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High Net Worth Tax Strategies — Pillar Wealth Management

Taxes take a significant chunk out of a person’s income and wealth. High and ultra-high net worth individuals are at a high risk of losing a considerable amount of their wealth if they aren’t proactive about tax planning. Therefore, we highly recommend working with a professional wealth manager or an estate planner to ensure that your assets and wealth are protected. These professionals can create a comprehensive plan with all the high net worth tax strategies that can benefit you.

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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.

If you want to learn the details of managing your wealth and planning for taxes, we recommend that you acquire a free copy of our book 7 Secrets to High-Net-Worth Investment Management, Estate, Tax, and Financial Planning.

At Pillar Wealth Management, our expert wealth managers and other finance professionals can help you with effective strategies to minimize your taxes. Visit our website to schedule an initial meeting with one of our professionals free of cost.Now, let’s learn more about how high net worth individuals can manage and minimize their taxes!

Table of Contents
Why do Billionaires Pay Fewer Taxes?
What Is Tax Planning?
High Net Worth Individual Tax Planning
How do I limit my taxable income? – Top High Net Worth Tax Strategies
What Are Some Strategies to Reduce Estate Taxes?
A Few Last Words

Why do Billionaires Pay Fewer Taxes?

If you’re familiar with tax laws or have been paying attention to the news, then you know that billionaires don’t pay a huge amount in taxes, so much so that high net worth individuals may even be paying less in taxes than an average earner. So, what are the tax loopholes for the rich?You can find out all about it in detail in the points below. Let’s dive right in!

1.    Lower Tax Rate on Investment Income

The major reason why billionaires pay less in taxes is the lower tax rate on investment income. Most billionaires and high net worth individuals make most of their earnings through investments. Unlike for regular people who work at a job to make a living, wages or earned income isn’t exactly relevant for high net worth individuals. As a result, billionaires pay less income tax.

At present, the top tax rate on income from employment is 43.4%, whereas investment income has a top statutory tax rate of only 23.8%. This huge difference in tax rates might mean that the employees hired by billionaires would be paying more taxes than them. This disparity in tax rates is what billionaires use to minimize their taxes and pay a minimal amount. The loophole is that they utilize investments as the primary source of their earning. 

2.    Reduced Taxable Income

This is one of the top strategies high net worth individuals use to avoid taxes. Keep in mind your adjusted gross income is unquestionably the most important aspect when it comes to taxes. Your adjusted gross income is what you have left after you have made the required adjustments, like contributions to your 401(k) and IRA accounts.

There are many other adjustments that you can use. Moreover, you can also speak to your financial advisor to discuss your particular situation in more detail.

3.    Increased Deductions

Another way to legally avoid taxes is to maximize the number of taxable deductions all through the year. Depending on your line of work, your charitable donations, and certain expenses, you can make significant deductions. For example, deductions include gifts, charitable donations, personal property taxes, state taxes, interest paid on your mortgage, job-related expenses, and investment expenses.

These deductions accumulate over the years. This is precisely why you need to maintain an itemized list of expenses throughout the year, in addition to any receipts. You can even create an Excel file and add a line item whenever you have a deduction.

4.    Utilizing Tax Credits

Tax credits are very much like incentives, and they help you minimize your tax liability effectively. Even though tax credits don’t have an impact on your taxable income, they can be subtracted from your final tax bill. Hence, they can significantly reduce the amount you have to pay Uncle Sam.

There are many things you can use to benefit from tax credits. Nevertheless, the ones that are most beneficial include paying college fees or adopting a child. Of course, you should never adopt a kid only to benefit from tax credits, but if you are planning to adopt, you should be aware of the tax credits for which you qualify. In addition, you might consider attending some college classes to further your education.

For instance, if you want to study photography, you can sign up for a college course and get tax benefits. Due to the Lifetime Learning Credit, you have upwards of $10,000 or more per household to use for college credits each year, getting 20% in tax credits. Contact us to get more information about tax credits.

What Is Tax Planning?

Tax planning is the process of reviewing a financial plan or situation to make sure that every element works in concert so that you pay the minimum in taxes. A strategy that reduces your tax burden is known to be tax-efficient.

Tax planning is a vital aspect of every affluent individual’s overall financial strategy. Reducing your tax obligation and increasing your contribution to retirement funds play a huge role in making you financially successful.

 Proper tax planning encompasses numerous considerations. These considerations include the timing and size of purchases, the timing of income, and planning for other expenses. Additionally, the mix of investments and the types of retirement strategies also have to be in harmony with your tax filing status and deductions to achieve the best possible outcomes. Feel free to speak to the professionals at our firm to see what tax recommendations they have in store for you.

high net worth tax strategies

High Net Worth Individual Tax Planning

Professional tax planning certainly helps reduce tax obligations. However, there’s another side to tax planning that many people aren’t familiar with.

Tax planning is about investing your money in the right financial products at the right time so that you can attain your long- and short-term financial objectives. If you wish to learn more about accomplishing your financial targets, read our comprehensive and insightful guide on Improving Portfolio Performance – The Shifts Multi-Millionaires Must Make to Achieve Financial Security and Serenity.

Here are the two important aspects of high net worth tax planning.

1. Federal Income Tax Planning

Family or individual tax planning focuses on identifying your income sources, how you file your tax returns, and the tax breaks that provide the maximum relief.

Depending on your income and eligibility status, you may have access to various tax-saving instruments, such as:

• W4 Allowances — these depend on how much you want to withhold from every paycheck

• Deductions — HSA contributions, charitable donations, and college savings (529)

• Credits — Popular credits like the Child Tax Credit, Earned Income Tax Credit, Lifetime Learning Credit, and AOTC can reduce your federal tax obligation.

Ideally, you should meet with a financial advisor specializing in high net worth tax planning to determine how you can alter your tax plan and make sure you stay in the best possible tax situation. Feel free to speak to the professionals at our firm to learn about their tax recommendations.

2. Estate Tax Planning

The IRS imposes estate taxes on estates valued higher than a particular amount. This figure is quite huge (in 2019, it was $11 million) and is naturally a major source of interest for high net worth individuals.

Since wealthy individuals like yourself have to face the burden of inheritance tax, comprehensive tax planning can be a great way to safeguard your estate’s value from federal taxes.

Keep in mind that many states levy their own estate tax, which impacts estates at considerably lower values than the federal threshold.

How do I limit my taxable income? – Top High Net Worth Tax Strategies

Billionaires and other high net worth individuals need to devise strategies that minimize their taxable income as well as overall taxation imposed on them. If you want a comprehensive account of some complex tax planning techniques, you should ask for a free copy of 7 Secrets To High Net Worth Investment Management, Estate, Tax, and Financial Planning, authored particularly for families and individuals who have $5 million to $500 million worth of liquid assets.

Here are a few strategies that are useful for billionaires, which you may wantto look into:

1.     Hiring An Experienced Tax Planner and Financial Advisor

Some challenges can severely impact your financial circumstances regarding your tax obligations. These can include things such as getting married, starting a family, becoming unemployed, getting a divorce, and buying a vacation home.

To deal with these situations, many high net worth individuals choose to hire an experienced tax planning advisor. These professionals help wealthy clients attain their financial targets by using techniques that are tailored to their individual circumstances. If you have $10 million or more, you should read our book, 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning to learn the importance of aligning your financial goals with your life circumstances.

2.     Tax Loss Harvesting

Tax-loss harvesting is a technique whereby you sell some investments at a loss to offset the profits made from selling other investments. The result is that you only have to pay taxes on your net profit.

You can use the income you generate from selling the unprofitable investments to buy other assets that can potentially grow in the future and make up for your losses. Then, you can even out the future profits with future losses, hence building a profitable cycle of tax savings.

Unfortunately, using a tax-loss cultivation strategy isn’t as simple as it sounds. Trying to harvest tax losses yourself is a complicated and labor-intensive task. Historically, this task was performed on Excel spreadsheet, but now, your tax advisor can offload a lot of this strenuous work by using financial software.

Our wealth managers at Pillar Wealth Management recently helped a client save more than $30,000 in taxes simply by managing his profits and losses. Visit our website to schedule an initial meeting with one of our wealth managers free of cost.

What Are Some Strategies to Reduce Estate Taxes?

A lot of work goes into creating a plan that minimizes estate taxes for billionaires in the long run. Here are a few highlights of the strategies wealth managers recommend:

1.Moving to a state that imposes no estate tax

2.Using irrevocable life insurance trusts

3.Establishing estate-friendly trust funds

4.Using the proceeds of life insurance to pay estate tax

5.Setting up donoradvised funds

6.Splitting family income

7.Investing in a startup or business

A Few Last Words

Taxes have a huge impact on a person’s income and wealth. If you’re a billionaire or other high net worth individual, you have to be proactive about your tax planning. We highly recommend working with a team of professionals that understand your financial goals and advise you on tax planning in a way that maximizes your benefits.

At Pillar Wealth Management, we understand that your financial goals need more than just the highest investment performance. Hence, we believe that tax planning is an essential element of cost control and achieving financial serenity. Feel free to sign up for a no-obligation meeting with one of our advisors to get started with high net worth 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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