There is no way to avoid paying US taxes entirely without leaving the country altogether. While that is an option for many of our clients, it’s not the best option for all. How are investors supposed to combat increasing tax responsibility targeting high earners? In this article, we look at how high-income investors can lower their tax bill and how Alpen Partners can help directly.
Why do high earners need tax efficiency?
Many of our US investors, and those who hold assets in the country, are unhappy with how difficult it can be to save on taxes. High-earning investors are at even more risk since they are subject to capital gains tax on the investment they have sold for a profit. Estate taxes make it hard to ensure that all of the savings you did for your family will reach your beneficiaries without being wiped out by the federal government. Additionally, with ever-changing tax legislation, it can be quite challenging to plan for the future. There are ways to lower the tax bill of high-earning investors, but it often involves the help of a professional who knows the ins and outs of tax laws. They will use strategies to help you create a tax-efficient portfolio. These tax planning strategies involve making investments that have tax benefits and creating structures that offer lower or deferred taxation. The strategies that work best for each investor depend on whether they are an individual or a business and how the income is made. Just like all financial planning, there is no handbook of strategies that will work for everyone, but there are services that we can offer that can guide you through the process. For example, our tax professional can look at your current portfolio and enhance your savings to ensure you aren’t paying unnecessary taxes just because it’s not structured correctly. Let’s take a look at a small number of these tax-efficient options.
Tax Efficient Strategies
Tax strategies will vary depending on your current portfolio and your goals. For example, the tax plan of someone trying to create an estate plan to pass down their wealth will be different from the investor who is trying to save for a lavish retirement. Below we cover some of the ways our clients can plan well and save in the future. Ensure your portfolio is tax-efficient and contact the experts of Alpen Partners to assess your assets with the guidance of professionals.
A trust is a fiduciary relationship in which an individual known as a trustor gives a trustee access to hold assets for the benefit of a third person, the beneficiary. Investors will typically use a trust to provide asset protection, ensuring the assets are distributed according to the trustor’s wishes and can help individuals avoid or reduce inheritance or estate taxes. Many investors and corporations will use a trust because the tax consequences can often be lower compared to other tax planning options. Not only does a trust offer tax advantages if a wealthy investor is looking for asset protection, but it is also advised the investor to seek offshore options, some that favor the creditor less. Additionally, for our internationally-minded clients, a trust can hold foreign assets.
Life insurance plans allow investors to save on taxes for when they are alive and after they pass away. With an insurance account, investors transfer assets to beneficiaries, free of income and estate tax. There is also the potential for growth of cash tax-deferred while in the policy. A life insurance policy makes it easy to pay for a beneficiary’s education, fund a spouse’s retirement, and much more without any portion of it being wiped away by the IRS.
One of the easiest ways to save on taxes is through tax-deferred vehicles that are utilized for retirement savings in the United States. This includes 401(k) plans and IRAs. With a 401(k), an investor places money into an account where it will grow tax-free. The money is placed into investments before federal and state income tax is withheld, therefore lowering the taxable income of the account holder. The taxation begins at the time the finds are being withdrawn. While this option does not completely eliminate a person’s tax responsibility on this income, it is lower since individuals are typically taxed less after retirement. Another tax-favored retirement option is an IRA or individual retirement account. With these accounts, individuals can choose how the money will be invested where it grows tax-deferred.
Why limit yourself to your home jurisdiction. If you are a high-earning investor with assets located solely in the United States, you are missing out on not only tax savings but so many other financial benefits. Investors worldwide seek out offshore jurisdictions to take advantage of better banking options, tax incentives for foreign investors, and markets that can’t be found in their country. A lot of our clients will leave their home jurisdictions altogether to free themselves of burdensome tax responsibility. By changing which countries you are obligated to pay taxes to, you may be able to take advantage of significant tax breaks, especially if your home country taxes on income earned from a different country, like the United States. Our team offers more than tax optimization services. Alpen Partners offers a range of financial and life planning, including offshore investing and relocation. If you are interested in expanding your possibilities, contact the experts today!
Tax Efficient Planning with Alpen Partners
Find the best tax-efficient portfolio strategy for you with the guidance of Alpen Partners. No matter the reason you are looking to re-examine your portfolio, our experts can guide you through the process of growing and protecting your wealth. Don’t lose out on the wealth you have worked hard for. Contact our team today!
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