Move Past the Immediate, Plan for Your Goals

Now that you’ve handled what’s urgent, it’s time to focus on what’s important. But what is really important to you? Is it helping those in need? Is it leaving an inheritance for kids or grandkids? Is it material things – it may be?
What’s important is unique to each of us, but in my experience it generally falls into a few categories:

  • creating/maintaining a comfortable lifestyle;
  • minimizing taxes;
  • protecting our wealth;
  • leaving money to heirs or charity.

These categories haven’t changed in the 30 years since I passed the CPA exam.
The current economic crisis is different in many ways, but the behaviors I’ve seen recently are similar to those witnessed in previous down markets. We aren’t here to share the same platitudes about not “panic selling” and “buy in the dips.” We’re here to prompt you to think about what’s important to you and then build a plan to get there.

Regardless of your ultimate goal, there are steps you can take today to minimize taxes (which may increase to pay for these new federal programs/bailouts) which give you more money to put towards your goals. Here are just a few actionable ideas:

1. Harvest losses. Look at the specific lots in your after-tax portfolio. Can you take a loss and buy something that allows you to remain in the market, but not run afoul of the wash rule? Note, if you have individual securities, this may be tough – e.g., selling Delta Airlines and buying United Airlines may be increasing idiosyncratic risk.

2. Consider a Roth Conversion. Better to tax the seed than the harvest. With incomes potentially lower, and investments lower, now may be a good time for a Roth Conversion.

3. Examine various charitable donation vehicles. This low interest rate environment makes Charitable Lead Trusts attractive. Of course, Donor Advised Funds are very common, as is donating appreciated securities. Coupling these charitable techniques and Roth Conversion is a popular strategy at our firm

4. Reposition assets. Also referred to as asset location, the general idea is to hold stocks in after-tax accounts and Roth IRAs, and bonds in IRAs and 401(k) plans. The benefits are numerous: step up in basis for equities, lower current taxable income, etc. With lower asset values today versus a month ago, now is a good time to look at what you own and where you own it.

Remember, the best time to plant a tree was 20 years ago, the second-best time is now. Talk with your advisor now about the steps your taking to reach your goals.

The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

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Adam Yofan, (CPA-inactive)

Putting his deep and diverse experience to work, Adam spends his days helping clients address their multilayered issues in areas such as portfolio construction, tax minimization, retirement planning, asset protection, and estate and legacy planning. When financial challenges become complex, Adam quickly and nimbly pulls together the right team of professionals, coordinates recommendations and then puts comprehensive strategies into play.

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