly how tax shelters are treated. In order to get the most out of modern tax strategies, stay abreast of any changes and updates that occur and adjust your plan accordingly.

Assemble a team of professionals, with individual expertise in the fields of finance, accounting, and tax law, who can best advise you on the latest and most effective way to structure your tax strategy.

The experienced attorneys at the Jeffrey M. Verdon Law Group can provide expert legal advice on financial matters including income tax planning, estate planning, asset protection and general risk mitigation.

Posted in Updates.