Pop quiz: Who do you turn to for advice when you want to reduce your tax bill? If you’re like most people, you might answer, “My CPA.” You hand off forms and receipts and hope for a miracle. More often than not, you don’t get one.
Truth is, it’s probably not your CPA’s fault. The best way to find tax savings is often not through a more intricate knowledge of tax law or a more creative deduction idea. It’s from having someone in place who oversees the family’s full scope of wealth-related activities – someone who can find tax reduction opportunities that go undetected by accountants and other advisors because no one sees the whole picture.
Financially successful households may use the services of several different financial professionals such as accountants, investment advisors, insurance agents, estate planning attorneys and so on. Usually these specialist-advisors are a society of equals, each maintaining a “silo” relationship with the family, with no one folding these individual components together in an optimal way.
Unless one person is getting a bird’s-eye view of all of the family’s and advisors’ activities, the family’s tax exposure is likely to be higher than necessary. Furthermore, tax reduction opportunities are often lost because they are only sought when the tax returns are being prepared, with data gathered at a single
point in time – generally December 31 – after the transactions have all been made.
We overcome these shortcomings with what we call a PERSONALCFOapproach – a continuous, 360-degree view of our clients’ economic lives. From this bird’s-eye vantage point, numerous opportunities to reduce taxes can come into focus. For instance, we were able to save one client a $20,000 tax bill by offsetting the gain from a sale of real estate with losses in a stock portfolio. It’s highly unlikely a “silo” advisor would have been aware of both sides of the transaction. Furthermore, the accountant would not have known about the opportunity until it was too late – the spring after the tax year ended. Coordination by a PERSONALCFO, who was aware of the family’s activities in real time, made all the difference.
In another case, a client was faced with an increase in income taxes due to tax law changes that took effect in 2013. By starting a new retirement plan, called a cash balance plan, she shaved 10% off her tax bill, and was able to save more for retirement.
We live in a time when information is overwhelming. But wisdom – knowing how to use information in the best way – is increasingly rare. That’s what we at PARTNERSINWEALTH strive to provide our clients; wisdom that can protect and accelerate the growth of their net worth. It’s the kind of wisdom that only a 360-degree perspective can bring.
For more information, helpful guidance or professional assistance, please contact Jim Waters, CFP®, at PARTNERSINWEALTH : 713.964.4028 or email@example.com.