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Tax Strategies and Asset Location Planning — It's not what you earn, it's what you keep.

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Asset Location

Asset Location is a technique that can greatly enhance the amount of return that's kept and not paid out in taxes.

Asset Location refers to how an investor distributes their investments over taxable accounts such as a Trust brokerage accounts, tax-deferred accounts such as IRAs and 401Ks, and tax-exempt accounts such as Roth IRAs and Roth 401Ks.

Allocating assets that pay the lower long term capital gains tax rates to your taxable accounts and allocating assets that pay higher income tax rates to tax deferred and tax exempt accounts allows investors to keep more of the return they make.

This technique requires skillful planning and execution in order to achieve.

Shifting of assets can often trigger a taxable transaction with unintended consequences which is why a thoughtful, skillful process in needed. We strive to achieve this for all of our clients.

Tax Management Strategies

We consider these three methods used in legal tax planning:

  1. Avoiding Taxes
  2. Involves the use of exclusions, credits and certain deduction to legitimately reduce taxes.

  3. Deferring Taxes
  4. Doesn't produce a permanent reduction in taxes just reduces current taxes.

  5. Conversion
  6. Shifts highly taxed income into lower, more favorably taxed income.
Good tax management goes hand-in-hand with good financial planning.

A main objective of financial planning is to structure your assets and financial affairs to amass the greatest amount of wealth possible. When fewer dollars are paid in taxes, more money is available to work towards accumulation of wealth.

In implementing investment strategies with you, we'll employ legitimate methods and smart tax planning to reduce, defer, or avoid taxes.

Understanding the tax rules on capital gains, both short and long term, and income such as interest and dividends are key to developing the appropriate strategy.

Paying attention to the tax rules on both short and long term capital gains—plus those that affect income from interest and dividends—is a part of developing the right strategy for you.

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Things We Consider

90% of investment results happen because of correct asset allocation.1

The aim of asset allocation in the first place though is to balance risk and reward. In looking at how to best allocate your assets, we factor in your timelines, goals, and needs, and apportion your portfolio's assets accordingly.

And, it's customized for each client.

1 Research supports this claim. We don't just make this stuff up.

The old saying, "It isn't what you make, it's what you keep," is the core of an effective wealth management plan. Since taxes are inevitable, after tax returns are crucial to achieving wealth planning goals.

Asset location refers to how an investor distributes their investments over taxable accounts like Trust brokerage accounts, tax-deferred accounts such as IRAs and 401Ks, and tax-exempt accounts such as Roth IRAs and Roth 401Ks.

And, using asset location planning correctly can increase how much money is kept and not paid out in taxes.

Often also referred to as marketability, liquidity is the ability to turn an asset/investment into cash quickly.

For example, investments in ETFs, most company stocks, and bonds that trade on national exchanges have high liquidity; real estate on the other hand takes longer to convert to cash.

We strive to understand our clients liquidity needs so there's access to cash as needed.

Periodically, portfolios drift away from goals as the value of investments within the portfolio change.

Rebalancing brings a portfolio back into line with your goals and helps reduce risk.

Under-weighted securities can be purchased with newly saved money; alternatively, over-weighted securities can be sold to purchase under-weighted securities.

Our goals are to maximize returns and minimize taxes.

To help achieve these things, we look to do things like: sell tax efficient assets first, use Exchange Traded Funds (ETFs) with low portfolio turnover, and buy investments with the biggest tax advantages.

Since every investor has different needs from fixed income to access to capital, we factor all this into your portfolio construction.

ETFs (Exchange Traded Funds) offer clients a way to build a tax efficient asset allocation that's diversified, low cost, low conflict of interest, tactically tradeable, and highly liquid.

Building a core asset allocation using ETFs can provide exposure to all the necessary portfolio constituents with low minimums. We use ETFs to generate core portfolios that strategically expose our clients to investments that meet their risk tolerance and investment goals.

Using ETFs (Exchange Traded Funds) significantly reduces portfolio conflicts of interest.

One of the more difficult things that happens when using Mutual Funds and Separately Managed Accounts is that portfolio managers may all be investing in the same investments for a number of reasons.

For instance a Value manager may be buying a stock that your current growth manager is selling. Often Mutual Fund Managers and Separate Accounts Managers suffer from style drift. This is where fund managers invest money outside of their mandated portfolio model, often to boost poor performance. Unfortunately, this can unintentionally raise the risks of--and to--a portfolio.

ETFs offer high transparency and often have low turn-over of positions that make up the fund. This helps eliminate conflicts of interest and allows us to look at making better choices for you.

"Don't put all your eggs in one basket," is one way of thinking of global diversification.

True diversification means to reduce risk by investing in a variety of assets that have low correlation of return to one another.

Diversification can be achieved many ways within asset classes, amongst asset classes, by sector, by size, by industry, and so on. The idea: don't expose all your money to the risk of a single investment.