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Wealth Management Tax Strategies You Can Use — PillarWM

When your earnings exceed a certain limit, you are subject to much higher taxes. In fact, sometimes, these tax rates can be as high as 50 percent of your income. This can put a major hole in your wallet, particularly if a lot of your wealth is tied up in non-liquid assets. Because of this, many wealth advisors focus on curating and implementing wealth management tax strategies for affluent individuals. If you have liquid wealth worth $5 million or more and wish to know more about some effective tax strategies in great detail, ask for a free copy of our new book, 7 Secrets to High Net Worth Investment Management, Estate, Tax and Financial 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 fiduciary, fee-only wealth advisors offer comprehensive financial advice to clients who have liquid investable assets ranging from $5 million to $500 million. Our team of wealth managers can implement tax strategies that apply particularly to high net worth and ultra-high net worth individuals. Book a free consultation with one of our expert wealth managers to gain more information about our tax management and planning strategies.

Table of Contents
Why Do High Income Individuals Need to Pay More Taxes?
What Are Taxation Strategies?      
Why Is It Important to Use Wealth Management Tax Strategies?
How Do Wealth Managers Get Paid?
How Much Should You Pay A Wealth Manager?
A Few Last Words

Why Do High Income Individuals Need to Pay More Taxes?

According to the progressive taxation system, an individual’s taxes are calculated based on their taxable income. Thus, high net worth and ultra-high net worth individuals need to deal with higher tax rates.

To determine the amount of money you have to pay in taxes, you have to know your total taxable income. You can calculate your taxable income by deducting IRS-allowed line deductions from your adjusted gross income. The final value will allow you to figure out which tax bracket you fall in.

As an affluent individual, you need to be familiar with the kinds of taxes that can be levied on you. Federal or state income taxes are progressive taxes. In addition, capital gains taxes are imposed on any high-value asset or item that you sell.

Using your investment gains to pay exorbitant sums of money to Uncle Sam is counterproductive to any income-producing activity you use to grow your wealth. If you want to know more about how ultra-high net worth individuals safeguard their wealth, make sure to order a free copy of our hardcover book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates: Strategies for Families worth $25 Million to $500 Million. In this book, we discuss some useful strategies that help wealthy individuals live a financially stable life.

What Are Taxation Strategies?      

Taxation strategies are essentially actions that aim to minimize taxes, regardless of your investment or business situation. These strategies go beyond just wishing you could pay lower taxes. Instead, they are developed to ensure you pay the lowest amount of taxes legally possible. The overall goal of every taxation strategy is to build your wealth.

Taxation strategies enhance the way your business income and personal spending are structured. They entail analyzing how your business structure impacts your payroll and income taxes, which of your expenses are tax-deductible, and how you can most effectively donate to charities and causes dear to you.

Taxation strategies highlight how you can reduce your taxes depending on current taxation laws. Additionally, they even involve investing your wealth in the most appropriate investment and financial products at the relevant time to attain your long and short-term objectives.

In short, taxation strategies are a long-term vision for your business and financial future. This is precisely why your taxation strategy should be devised for years, if not decades, down the line. Here are some taxation strategies for high-income earners.

1. Tax Loss Harvesting

Tax loss harvesting is a strategy that involves selling particular investments at a loss to offset profits made by selling other investments. As a result, you only have to pay taxes on your net profit.

You can use the income you earned by selling the losing investments to buy other investment products that are likely to grow in the future and help you recover your wealth. You can then use the future profits to even out the losses, hence creating a thriving cycle of tax savings.

Unfortunately, executing tax loss harvesting isn’t as simple as it sounds. Trying to harvest tax losses by yourself is a challenging and labor-intensive job. Historically, this task was done using an Excel spreadsheet. However, now, it’s fairly easy as most of the strenuous work is performed usingsoftware and managed by your wealth advisor.

Recently, our team helped a client save more than $30,000 worth of taxes just by managing their profits and losses. If you have invested liquid wealth worth $5 million or above and want to use tax loss harvesting, ask for a free copy of our book, 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning.

2. Paying Certain Taxes Immediately

Another excellent strategy to lower taxes is to pay some taxes immediately as paying them will cost less than deferring them to another year. This is particularly true if you presently fall in a low tax bracket year. In such circumstances, the best strategy is to register income sooner than what you had initially planned or putting off an expenditure. Thinking about using this strategy? Visit our website to schedule a no-obligation meeting with one of our wealth managers.

3. Taking Advantage of Tax Credits

Tax credits are quite similar to incentives. They help you successfully lower your tax obligation. While tax credits don’t directly impact your taxable income, they can be deducted from your final tax bill. Thus, it helps to notably lower the amount of your taxes you have to pay.

There are many things you can do to benefit from tax credits. For instance, you can get credits for purchasing energy-efficient appliances and for making energy-saving improvements.

Additionally, you can enroll in college courses to pursue your education. For example, if you wish to learn how to play an instrument, you can sign up for a college course and benefit from tax credits. The Lifetime Learning Credit offers $10,000 per household to use for college credits every year, where they will receive 20% in tax credits.

4. Hiring a Tax Advisor

Some life changes can have a major impact on your financial circumstances in terms of your tax obligation. These include marriage, divorce, getting an inheritance from your parents, and unemployment.

For guidance on such situations, many high net worth individuals choose to hire an experienced and skilled tax advisor. These advisors help wealthy individuals reach their financial objectives by using strategies that are adapted to their particular circumstances. If you have $10 million or more, don’t hesitate to read our book, 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning to learn why it’s necessary for your financial strategies to line up with your financial circumstances and goals.

5. Saving for Retirement

Another great taxation strategy is to reduce your taxable income by maximizing your retirement savings. If your organization provides an employer-sponsored plan, such as a 401(k) or 403(b), you can make pre-tax contributions of up to $6,500 above the actual limit. As contributions are made pre-tax via paycheck deferrals, saving money in an employer-sponsored retirement account is a simple and direct strategy to reduce your tax obligation. Book a free consultation with one of our wealth managers for expert advice on retirement income planning.

6. Using a Roth IRA Conversion

Roth IRAs are tax-free retirement accounts that lower your tax obligation and save money on taxes even if you fall in the highest income bracket. Unlike a conventional IRA, you can make Roth IRA contributions from your post-tax income. This means you will need to pay taxes before you contribute, not at the time of withdrawal.

Even though it might not sound like a benefit, it actually is quite advantageous. The income earned on the money in your Roth IRA isn’t taxed. You can transfer the money you have in a 401(k) or a conventional IRA into a Roth IRA and get the same benefits.

Ideally, you should use a Roth IRA conversion when you’ve had a year with a lower income than the previous year. You can also do it after you retire and briefly lie in a lower tax bracket.

wealth management tax strategies

Why Is It Important to Use Wealth Management Tax Strategies?

In this global climate of economic volatility and long periods of extremely low bank interest rates, using the appropriate tax strategies plays a significant role in helping investment returns exceed living costs. You can read our guide, Improving Portfolio Performance, to find out some ways to enhance your investment performance.

At the end of the day, what matters when determining the value of investments is real returns after all the management fees, expenses, costs, and taxes have been considered. For example, real estate is often vaunted for producing fairly high investment returns in the long term. However, with the application of wealth and capital gains taxes, the tax burden can be quite high as compared to other assets.

How Do Wealth Managers Get Paid?

Before you start working with a wealth manager, you need to understand how they get paid so that you know how much you have to pay in fees and understand how other modes of payment could incentivize them to make particular recommendations. Let’s take a look at the various ways wealth managers earn money.

There are essentially three ways in which a wealth manager makes money.

1.Client fees, generally charged either on an hourly basis or as a percentage of the client’s assets under management

2.Commissions for particular economic transactions, like the sale of insurance products or the purchasing and selling of securities


1. Client Fees

Many wealth managers earn a fee directly from their clients. A management fee is charged, which is usually a percentage of the assets they are managing on your behalf. If a wealth manager is managing $1,000,000 worth of investments and charges a 1% management fee, you will have to pay $10,000 per year. Often the fees will be charged quarterly.

Fee percentages might vary based on how much you have invested with a manager, with many managers reducing their percentage for higher account balances.

2. Commissions

Here, a wealth manager makes their money from commissions. These fees are earned when they suggest and sell particular financial products, like annuities or mutual funds, to a client. For instance, you might invest $10,000 into a mutual fund your manager recommends; consequently, they receive a 2% commission, earning them $200. They might also earn commissions by selling annuities to clients.

Commissions represent a possible conflict of interest. They encourage your manager to recommend certain products. However, you need to ensure that the advice you get is tailored to your requirement and not tied with how much it allows the manager to earn. With this in mind, many experts recommend staying away from commissioned wealth managers.

3. Salary

Some wealth managers are paid a salary by the wealth management firm for which they work, instead of charging fees or earning commissions. Such managers might also have opportunities to get incentives or earn bonuses for meeting specific performance goals, like onboarding a certain number of new clients every year.  

How Much Should You Pay A Wealth Manager?

How much you need to pay a wealth manager depends on the services you are using and several other factors. Ideally, you should work with fee-only advisors who charge approximately 1% of the assets under management.

Another important thing to keep in mind when determining how much to pay a wealth manager is whether your advisor is held to a fiduciary standard. A fiduciary is held to a higher ethical standard and has to act in your best interests at all times.

A Few Last Words

Using the best wealth management tax strategies for high net worth individuals can be challenging if you don’t have the relevant knowledge and experience. At Pillar Wealth Management, we know your goals include more than high investment results. We believe that tax strategies are a vital component of your wealth plan. Register for a free meeting with our wealth advisors to start saving on taxes 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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