Tax Planning for Wealthy Clients

Wednesday, April 22, 2015 Print Email

The tax consultants should think about tax saving schemes for their worthy clients with the higher tax rate of 39.6%.

At the AICPA Personal Financial Planning Conference 2015, a CPA Bob Keebler stressed that managing tax brackets carries high importance and finding tax advantage for higher tax rate clients has become highly difficult.

Keebler added that although smart financial planners could find tax advantages but it has become difficult over the time.

He made two suggestions

Roth IRAs: Pay attention to State Laws:

It is essential to pay heed to the state tax laws when your clients are planning their retirements. But if you aren’t in favor of estate taxes, Keebler mentioned that the IRAs of Roth are good options for several clients and could also be extra efficient.

He argued that you have to consider federal and state taxes along with the state income tax changes while you are taking Roth conversions into consideration.

As an instance, if a Nevada based client wants to move to California, you should convert their assets in Nevada in order to evade 13.3% California state tax.

Separating the Roth conversions is also important, noted by Keebler. A client seeking to switch to Roth should be told about the significance of shifting assets gradually over a long time.

A greater flexibility is created by maintaining different Roth accounts and it also provides an opportunity to get recharacterized the underperforming assets which were separately invested and classified earlier.

Consider Putting Wealth into Life Insurance:

For higher rate taxpayers, Keebler indicated that it is feasible and also remarkable tax saving scheme to invest in the life insurance.

Keebler added that investing in a life insurance, IRA and Roth IRA are legal tax saving plans. And by fulfilling certain requirements, the life insurance can provide same tax credits as provided by Roth conversions. The inheritors of your clients would be benefited by the life insurance scheme because no taxes are normally imposed on the beneficiaries of death benefits.

Keebler suggested to invest the wealth in a life insurance scheme after paying the state tax. 

Source: ReadyRatios

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