Tax Planning

Tax planning is an important piece of a solid retirement plan, as we want to create portfolios that are as tax efficient as possible.

Considering taxes while creating your financial and retirement plan can make a huge difference in the future value of a portfolio and have a major impact for your future.

The key to successful tax planning is knowing the current laws and applying them to the existing financial and estate plan in place. Because regulations can change annually, it’s important to have an experienced partner to help you navigate the choppy waters of the IRS tax code.

There are three common elements to tax planning for the purpose of minimizing your tax burden:

  • Reduce adjusted gross income
  • Increase the amount of tax deductions
  • Appropriate use of tax credits

Protect your Loved Ones and leave a Wealthy Estate

Life insurance has long been a staple in basic estate planning, as it may provide an income tax-free death benefit far in excess of the premiums paid. Federal and state estate taxes may be imposed on all the property that you own at your death, and this tax must be paid from your estate. A life insurance policy that is owned by your heirs, or in an irrevocable trust, will avoid being included in your estate. It can then be used to pay any estate taxes that may be levied at the time of your death.

Life insurance offers one of the best returns on your investment dollar available in the market today. Other useful benefits include:

  • 100% tax-free income
  • Guaranteed interest growth
  • Accelerated death benefits
  • Flexible premium plans

There are two basic types of life insurance: term and whole life. Both provide money for your heirs in the event of your death, but they do so in very different ways.

Term Life Insurance

You pay a premium every month or quarter, and your heirs receive a specified amount if you die. That’s the idea behind term life insurance. The policy lasts for a set amount of time, such as five or ten years. It is very inexpensive for young people. Prices go up as you age. When the “term,” or duration of the policy is over, you have no equity remaining in the policy, and must start over with a new policy.

Whole Life Insurance

This is really a combination of life insurance with an investment strategy. You pay regular premiums, and your heirs receive a fixed amount upon your death. However, the policy is also something like a savings account or investment fund, because your premiums build equity, called “cash value.” The cash value is not taxed, and you can borrow against it.

Life insurance is a critical component to any financial plan. Primarily it protects your family and loved ones from hardship by creating the necessary liquidity needed to continue a comfortable standard of living in the event of an untimely death. It can also be used as an effective tool to generate wealth for heirs, beneficiaries and charitable organizations.

How Much Life Insurance Should I Have?

There is no simple answer to how much coverage is enough. Many factors will influence the decision on how much coverage you need. A few factors to consider include:

Contact our Tax Planning Team

Contact us to schedule a meeting with a tax planning professional. We will review your retirement documents at no cost and make the appropriate suggestions with your retirement goals in mind.