Create a Plan for Death and Taxes

Tax Planning

I recently talked about the importance of Tax Planning on The Daily Flash, a nationally syndicated morning TV show (See below to watch the segment). I touched on the two guarantees in life DEATH and TAXES!

We can never avoid these events, but we can certainly do our best to delay and/or minimize the financial impact of both. Here are 6 tips to consider.

1. Implement Tax Bracket Management

  • Tax deductions such as a 401K contribution might avoid going into the next tax bracket (higher rate)
  • Roth 401k or Roth IRA contributions (After-Tax) will be helpful if you expect to be in a higher tax bracket in the future.

2. Use Tax-Deferred Accounts when it makes sense for your situation (Deferral means potentially paying taxes later, but not right now)

  • IRA’s and 401K’s provide tax-deferred growth for retirement.
  • 529 Plans can provide tax-deferred growth for education expenses.

3. Be strategic when using insurance

  • Life insurance in most cases, can provide a Tax-free Death Benefit to a spouse, kids, or any person you love.
  • Tax-deferred growth is also possible through certain insurance products.

4. Be Tax Diversified when it’s time to collect retirement income

  • Having an income distribution strategy that tells you when and how much to take from a 401K, IRA, Roth IRA, Insurance Product, or a Taxable (non-retirement) Investment Account could provide big tax savings throughout your retirement.

5. Avoid Reactive Tax Planning

  • Reactive Tax Planning is when you give a stack of papers to your tax professional and call it a day. Reactive tax planning is just getting taxes done before a deadline, and there is usually very little to no thought about an overall tax planning strategy.

6. Implement Proactive Tax Planning

  • Proactive tax planning is when you proactively plan for future tax implications. The sale of any significant asset should have projections on tax implications. Higher or lower future expected income might also require making certain adjustments to save on current or future tax bills. 

Yes, Death and Taxes are the two guarantees in life, but only one impacts us every single year. We should not be caught off guard when it’s tax time. Let’s plan ahead and be prepared for taxes this year and every year. We’ll work alongside your tax professional to create and implement a long-term tax-saving strategy. Tax Planning works best when there is a collaboration between you, your Financial Planner, and your Tax Professional.  

TALK TO A PLANNER today. We look forward to working with you soon! 

*Important note on your 401K option: A plan participant leaving an employer typically has four options (and may engage in a combination of these options), each choice offering advantages and disadvantages.

• Leave the money in his/her former employer’s plan, if permitted.

Roll over the assets to his/her new employer’s plan, if one is available and rollovers are permitted.

• Roll over to an IRA

• Cash out the account value.

*Important Note on 529 plans: Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.

* Important Note on Life Insurance: Guarantees are based on the claims paying ability of the issuing company


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Please consult your qualified tax advisor to discuss tax related strategies.

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