NUMBERS
GOALS
Goals are critical for tax planning. Each tax strategy has a long-term commitment whether it is the tax reporting, the nature of when and how much funds they receive, when the capital gains taxes actually come due, and so on. There needs to be consideration of the long-term commitment alongside of one’s personal goals. Too often, investors just assume that there are no options that meet their real goals, so they just pick what they think is best. By understanding one’s goals and doing advanced tax planning, it may be easier to accomplish those goals than they realized. Write down the goals. Understand that if your goals are to use money for personal use (pay off primary home mortgage, buy a car, etc.), then the government wants their money because you are using yours for personal use. However, don’t assume that there are no options to accomplish your goals. There may be. When you speak to a capital gains strategist, make sure you’re honest about the nature of your goals so that they can help you to find a good fit, if possible.
Tax deferral strategies, most of the time, come with a cost. Among the least expensive is a 1031 Exchange. Among the more expensive are various types of tax mitigation or deferment trusts. Each investor ought to start by sitting down with their tax professional to get a reasonable estimate of taxes to be paid upon the sale of the asset. Once that is determined, it is easier to answer the question: “Does it make sense to spend this much money for a transaction as compared to the expected cost of taxes?” If one cannot really leverage the difference between the projected tax bill and the cost to do the strategy to grow the estate, then it is not worth it.
DOES IT MAKE SENSE TO SPEND THIS MUCH MONEY FOR A TRANSACTION AS COMPARED TO THE EXPECTED COST OF TAXES?
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