By Jim Shellenberger, CFA, CFP®
As we look ahead to 2025, affluent families face a complicated tax environment, including changing laws and potential tax increases. But by being aware of the most recent tax rules and using efficient wealth-planning strategies, they can overcome these obstacles and optimize their wealth for future generations.
I wrote this article to provide insight into various tax-efficient techniques tailored to the needs of affluent families. I explore subjects like estate planning, tax-advantaged investment vehicles, and charity giving.
Estate Planning
Let’s start with an explanation of estate planning as a fundamental element of tax-efficient wealth transfer.
Essentially, estate planning is how you can distribute wealth to future generations while lowering tax obligations. By strategically structuring your estate, you can leverage a number of tax incentives, including charity deductions and annual gift tax exclusions. This strategy allows you to effectively transfer your assets, reduce potential estate taxes, and assure the continuation of your legacy.
As a wealth manager, I’ve found these estate-planning techniques to be consistently efficient:
- Charitable Planning: Make a lasting impression and simultaneously lower your taxable estate by utilizing charitable giving techniques.
- Family Limited Partnerships (FLPs): Use FLPs to mitigate gift and estate taxes and transfer assets to future generations while maintaining control.
- Gift Tax Exclusions: To transfer wealth to beneficiaries without paying gift tax right away, utilize the annual gift tax exclusions.
- Generational Skipping Transfer Tax: Understand the laws governing the transfer of wealth to grandchildren and beyond.
Tax-Advantaged Investment Accounts
Another key strategy for reducing your overall tax burden is investing in tax-advantaged accounts. These accounts are specialized savings vehicles that give you tax breaks in exchange for investing your money, allowing your money to grow faster and more efficiently.
Popular tax-advantaged accounts include the following:
- Health Savings Accounts (HSAs): Make tax-deductible contributions and tax-free withdrawals for approved medical costs.
- 529 Plans: Use 529 plans to save for educational costs while decreasing your tax bill.
- Individual Retirement Accounts (IRAs): Invest in traditional and Roth IRAs to save for retirement and reduce your taxable income.
- Municipal Bonds: Lower your federal income tax obligations by purchasing tax-exempt municipal bonds.
Tax-Efficient Charitable Giving
Lastly, tax-efficient charitable giving allows you to optimize your philanthropic impact while decreasing your tax burden. When you donate appreciated assets like stocks or real estate, you can avoid capital gains taxes and earn a charitable deduction for the full fair market value of the asset.
Common tax-advantaged charitable giving techniques include:
- Charitable Lead Trusts (CLTs): Give money to a good cause while retaining income for a specified period of time.
- Charitable Deductions: Lower your taxable income by donating cash, appreciated securities, or other assets to approved charities.
- Charitable Remainder Trusts (CRTs): Establish a trust that pays recipients income for a predetermined amount of time, with the remaining funds given to charity.
- Donor-Advised Funds (DAFs): Create a DAF to gain immediate tax savings while making charitable contributions over time.
Partner With a CERTIFIED FINANCIAL PLANNER® and CPA
The last suggestion I want to share is that while the 2025 tax-efficient strategies for affluent families discussed above can be a great way to mitigate your tax responsibilities, it’s extremely challenging to navigate the complexities on your own.
Partnering with a CERTIFIED FINANCIAL PLANNER® and CPA can help to:
- Lessen your tax liability by suggesting tax-efficient strategies.
- Maintain tax law compliance by regularly adjusting your strategy.
- Learn new strategies suited to your unique financial circumstances.
We’re Here to Help
Affluent families are in a unique situation as potential changes to 2025 tax laws could be on the horizon. A smart move is to partner with a professional financial advisor who can guide you to optimize tax strategies, safeguard wealth, and pursue long-term financial goals.
At Elevate Wealth Management, we provide transparent, comprehensive wealth management for clients at all stages of their investment journey. Your money is not just an account number to us, it’s your life story.
Schedule an introductory meeting by reaching out to us at jshellenberger@frontierasset.com or 307.673.5675.
About Jim
Jim Shellenberger, CFA, CFP® is a financial advisor at Elevate Wealth Management, an independent, fee-only wealth management firm serving young professionals, pre-retirees, and retirees in Sheridan, Wyoming, and surrounding areas. With the mission of serving and educating, Jim is dedicated to providing comprehensive, top-notch services that not only help his clients reach their goals, but also empower them to make the best financial decisions for their lives and walk toward their future with confidence. Jim is known for going the extra mile, not only offering valuable knowledge in investment management as a former investment analyst, but building long-lasting relationships so he can give honest, customized advice and strategies that make an impact on their lives.
Jim has a bachelor’s degree in business administration with a minor in finance from the University of Wyoming. He is proud to be a Wyoming native and loves exploring the outdoors with his family—hiking, fishing, hunting, and backpacking. Faith is an integral part of Jim’s life, and he always looks forward to attending church on Sundays, Bible study on Fridays, and being part of his church community. He’s also an avid sports fan! Fun fact: Jim owns shares in the Green Bay Packers. To learn more about Jim, connect with him on LinkedIn.
The views expressed represent the opinion of Frontier Asset Management. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Frontier Asset Management believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. The use of such sources does not constitute an endorsement. Frontier does not have an affiliation with any author, company or security noted within. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and the Frontier Asset Management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in securities involves risks, including the potential loss of principal. Past performance is not indicative of future results.
Frontier does not provide tax advice. Please consult with a CPA for recommendations pertaining to individual circumstances.
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