FEATURES

You can find reports from our Investment and Research team, timely and informative financial planning topics from our Wealth Management team, and deeper dives on various important topics in our white papers from any team member. Read online, share with friends, or download for your convenience.

The Election: Taxes Could Be Going Up

What Can You Do About It?

While the actions by Congress and the Treasury earlier this year helped support the economy through the ongoing COVID-19 pandemic, it also created uncertainty as to how the U.S. can pay for all this new debt. As the election approaches the federal deficit is the invisible elephant in the room. There are three main options for dealing with the debt: grow our way out of it, inflate our way out of it (devalue our currency), or raise taxes and cut spending. 

As we work carefully to prepare and plan for each client's individual situation, our financial planners at Allegiant Private Advisors have some proactive strategies to preserve and protect your wealth through one of these scenarios: tax increases.

Roth Conversion of Your Pre-Tax IRA Money

You may have seen the chart below in a recent Feature: Roth Conversions and Their Place in Your Financial Plan. As our Wealth Advisor Michelle Cross, CFP®, CPA, CDFA®, AIF® explains, this chart shows that tax rates are near an all-time low while the deficit has grown exponentially. Exploring a Roth conversion is a great way to avoid the taxes of tomorrow for not only yourself but future generations as well. Click here to read Michelle's full article for more detailed information about a Roth conversion.

Maximizing Your Estate and Gift Tax Exemption


Rewind to the end of 2012 and the expiration of the "Bush Tax Cuts," the last time that aggressive gifting strategies were in the spotlight. The exemption limits under the tax law back then were set to go from $5,120,000 down to $675,000, per person (see chart). This caused many wealthy Americans to scramble to put together a revised plan with their estate attorney. A lot of last-minute work was done funding various trust vehicles - but that turned out to be all for nothing since the exemptions were continued at the same rate, plus inflation. The current exemption amounts are now at $11,580,000 per person, but this exemption is a hot topic when discussing ways to close the deficit. It's funny how history tends to repeat itself with different wrinkles each time. (As Mark Twain is reported to have said, "History may not repeat itself, but it often rhymes.") We recommend you speak with your Wealth Advisor now to figure out how estate tax exemption changes may impact your plan and what strategies can work for you. 

Utilizing Life Insurance to Pass on a Guaranteed Asset and Avoid Income Taxes
Some of the world's wealthiest families utilize life insurance to pass wealth to future generations. The beauty of life insurance is that the proceeds avoid income taxation and if owned properly are excluded from your estate exemptions. There's no better time than now to review how your plan utilizes life insurance and what changes (if any) should be made. Click here to read more about this strategy: Utilizing Life Insurance as a Tax-Efficient Inheritance Tool.

Asset Location
Most people spend quite a bit of time talking about asset allocation (the types of assets that you own), but asset location is often just as important, if not more important. Asset location refers to how your assets are distributed across savings vehicles and investments. Since different types of investments receive different tax treatments, a proper asset location strategy can help minimize tax liabilities as you balance your portfolio with tax-advantaged, tax-free and taxable accounts to maximize after-tax returns. Also of great importance is how the accounts are titled, establishing ownership for estate and asset protection purposes. For example, let's explore an individual who is planning to pass low-basis growth assets to the next generation. Under current law, owning these growth assets in a non-qualified account would allow for a step-up in basis upon the owner's death.  If tax rates go up, estate exemptions go down or step-up basis goes away then switching that asset location to an Irrevocable Trust or Family Limited Partnership could be more efficient. Understanding how assets are titled will demand more attention and should be discussed with your advising team.

Allegiant will be providing more details regarding these topics as well as real-life examples to help further illustrate the concepts moving forward. Please do not hesitate to reach out to your Wealth Advisor to discuss these areas to consider. The Allegiant Private Advisors team works closely with clients' accountant(s) and legal advisors to ensure that you have a clear understanding of what this type of planning means for you.

We are here to help you navigate all of these various areas as your thinking partner and, as always, look forward to connecting soon. Please do not hesitate to reach out to your Wealth Advisor at any time.
 

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