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Tax Savings for High-Net-Worth Clients, Obscure Edition

December 14, 2015

With the year coming to a close and advisors wrapping up annual accounts, most advisors are taking advantage of the common tax savings for their customers, but many overlook the more obscure savings, one tax advisor tells Financial Advisor magazine.

For starters, advisors should steer clients away from having margin status on stocks that come with qualified dividends taxable as ordinary income, Robert Keebler, a partner with Keebler & Associates, a tax advice and accounting firm, tells the magazine. Keebler also warns that the majority of protective puts lead to qualified dividends also getting taxed as ordinary dividends.

Other tax-saving strategies include putting clients into defined-benefit plans, investing in oil and gas partnerships when appropriate and using real estate investment for a “depreciation tax shield.”

For clients with enough income tax from passive income, Keebler suggests taking advantage of partnerships that can help them tap into Internal Revenue Code §42, which applies to low-income housing credits, Code §47 for rehabilitation credit, and Code §48 for energy credit.

More savings are available through the use of charitable remainder trusts, either to cut taxes on large sales, add to retirement income or move income to others in the family, Keebler says.

Keebler also reminds advisors that on children’s unearned income, the tax doesn’t automatically include net investment income tax, and suggests skirting state income taxes with intentionally defective non-grantor trusts.

Finally, Keebler recommends getting the client’s other advisors together to figure out how to move distributions from trusts and estates in such a way as to move the client into a lower tax bracket.

By Alex Padalka
  • To read the Financial Advisor article cited in this story, click here.