In this Wealth Planning Update:
Becoming successful at a young age has many challenges. You have most likely spent the majority of your life focused on your passion. Whether your passion was becoming a professional athlete, starring in your first movie, or building your company, your time and attention has been devoted to achieving your goal. Congratulations! You have achieved your goal, so what now? You’re faced with decisions you may have never had to make before. Where do you start?
Wait - Don’t make hasty decisions! You need a team in your corner
Your first instinct may be to purchase a beautiful home and luxury car—which is common. You may also want to thank your parents or other friends and family members for their support by giving them major gifts. Some entrepreneurs want to reinvest their money into a new business venture or provide for a charitable cause. You have the opportunity to make these decisions because of your success, and you should. However, you should have a team of trusted advisors to strategize how and when to make the gifts, purchases, or investments to help achieve your goals in the most tax-efficient manner.
For example, buying your mom a house is a great idea, but did you know you may be subject to gift taxes on gifts over $14,000? Creating your private foundation may provide income tax benefits and allow you to give to a cause you’re passionate about, but did you know about the 5 percent minimum payout requirement? Could a donor advised fund be a better alternative? Your trusted advisors will work with you, your attorney, and CPA to help you avoid unintended consequences from your good deeds and new business ventures.
Planning is for parents; why do I need a plan?
When you hear terms like estate planning, wills, or trusts, you may automatically think about your parents and grandparents. Why would someone who is young need an estate plan? Regardless of age, everyone should have basic estate planning documents in place.
Who will make important medical and financial decisions on your behalf if you are unable to? Do you want to leave it to the state to decide, or do you want to take control of your own future? Your estate planning documents will dictate who steps in to take care of you and your wealth if you’re incapacitated and what happens to your wealth once you pass. Depending on your level of wealth and state law, proper estate planning may help you and your loved ones avoid lengthy and expensive court proceedings. Additionally, trusts can be great tools to gift assets to our loved ones in ways that may reduce or eliminate gift taxes.
While it is important to make sure your estate plan is in place, planning also means taking the proper steps to help preserve and grow your wealth. It is essential to meet with your advisors to discuss what kind of lifestyle you envision having with your new wealth; immediate and future expenses should be considered. After understanding what your expenses are, the investment professional on your team of trusted advisors can create an investment plan tailored to your personal needs, goals, age, and risk perspective. Once you’re comfortable with your plan, your team can then implement your plan, giving you time to focus on the next phase of your career.
Taxes, taxes, taxes
Great success typically means greater taxes. However, there are strategies you can take advantage of to help reduce your liability. Here are some possible scenarios you might relate to:
Take the first step: Build your team
It can be overwhelming to realize the types of decisions and considerations you have to make when your wealth grows significantly. Just as you have expertise and success with your endeavors, your team of trusted advisors can help you make decisions in growing and managing your wealth. Contact us to get the process started.
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Wells Fargo and Company and its affiliates do not provide legal advice. Wells Fargo Advisors is not a tax or legal advisor. Please consult your legal and tax advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.
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Trust services available through banking and trust affiliates in addition to non-affiliated companies of Wells Fargo Advisors. Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.
The information and opinions in this report were prepared by Wells Fargo Wealth Management. Wells Fargo Wealth Management provides products and services through Wells Fargo Bank, N.A. and its various affiliates and subsidiaries. Wells Fargo Bank, N.A. is a bank affiliate of Wells Fargo & Company. Information and opinions have been obtained or derived from sources we consider reliable, but we cannot guarantee their accuracy or completeness. Opinions represent Wells Fargo Wealth Management’s opinion as of the date of this report and are for general information purposes only. Wells Fargo Wealth Management does not undertake to advise you of any change in its opinions or the information contained in this report. Wells Fargo & Company affiliates may issue reports or have opinions that are inconsistent with, and reach different conclusions from, this report.
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