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Please Click Links to the Left to Read about the Phase 2 Benefits
Portfolio optimization, in addition to producing many non-tax benefits, can help reduce taxes in at least ten ways. Portfolio optimization professionals can:
- review account statements to confirm that the correct trusts own each account in order to keep assets outside of the taxable estate,
- apply trust accounting principles to accumulate and distribute trust assets tax-efficiently,
- confirm the accuracy of tax basis and market value numbers shown on the balance sheet,
- determine that cash withdrawn from accounts for lifestyle needs will be taxed at the most favorable rates,
- evaluate whether assets not kept liquid for lifestyle needs are invested tax efficiently in longer-return assets,
- estimate which rates of return to assume when designing tax minimization tools,
- clarify whether asset management fees are tax deductible,
- identify unnecessary taxes on portfolio rebalancing transactions,
- integrate tax-efficient investments into portfolios, and
- gather data to graph projected after-tax inheritance for heirs under different return/risk assumptions.
Exhibit 1
Exhibit 2
Seasoned advisers appreciate the opportunities that result from optimizing portfolios and then updating an estate plan in response to changing tax laws, cash flow needs, and asset values. This wealth optimization process may seem daunting as an adviser considers the use of hundreds of different legal tools and an even broader assortment of financial instruments that might fund each legal tool. Fortunately, the same advanced 21st century economic system that produces the complexity also gives advisers solutions to the complexity in the form of sophisticated software programs that can evaluate myriad options while finding an optimal solution. An estate planner, such as a CPA or tax lawyer, can team up with a portfolio planner, such as a registered investment adviser, to run the optimization software. Although one adviser could in theory manage all of the interrelated tax and portfolio planning issues, a collaborative of two or more advisers can often serve the client most effectively.
Modern wealth optimization software routinely helps clients minimize transfer taxes and reduce income taxes dramatically. The software can illustrate year-by-year cash flows and action steps to help a client navigate through the confusing array of recommendations provided by tax lawyers, financial planners, accountants, money managers, insurance agents, and other advisers who need to consider all six sides of the tax planning puzzle. The software considers many different combinations of legal tools under different legal and financial design assumptions to determine how a client can maximize after-tax lifetime income and/or testamentary transfers to heirs and favorite charities.
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Voorhees Family Office Services, Inc.
650 Town Center Drive, Suite 890, Costa Mesa, CA 92626
Phone: (800) 447-7090 • Fax: (866) 447-7090
©Tim Voorhees, 2002-2017 |
