Fiduciary Advisory Specialist
Senior Wealth Planning Strategist

In this Wealth Planning Update:

  • Early success poses many new financial considerations. Having a team of trusted advisors can serve as the foundation to your financial success
  • Work with your team of trusted advisors to:
    • Ensure your estate plan is in place - unless you’re happy with the plan the government has already created for you
    • Plan for a realistic lifestyle geared toward helping preserve and grow your wealth
    • Help reduce the big tax bite by planning in advance of tax day
  • Get your time back to focus on your craft by letting your team advise you on your financial strategies

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?

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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:

  • An entrepreneur selling founder’s stock has special tax advantages. The Qualified Small Business Stock (QSBS) rules can exempt the sales of certain stock from taxes or allow a tax-free rollover of proceeds to invest in a new start-up venture. Qualification for these rules should be researched prior to a liquidity event. Your wealth team can work with you and your other trusted advisors to review possible impacts.
  • You're ready to purchase your new home as many folks with newly earned liquidity sometimes do. You could use cash to secure the deal, but could obtaining a mortgage be the better choice? You may not think of utilizing credit and leverage as being beneficial, but there are some positives to doing so. For example, with taking out a mortgage, you may benefit from tax deductions, low mortgage rates, and the ability to use your capital for other purposes. However, it’s important to keep in mind that these benefits come at the cost of carrying and paying a monthly obligation.
  • If you’re charitable, giving to a qualified charity may be one of the best ways to help reduce your income taxes. It is important to analyze which of your assets to donate to a particular charity in order to get the greatest deduction available. In addition to cash, many charities are happy to accept items such as appreciated stock. Also, donating stock may yield a much better tax benefit to you vs. giving cash.
  • Finally, an outsized-income year may present significant tax planning opportunities. You know you will probably owe a large amount in taxes; would it help to pre-pay some of your state tax liability via estimated payments? How much should you set aside for tax day? Have you considered other offsetting transactions in the same calendar year? These are some of the many decisions that may have significant tax-saving potential for you and all too often are neglected until it is too late to make an impact.

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.