Advanced Tax Planning Strategies for Wealthy Individuals

Creating a substantial portfolio is a major accomplishment, but maintaining and growing that wealth—particularly for individuals with $3 million or more—requires an advanced and proactive approach to tax planning. In the current shifting legal and economic climate, simply managing investments isn’t enough. Not only is strategic tax preparation recommended, it’s essential.

Today I want to explore the complexities of tax-efficient wealth strategies, examining opportunities for Roth conversion, the changing tax environment, advanced charitable giving, and strategic tax planning for $3M+ portfolios.

Understanding the Ever-Shifting Tax Landscape

Before I share tax-planning details, let’s take a look at the current tax landscape.

Legislation, economic cycles, and political changes all have an impact on the ever-shifting tax environment, making it critical to remain informed and flexible.

The following are key elements of the existing and anticipated tax landscape:   

• Sunset provisions: Unless Congress takes action, a number of recent tax legislation provisions are scheduled to expire. Because of this uncertainty, careful preparation is needed, taking into account both the possibility for future changes and the current tax laws. 
• Income tax rates: Managing taxable income requires an understanding of the current income tax brackets. Tax-efficient investing and income distribution strategies are critical for high-income earners because they are subject to higher marginal tax rates. It’s equally important to keep up with any modifications made to these brackets.
• State and local taxes (SALT): Particularly in states with high tax rates, state income, property, and other taxes can have a major influence on the total tax burden. It may be necessary to utilize strategies for managing SALT liabilities, such as using tax-advantaged accounts or taking residency changes into consideration.
• Estate tax: High-net-worth individuals remain concerned about the federal estate tax, even though it only affects a small portion of estates. For intergenerational wealth transfer, it’s essential to understand the current estate tax exemption, any future modifications, and methods to reduce its impact. 
• Capital gains taxes: Your total tax obligation can be significantly impacted by taxes on selling assets like stocks, real estate, or companies. While short-term earnings are taxed like regular income, long-term capital gains are usually taxed at preferential rates. Guidance from a knowledgeable tax professional can help you understand the subtleties of capital gains taxation and determine the right time to sell assets.

Strategic Tax Planning for $3M+ Portfolios

For large portfolios, a thorough and customized tax plan is not only advised but necessary. A few key strategies include:

• Trusts: A variety of trusts are useful for tax mitigation and estate planning. The gains of irrevocable life insurance trusts, charitable remainder trusts, and revocable living trusts vary based on the requirements and goals of each individual.
• Tax-loss harvesting: To reduce capital gains taxes, this strategy entails selling investments at a loss to offset capital gains. Although it can be a valuable tool, keep in mind that the wash-sale rule prohibits buying the same or substantially identical security again right away.
• Diversification: A portfolio that’s well-diversified can help control risk and possibly lower tax obligations. Investing across asset classes lessens the effect of the performance of any one investment.  
• Asset location: Strategic asset location is placing different investment types in the most tax-favored accounts. While taxable brokerage accounts could hold investments that produce long-term capital gains or tax-free municipal bonds, tax-deferred accounts such as 401(k)s and traditional IRAs may hold investments producing ordinary income.
• Considerations for business owners: Owners of businesses face particular tax challenges, which makes developing strategies for succession planning, reducing business income taxes, and maximizing firm sales a wise move.
• Qualifying charitable distributions (QCDs): QCDs allow direct contributions from an IRA to a qualifying charity for individuals over 70½. This lowers taxable income while meeting minimum distributions (RMDs) requirements.
• Alternative investments: Although they frequently come with more complexity and call for careful due diligence, investigating alternative assets such as real estate, private equity, or hedge funds can provide diversification and possible tax benefits.   

Roth Conversion Opportunities in 2025 and Beyond

A Roth conversion is the process of moving money from a standard 401(k) or IRA to a Roth account. Qualified withdrawals are tax-free in retirement, but taxes are paid on the converted amount. This strategy is helpful when higher tax brackets are anticipated in retirement.

• Handling the tax burden: Large conversion can result in a substantial tax bill. To control the tax burden and prevent moving into a higher tax bracket, carefully prepare for this technique.
• Evaluating the benefits: Consider the time horizon, retirement income requirements, and the current and projected tax rates. If higher tax rates are anticipated in the future, a Roth conversion can be advantageous.
• Future changes to tax laws: Making informed decisions about Roth conversions requires keeping up with potential changes to the tax code. 

Advanced Charitable Giving Strategies

Charitable giving provides the opportunity to support favorite causes while potentially lowering taxes. Consider these advanced strategies:  

• Donor-advised funds (DAFs): A DAF provides both an immediate tax deduction and a charitable donation. Over time, money is invested and given to charitable organizations.  
• Donating appreciated assets: It’s more tax-efficient to give appreciated assets (such as stocks or real estate) straight to a charity rather than selling them and then donating the proceeds. The appreciated value is exempt from capital gains taxes, and the fair market value may be deductible. 
• Private foundations: For large charitable contributions, a private foundation may be considered. It includes more administrative load but also greater grantmaking control. 
• Charitable remainder trusts (CRTs): A CRT allows asset donation while receiving income for a period. Remaining assets transfer to the specified charity at the term’s end.

Reach Out for Help

Assembling a solid team of knowledgeable tax and financial professionals is a significant step in building a customized plan that fits your individual needs, objectives, and risk tolerance. 

The seasoned financial advisors at Omnivest Financial possess deep industry knowledge and experience across various sectors. Our clients value that we don’t just manage wealth; we help them create a lasting impact aligned with their values and ambitions.

To find out more about how we can help you, schedule a meeting by calling (307) 337-1223, emailing reid.rasner@lpl.com, or getting started online.

About Reid

Reid Rasner is the CEO and Founder of Omnivest Financial, a premier wealth management firm dedicated to guiding high-net-worth clients through complex financial decisions. With a focus on legacy planning, Reid brings his extensive experience and insight into serving affluent individuals, families, and businesses, offering them clarity and confidence on their financial journeys. Inspired by managing his own family’s wealth, Reid saw the need for a proactive, transparent approach to wealth management, which led him to create Omnivest Financial. 

Reid obtained a bachelor’s degree in English with a minor in history from the University of Wyoming and is also a 2024 Republican U.S. Senate candidate from Wyoming, where he champions economic growth and stability. Outside of work, he actively supports his community through the Shrine, guided by the motto “helping kids and having fun.” He also enjoys weekend road trips and time with family, staying grounded and energized for his work with clients and his advocacy for conservative values. To learn more about Reid, connect with him on LinkedIn.
 

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.​

Asset allocation does not ensure a profit or protect against a loss.