Strategic Tax Planning
In our Spring newsletter, we highlighted our wealth advisory team and the financial planning we provide as part of our valuable service. Many of our clients have engaged in the planning process and are experiencing positive results.
Below is a real example showcasing the value we are able to provide in addition to investment returns. Of course, names and certain facts have been changed for privacy reasons.
Case Study: Strategic Tax Planning ‘a little ditty about Jack and Diane’
Jack and Diane recently sold a business, transitioning from high income last year to a much lower income in 2024. Additionally, Diane inherited a substantial IRA from her mother a couple years ago and would like to use a portion of the inheritance to honor her.
After reviewing the tax return and discussing future income projections, it was evident that their income would increase in future years when they returned to work or started a new company. Consequently, any distributions from the inherited IRA at that time would be heavily taxed.
Our suggested tax strategy was to distribute the full amount of the inherited IRA in 2024 while their earned income was low, and the distribution could benefit from other available tax offsets discovered in their return. We collaborated with the client’s CPA to run the numbers and confirm the strategy’s advisability.
By taking the inherited IRA distribution in a low-income year and leveraging the available offsets, the client will save tens of thousands of dollars in taxes this year. They plan to use the savings to enhance the exterior landscaping of their home, creating a sentimental tribute in memory of Diane’s late mother. The client has embraced the saying “saving money is making money” and enhanced their financial life by engaging with our advisory team.
Following this successful strategy, the client has reached out again to discuss further planning opportunities. We are now researching a previous outside investment that has the potential to offset meaningful gains from their Towneley portfolio over the next couple years.
While not every client has a current opportunity like this, many actually do. Let’s engage in the planning process together to see what opportunities may be available to you.
