Wealth Management And Tax Planning

“Wealth management” is a term often associated with smart spending, saving, and investment for the future through owning a small business, saving accounts, or certain categories of insurances.

However, in the accounting industry wealth management is an umbrella term that refers to a spectrum of services aimed at assisting a client to optimize wealth. Professional wealth management assists with investments, tax planning, retirement planning, and other accounting-related consultancies.

Through wealth management, you can receive financial services or products based on your needs. These services are more formally known as:

  • Portfolio management services
  • Financial planning and investment management
  • Employer-sponsored retirement plans
  • Fee-only financial management services
  • Social and governance (ESG) investing options

These services may sound too formal for something as simple as wealth management but that’s not true. Wealth management is not as easy as you may think, especially when it comes to paying taxes. Investments are great but around the time of taxation, the impact is high.

Professionals are hired to see the tax liability of your unique investment situation. Below are a few points mentioned on how a wealth expert can help you with tax planning on investments.

How can a Wealth Expert Help With Tax Planning:

The core purpose of your investment advisor is to help you make the fullest of every opportunity to invest but also help you keep what you have.

Guiding the tax management of your investment accounts is the integral responsibility of a wealth management consultant.

A wealth manager’s expertise lies in understanding your situation and when the additional taxes are applied based on your tax-efficient portfolios. He may use tactics to avoid paying more than necessary through 3.8% Net Investment Income Tax, and/or higher taxes (20% versus 15%) Alternative Minimum Tax, on qualified long-term capitals and certain dividends.

A wealth consultant or manager continuously monitors tax implication on any privately owned investment, on being self-employed/ owning a private business, and other categories that influence various stock options such as non-qualified stock options, incentive stock options, and the sale of employee stock purchase plan shares.

There is a belief and practice that shifting large amounts into tax-efficient investments will save you from paying taxes but in reality, it leads to concentrated positions. Wealth management in one sense helps you diversify investments and pay necessary taxes. A wealth manager helps you proactively structure your account keeping the tax situation in mind.

For an ordinary citizen, it may be hard to practice mitigating taxes or tax-loss harvesting but wealth management is here for it.

Tax-loss harvesting as explained by the GuardianWealth management experts’ is a method of limiting the recognition of short-term capital gains. The reason behind this practice is that short-term capital gains are taxed higher as per the federal income tax rate.

Wealth manager also significantly helps you avoid wash sale rules. A wash sale is basically when you sell a security at a loss and then purchase the same or identical security within the 30days. there are no deductibles in such cases of losses under the internal revenue code in the United States.

In a nutshell, wealth management services are designed to help you with investment taxation. The expert insights and analysis help you pay the necessary and divert the money towards better investing options. Tax planning for you might require days but for an expert, it can be done in a blink of an eye.

 

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