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Tax Planning – What Wealthy Investors Should Know:PillarWM

Tax is quite a complicated business, and you need to ensure that you grasp it to the best of your abilities. There are several different kinds of taxes that you have to pay throughout your life, such as property tax, capital gains tax, estate or inheritance tax, consumption tax and the list goes on. All these taxes can eat up a significant percentage of any individual’s income. In fact, the tax burden is notably higher for high net worth and ultra-high net individuals and families who bear the expenses of additional taxes such as progressive tax. To effectively minimize your tax liability, you should get started with tax planning. If you have concerns then you should request your copy of our helpful and comprehensive book, which is written specifically for families looking to invest between $5 million and $500 million,about tax planning, investments and estate planning.

7 Secrets minified

7 Secrets To High Net Worth Investment Management, Estate, Tax and Financial Planning

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

At Pillar Wealth Management, our fee-only, fiduciary wealth managers provide holistic financial recommendations to clients with $5 million to $500 million in liquid investable assets. Our team of financial advisors can execute specific tax planning strategies that are applicable to affluent individuals. Schedule a meeting with one of our professional financial advisors to get more information regarding our tax planning services.

In this article, we will take an in-depth look at tax planning, its types, importance, and characteristics.

Table of Contents
What Are Tax Planning and Types?
Why Tax Planning So Important?
What Are the Characteristics of Tax Planning?
Who Can Help You with Tax and Estate Planning?
The Bottomline

What Are Tax Planning and Types?

Tax planning refers to the process of analyzing a financial plan or situation to make sure that every element works cohesively to allow you to pay the lowest taxes possible. A strategy that lowers the amount of taxes you need to pay is known as tax efficient.

Tax planning must be an indispensable component of every high net worth and ultra-high net worth individual’s financial plan. Minimizing the tax burden and maximizing the ability to contribute to retirement funds are vital for success.

Tax planning encompasses numerous considerations. Considerations involve timing and size of purchases, the timing of income, and planning for other expenses. Moreover, the choice of investments and types of retirement plans should also work in harmony with the tax filing status and deductions to curate the highest possible results.

Types of Tax Planning

Many people believe that tax planning is a process that helps in lowering tax liabilities. While this is absolutely true, there is another facet to tax planning which most people don’t know about.

Tax planning is about investing your wealth in the appropriate financial instruments at the right time so that you can accomplish your short-term and long-term financial goals. If you want to know more about how you can attain your financial goals, read our in-depth guide, Improving Portfolio Performance – The Shifts Multi-Millionaires Must Make to Achieve Financial Security and Serenity.

Essentially, there are four different types of tax planning. These include:

1.Federal Income Tax Planning

Individual or family tax planning is focused on learning how much you earn, how you file your tax returns, and which tax breaks will offer the highest relief.

Depending on how much you earn and what you are eligible for, you might be able to access a number of tax-saving instruments, such as:

• W4 allowances – these are based on how much you wish to withhold from each paycheck.

• Deductions – charitable donations, Health Saving Account (HSA) Contributions, college savings (529) contributions can be used to reduce your taxable income.

• Credits – Common credits such as the Earned Income Tax Credit, Child Tax Credit, AOTC, and Lifetime Learning Credit can help to lower your federal tax liability.

Ideally, it would help if you met with a financial advisor specializing in tax planning to learn how you can modify your tax plan and ensure you stay in the best possible tax situation. Click here to speak to the experts at Pillar Wealth Management and find what tax advice they have for you.

2. Estate Tax Planning

The Internal Revenue Services imposes an estate tax on estates that are above a specific assessed figure. This figure is quite large (above $11 million in 2019) and is primarily a major source of concern for high net worth and ultra-high net worth investors.

Since affluent individuals like you do face the prospect of inheritance tax, holistic estate tax planning can be an effective method to secure the value of your estate from federal taxes. Maximizing this value may encompass a number of discounts, deductions, and various other tax benefits. Read our free hardcover book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates: Strategies for Families worth $25 Million to $500 Million and find out more about estate planning strategies.

It’s essential to bear in mind that numerous states impose their own estate taxes, which influences estates at often notably lower values as compared to the federal threshold.

3. Business Tax Planning

If you are self-employed, own a business, or both, you face an entirely unique set of challenges when it comes to paying federal taxes. This is why business tax planning is an essential component of your overarching business plan.

Fortunately, there are several deductions you can use to enhance your business tax plan and lower your income tax liability. These include:

• Employee and client entertainment

• Home office

• Loan interest

• Office equipment

• Professional service costs (accounting, legal, or consulting fees)

• Rent payments

• Travel expenses

• Utilities, such as internet, electricity, and phone

• Vehicle costs, including mileage, gas, and repairs

• Wages and salaries 

• And more

4. Retirement Tax Planning

Managing your taxes prior to and during retirement is essential not just to limit your tax burden once you have retired but to make sure you have complete control over your tax and income situation post-career and later.

Comprehensive tax planning during retirement involves having complete knowledge of how to protect what you withdraw from your 401(k) or IRA and maximize your income. This can include anything from leveraging itemized or standard deductions and increasing contributions to your IRA, calculating Social Security benefits, using the Tax Credit for the Elderly, deferring 401(k) plan distributions, and knowing how much of your annuity income or pension is taxable.

At Pillar Wealth Management, our financial experts can help you understand the challenges associated with retirement tax planning and curate a plan that’s properly aligned with your unique financial targets.

Tax Planning

Why Tax Planning So Important?

When it comes to your investments and savings, is your primary goal to provide an income, preserve your wealth, or generate growth? Maybe it’s all three of them? Regardless of your answer, tax planning plays a vital role in securing your assets and making the most of what you have.

Here are some reasons why tax planning is so essential.

1. A Lower Tax Bill for You

Let’s begin with the most evident benefit – lowering your overall liability for capital gains tax, income tax, wealth tax, along with other taxes on your assets, investments, savings, and pension.

If there exists a more tax-efficient method to preserve your assets and capital, you should definitely explore it to see if it works for you. However, a lot of high net worth and ultra-high net worth investors fail to do so and unintentionally end up sending more money to Uncle Sam than they should. This might include capital gains tax when switching between various investments or income tax on bank interest that you aren’t even withdrawing.

In addition, you could be losing out on alternative tools available in your state of residence that can effectively lower your tax bill too.

2. Reduced Tax Burden for Your Beneficiaries and Heirs

Obviously, the lower amount of taxes you pay in your life, the more you get to spend or pass on to your beneficiaries.

However, with certain investment portfolios, you might also be able to reduce the inheritance tax burden for your beneficiaries. Having the appropriate life insurance policies, for instance, can be extremely tax-efficient for purposes of estate planning.

Ideally, you should look for a strategy that will lower inheritance taxes while also offering tax-efficient investment growth and income all throughout your life. If you want to know more on how you can attain the highest possible investment performance, read our handy guide, 5 Critical Shifts for Maximizing Portfolio Growth Strategies.

3. Maximize Real Investment Returns

In this international climate of economic volatility and long stretches of extremely low bank interest rates, proper tax planning even plays a major role in helping investment returns surpass the living costs.

At the end of the day, what matters when evaluating the value of investments is real returns, after all the costs, expenses, management fees, inflation, and taxes have been considered. For instance, real estate is often admired for generating relatively high investment returns in the long run, but with the application of capital gains and wealth taxes, the tax burden can be extremely high in comparison with other assets. Find out how you can choose the best financial advisor who can help you save on taxes, fees, and other expenses.

Regarding investments, you should always start by ensuring that your investments are appropriately allocated and your portfolio is adequately diversified and particularly curated to match your financial situation, goals, requirements, risk tolerance, and investment horizon. In our ultimate guide for investors with $10 million and more, we discuss why wise investment is all about asset allocation, driven by your goals – not by Wall Street beliefs and methods.

If you don’t have proper tax planning in place, you could find your investment returns significantly reduced by taxes that could have been lowered or avoided altogether.

What Are the Characteristics of Tax Planning?

By now, you might be convinced to hire a financial advisor to assist you with tax planning. However, how do you know if the advisor is doing the right job? How do you determine that your tax plan is indeed what you need?

To help you out, here are some characteristics of effective and successful tax planning.

1. Your Financial Advisor Should Ask Questions

A financial advisor who is curious and asks questions to get detailed information is a competent financial advisor. This is the exact professional who has reviewed your overall finances and wants to find out what your short and long-term targets are, and can offer advice while discussing your situation.

2. Use A Combination of Tax Planning Strategies

Generally, there is no single tax planning strategy that lowers your tax bill. Rather, it is a blend of various techniques that results in high investment performance. For instance, smartly utilizing accelerated depreciation techniques while leverage tax credits can lower your tax bill in the first year, which eventually lowers approximate tax payments for the second year.

3. Doesn’t Waste Tax Deductions

Effective tax planning doesn’t waste tax deductions. There are situations when you should not make a deduction in the first year because the tax savings aren’t as high as they could be by saving the deduction for a later year. Certain deductions are deferred by delaying expenditures, while others are deferred by making elections. 

4. Deferring Tax Payments

In some cases, the crux of a successful tax plan is simply deferring the tax payments. For instance, there are situations where taxes will be due, but there is high flexibility in timing the year in which they have to be paid.

5. Paying Certain Taxes Immediately

Successful tax planning dictates paying certain taxes immediately because paying them now will be less costly than deferring them to another year.   This is particularly true when you are presently in a low tax bracket year. In such situations, the ideal tax strategy may be to register income earlier than what you initially planned or deferring an expenditure.

Want to find out if your tax planning is appropriate or not? Click here to schedule a free meeting with one of our financial advisors.

The Bottomline

Looking for the best tax planning can be challenging when you don’t know who to trust with your wealth. At Pillar Wealth Management, we acknowledge that your financial objectives require more than just maximum investment performance. We believe that tax planning is an indispensable component of cost control and attaining financial serenity. Feel free to sign up for a consultation with our advisors to get started with tax planning today!


To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.

We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.

You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.

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